As all will have noted there's an awful lot of propaganda flying around about this Brexit, this idea that Britain might leap free from the clutches of the European superstate (not that we want to hide our opinion here). It is sadly true though that quite some measure of that shrieking and wailing in the headlines doesn't actually tell the story being indicated. Take this for example, that Brexit would lead to a fall in the pound, a rise in inflation and thus a rise in interest rates:
The Bank of England will need to raise its key interest rate or Bank Rate to 3.5pc by the end of next year if Britain votes to leave the EU, the newest recruit to the Monetary Policy Committee has warned privately.
Michael Saunders, who was chief economist at Citibank, and will join the rate-setting MPC in August, said the drastic rise would be needed because Brexit would cause the pound to collapse, which would send inflation sharply higher.
That does sound oh so terrible, yes. But then consider for a moment what recent economic policy has been. Something, anything, to get the pound down and the inflation rate up. For that's the mechanism by which expansionary austerity might work, as it did back in the 1930s. That's how to square that circle of having a contractionary fiscal policy: by having a massively expansionary monetary one through the exchange rate.
We've been doing this to the point that the Bank of England currently owns some £400 billion or so of the government's debt. Really, they've been tossing in the kitchen sink and inventing new tricks to try and bring about this situation. Quite why it's a bad thing if we leap free but a good thing if it's done deliberately is hard to fathom.
No, we would not say that this in itself is a good enough reason to vote leave: our point here is rather about how confused some of the boosters of remain are becoming. We are supposed to be scared of this outcome? The one which government policy has been aimed at for a near a decade already?
Interestingly, assume that it did happen: it wouldn't actually be necessary to raise interest rates in quite that manner anyway. It would provide an interesting opportunity to unwind QE though.