“Expert” is defined as a person whose research, knowledge and experience accords them the respect of their peers in a well-distinguished domain.
Economics is just such a domain, yet the degree of diversity in the views of so-called experts can be astonishing. Take one of today’s most topical issues: will a UK exit from the EU be a blessing or a disaster? Those who take the former position point to a saving for the exchequer of some £8 billion each year; a return to sovereign integrity and the restoration of democratic self-determination in all areas of national life.
At the other extreme are experts who cite, with equal relish, UK/ EU trading statistics, concluding that the loss of trade following a UK exit would induce a spiral of decline and years of irremedial economic gloom.
Who should we trust? Since criteria defining an expert include “experience”, and since unilateral exit from the EU has never been experienced, reliance on basic common sense may be preferred to any feigned expert opinion.
What does common sense tell you about the following opinion of a leading EU motor industry chief? “All trading countries should have their sovereignty, but don’t even discuss leaving a trading partner to whom 50% of your exports go. That would be devastating for the UK economy.”
“Trading countries” is a contradiction in terms. Nations do not trade. People and businesses trade.
This expert’s assertion is widely shared, but it is flawed. “Trading countries” is a contradiction in terms. Nations do not trade. People and businesses trade. A trade in goods or services occurs when, and only when, the most that a buyer is prepared to pay exceeds the least that a seller will accept. In such circumstance a price will be struck.
The buyer expects the goods to be of merchantable quality, and the seller expects to be paid in a currency whose purchasing power can be trusted to endure. Thus it is and always will be. Free trade is human nature, and the only thing governments do is get in the way, either by imposing quotas and embargos, or by debasing the currency.
Free trade – that’s what really matters
There is nothing EU membership can bestow that free trade does not already guarantee. But currency debasement, now so prevalent that it passes as policy, will hinder free trade as surely as any embargo. Actions now pursued by central banks everywhere rely on the impossible notion that a weak currency is a good thing because it will induce an export-led revival, ignoring the corollary that there must always be an importer at the other end.
This ludicrous race-to-the-bottom is self-defeating. Everyone else is also flooding the bond markets with newly-printed fiat money, carrying the inescapable consequences of inflation and higher production costs. This internal transfer of wealth is a theft suffered by each country’s own citizens.
The endgame being played out in many troubled EU states is closing in. Germany is the exception, but for how long will a thriving economy allow a bunch of blunderers control its currency? Berlusconi’s come-back plea to the European Central Bank is “to act like a real central bank and therefore print money – or we shall be forced to leave the euro and return to our own currency!”
And Spain? Right now the only buyers of its government’s debt are the pension funds of its own state workers. Talk about the snake eating its own tail.