COMMENT: Dear Marty,
In your recent blog about BREXIT, and. “Remainers acting in self-interest”, you produced an ONS graph showing UK’s growth rates before and after joining the EU (previously known as the Common Market), and concluded: “Britain has NEVER received a fair deal since joining the EU”.
Surely you have overlooked a groundbreaking event in the early 1970s, which has shaped economic cycles and led us to where we are today: Nixon’s fateful decision to ditch the Gold Standard?
Regards,
Raj

ANSWER: No, the two are not connected. Bretton Woods collapsed on August 15th, 1971. The peak in Britain’s GDP came in 1973. Nixon closing the gold window was by no means discretionary. To the contrary, there was no alternative.

The gold standard failed as it always does. You simply CANNOT FIX the value of money. It was stupid to create Bretton Woods with a fixed exchange rate. Once again, people argue currency manipulation for trade when the free markets control the value of currencies today. China has tried to support the yuan, not suppress it for trade benefits.

The government cannot fix the money at some arbitrary value and then spend whatever they want, thereby increasing the supply of the currency while keeping the value to gold fixed. A grade-school child could figure out the inevitable collapse. I was called into the ERM Crisis for they overthrew Maggie Thatcher to try to take the pound into the coming Euro. They fixed the pound at absurd levels and they created Black Wednesday. I was called because again I warned this would fail but only Maggie would listen. They tried to fix the pound in the European Exchange Rate Mechanism and it blew up in their face.

Currency pegs all face the same fate. The British attempt to fix the pound after World War I was absurd. On September 20, 1931, Britain abandoned the gold standard. It was an event that has scarred political memories for two generations, for the financial crisis which preceded it led to the fall of the minority Labour administration and the decision by its leader, Ramsay MacDonald, to form the National Government with the help of the Conservatives. Electoral catastrophe followed for Labour, and many within the party never forgave MacDonald. Labour’s suspicion of the international banking community, which played a part in the government’s fall, dates from this experience, too.

The Swiss tried to peg the currency against the euro and that blew up. There is no exception in history. The fate of pegs is always the same because there is this thing we call the business cycle.

COMMENT: Dear Marty,
In your recent blog about BREXIT and the Yellow Hammer leak, you say: “British pound is still under pressure as the propaganda machine is in full force”.
Surely anyone can see is that the £ falls whenever no-deal propaganda is in the ascendancy, and £ rises when Remain or Brexit with a deal is trending higher???

R

REPLY: This is the same thing as when the pound was not going to join the euro. The propaganda was that the pound was going to collapse and Britain would not be able to export unless it joined the Euro. I cannot tell you how many companies we had to rescue from shorting the pound out of fear it would collapse. The propaganda even convinced the top German auto manufacturers, Mercedes, and they shorted the pound for two years worth of sales. The exact opposite took place. We were called in to reverse all the hedges that lost $1 billion because of that nonsense. They then set up a meeting with the board of Daimler which was separate back then. The board had passed a resolution that once a hedge was taken they would let it run. We made back the $1 billion for Mercedes and the last day of the fiscal year, Daimler and Mercedes were merged to hide the $1 billion loss at Daimler.

Despite all the propaganda that desperately tried to say Britain should ditch the pound and join the euro, what occurred was exactly the opposite of the underlying trend. The euro declined religiously into May 2000 before a sustainable rally took place. The number of short positions against the pound sterling was staggering. It felt like we became simply a British firm in those days putting out fires the bankers all started with their recommendations to short sterling.

With the propaganda machine, we are once again in the very same position with the same absurdity that the pound will crash and Britain will sink below the wave if they do not surrender sovereignty to Brussels.  They always preach the same doom and gloom about trade playing the same scenario with the same pitch we heard back in the 90s. They just roll out the same BS every single time.