Brexit discussion thread XIV (Please read OP before posting)

are you talking about Italy, the 8th economy in the world, member of the G7, the second biggest manufacturer in Europe and the 5th in the world and co-founder of the EEC? Italy not worth to be in the union with Germany? Italy not productive? I'm not sure you know what you're talking about...

And you think the rest of G7 are not in debt ?

Apparently what counts is not the level of debt but the trend in the ratio of debt to GDP (can't post links yet, sorry, but there's an article about it on the FT). Besides, it seems that Italy's national wealth and assets are 4 times larger than their debt. Also countries like the US and Japan have a very high level of debt. Anyway, I'm not an economist so can't discuss this in detail, I just wanted to point out that in English speaking media (especially British) Italy is seldom mentioned together with France and Germany (they always say France, Germany and Spain when they add a token Mediterranean country). However, Italy is higher up than Spain in many rankings, it's a bigger economy, as well as being the 4th most important military power in NATO, (again, no links sorry, but the ranking is US, France, UK, Italy). But British media think of Spain first, probably because so many Brits retire there, although not so many anymore ;-)

Sorry if I bang on about Italy (I'll change topic I promise) but just to demonstrate what I mean about British media and stereotypical views that ultimately create ignorance and misinformation. The bit below is from today's Guardian and it says "In contrast, Germany and France kept expanding despite the energy crisis, while the US returned to growth." No mention of Italy despite the fact that Germany and France are both +0.2 while Italy is +0.5. Anyway, the news is that Brexit Britain is -0.2%

UK lagging behind other G7 economies on growth

"The UK is the only member of the G7 with a shrinking economy in the third quarter of 2022, my colleague Graeme Wearden reports on his business live blog. Japan has not yet produced Q3 GDP data, but the figures are available for other G7 economies, Graeme says. He writes:

In contrast, Germany and France kept expanding despite the energy crisis, while the US returned to growth.

Here’s how G7 nations fared in the July-September quarter:

Canada: +0.4% (according to advance data)

France: +0.2%

Germany: 0.2%

Italy: +0.5%

United States: +0.6%

United Kingdom: -0.2%

I'd warrant that the argument is that otherwise debt free =/= debt free. The question wasn't, 'name a country that is OK financially', it was to name one that wasn't in debt.

You may have a very sustainable debt, but you still have a debt.

Even if you had enough money to clear it outright, but opted not to because the exit penalties were too steep or because you could make more from investing it than the interest accumulating, you'd still have a debt.

It's not just a question of productivity, tax evasion, corruption and funny money. A lot of Japan's public debt is held by Japanese investors because there's a culture in Japan of investing in government bonds. The same is true of the UK, incidentally - a large chunk of UK government debt is held in the UK. It also helps that London is a major financial centre, so the UK can sell its debt there. Irish government debt is largely held outside Ireland, not because we have low productivity or high tax evasion (we don't, on either count) but because we don't have much culture of investing in government debt, we don't have a lot of capital to invest anyway, and our government issues debt in the largest and most liquid markets, where anyone can buy it.

One of the consequences of having your debt held domestically is, incidentally, that defaulting on debt is not available to you in a crisis, because the pain of the default would be born at home. One of the reasons Japanese government debt is regarded as so secure is precisely the political obstacle to any kind of default.

It's not clear, incidentally, that government's whose debt is held domestically are any better off than governments whose debt is held abroad. The cost of the debt is the same in both cases, and if citizens and domestic institutions invest heavily in government debt, that creates a problem for the productive sector of the economy - where are they to get capital from?

Would this be because of Brexit?

It's a combination of factors, but the primary ones are (a) the decline in the pound, plus (b) the damage done to investor confidence by the Truss premiership. Although of course you could see both of those things as consequences of Brexit themselves.

What has happened is that the total market capitalisation of equities quoted in London (measured in US$) has fallen below the total market capitalisation of equities quoted in Paris (also measured in US$). currency movements don't really affect the value of shares in big multinationals; they earn revenues all over the world in a variety of currencies and so tend not to be affected by exchange rate movements in the currency their shares are listed in. But the mid-size companies which do a large amount of business in their home market are affected. In the UK the mid-size companies suffer the double whammy of sterling's fall against the dollar (so their largely sterling-denominated earnings fall in dollar terms) plus the general rock-bottom consumer and investor confidence in the UK market.

but in fairness peregrinus considering your point a

both the euro and the pound have been hammered by the dollar in the last 15 month both equally about 15 percent since about august 2019 and also after the referendum there is not a big change either in the value . and the truss blunder was just really stupid politics something the torries voted for.

iam sure there is a better chart but overall i do not see a dramatic change of euro vs pound to the us since brexit ref. at first sight , it almost looks like the pound was if anything slightly stronger until the truss blunder.

George Eustice making some damning criticisms of Liz Truss over the UK-Australia trade deal. He pretty much says the deal is terrible for the UK and Truss is the reason it's terrible.