Prelude on terminology

Uncertainty surrounding the outcome of Brexit has caused the British pound to be devalued against the main international currencies. British importers must therefore pay more pounds to buy the foreign currency required to pay for their imports of finished goods and components. Higher prices, in effect.

But it is wrong to refer to this as “inflation” just because prices have risen. Real inflation is an increase in the money supply caused by successive waves of money printing by the Treasury and its willing partner in crime, the Bank of England, effectively conjuring up debt that will never be repaid, followed by its monetisation.

Central banks have been practising this form of credit expansion to stave off the recessionary consequences of earlier credit expansion – a monetary inoculation that inverts cure and disease.

Only the European Central Bank continues to buy sovereign bonds artificially created in this way – effectively bailing out the banking systems of southern European states of Italy, Spain, Portugal and Greece.

Brexit uncertainty

That is a snapshot of where we are now. But let’s revert to the other cause of today’s rising prices: the uncertainty referred to at the beginning of this essay.


uncertainty is accompanied by an irrational fear of the unknown


As usual, uncertainty is accompanied by an irrational fear of the unknown, and that in turn has spooked the thinking of those who succumb to the doomsayers’ warnings of Britain outside the EU, ignoring the umpteen millennia during which Britain flourished without membership of a customs union.

The elements of that fear are myriad, and concern such questions as availability of future employment opportunities; whether the NHS can survive without foreign employees; whether the world’s major financial centre will suddenly migrate from London to Paris or Frankfurt; whether the predictions of such formidable brains as Carney, Osborne, Lagarde, Clegg, Heseltine, Blair, Clarke and all the other forecasting geniuses might, after all, be right; whether Britain’s future security will be irremediably jeopardised by going it alone; whether Barnier’s and Juncker’s hollow threats must be taken seriously. Or whether, in effect, modern Britain is economically dependent on EU membership for survival.

Rational analysis of costs

The only way to defeat all this emotional folderol is to subject it to rational economic analysis. What we observe is that a far more justifiable fear lies within the EU team that is supposed to be “negotiating” with Britain, yet behaves far more like a stonewaller. Having done their sums, its members are confronting the awful truth that the real dependency is exactly the other way round.


without the UK the EU is in dire financial straits


As Alasdair MacLeod of ‘Goldmoney’ has recently pointed out, Brussels’ bloated administration costs stand at almost exactly the same amount as Britain’s net annual contribution to the EU budget of €8 billion, and hence that without the UK the EU is in dire financial straits. Why else do you suppose they were irrationally adamant that agreement on the size of the “divorce bill” must take priority over all other severance issues? By contrast, would a threat by, say, Romania to leave the EU be greeted by such acrimony and spite?

The EU’s post-Brexit economic outlook will hinge on the ability of France and Germany to meet not only the EU’s huge existing commitments, but also to stump up the wherewithal to meet the cost of the grandiose aspirations of its unelected upper echelons, including the creation of its own EU standing army, and an annual eurozone budget to be “managed by a eurozone parliament and eurozone finance ministry”, to quote economic moron Macron.

He is advocating full financial sector regulation, which will include a banking union, a capital markets union, full fiscal convergence, a joint European budget and a “crisis stabilisation mechanism” – a neat euphemism for bailing out Italian, French, Greek, Spanish and Portuguese banks with German and Dutch money, as Patrick Barron has put it.


We are, in effect, looking at the socialist model of a fiscal transfer union


We are, in effect, looking at the socialist model of a fiscal transfer union with the ECB as backstop. Even its chairman, “whatever-it-takes” Mario Draghi, must know that, as monetary policy goes, “kicking the can down the road” doesn’t work in a cul-de-sac! Any plans to forge a genuine economic recovery in the EU would have no realistic place in his sights if he faces another retinue of Southern European states needing bailouts. He also knows that in a systemic EU financial meltdown the UK will bear no liability whatsoever.

It’s not only Britain

Even though the EU’s assemblage of erstwhile enemies is preferable to warfare, its structure is rigidly centrist, bureaucratic and, after 20 years of qualified audit reports, financially unaccountable.

This is an unsustainable formula and the Brexit vote was one of the early indications of what will inexorably follow, piece by piece. The big cheeses in Brussels, even now, haven’t a clue about the root causes of the disaffection that manifested in the referendum result. It is so much easier for them to blame racist xenophobia, or electoral stupidity, or Britain’s historical awkwardness.

The former Polish Prime Minister (now President of the European Commission) Donald Tusk pointed out recently that one of the goals of Poland’s ruling party is “to free Polish politics from the burden of the EU”. Then he added the comment that says it all: “I can easily imagine a situation when Poland finds itself among the ‘net payers’; then the government would feel it is time to ask Poles if they want Poland to continue being in the EU”.

This replicates, precisely, the fears of the reservoir of “remainers” everywhere: the availability of an ECB bailout stands, in their minds, as a beacon of salvation for any EU member lacking confidence in its ability to generate sufficient wealth to meet its commitments.

The EU is not a free trade area

This blinds them to the reality that the EU is an unvarnished customs union and not a free trade area at all. Free trade areas remove trading barriers between members, as a result of which participants become wealthier while retaining their right to trade with other countries.

A customs union, by contrast, erects a tariff wall around its members who, by virtue of that membership, are bound to surrender their right to enter into independent trade agreements. Of 28 member states in the ‘single market’ only Britain and Germany sell more goods and services to the rest of the world than to the EU. It is interesting that we in the UK have never had a trade agreement with our largest trading partner – by far – the USA.

The EU opted for a customs union as a step towards its supreme goal of an “ever closer” political union that continues to obsess the fantasists in its upper ranks. Beyond the trappings it already possesses (legal and parliamentary supremacy over its members, a president, a foreign minister, passport-backed citizenship rights, written constitution) there is much more to come.

Anti-competitive practices

In the “ever closer” dream there is certainly no room for anything as vulgar as competition. Take taxation. One of the early signs of President Macron’s true colours was his fervent advocacy of tax “equalisation” as part of the move towards full regulatory equivalence – a principle in which he adamantly believes. Yet, Hungary (to take one example) legislated for a low-rate flat tax years ago. Prime Minister Victor Orban has been quite clear where he stands: “Our low tax rate gives us a competitive advantage, and we cannot do without it!”


putting it another way, “stuff you, Macron!”


Or, putting it another way, “stuff you, Macron!”

EC President Donald Tusk confronted an issue of real and immediate concern last month when he criticised the mandatory relocation of refugees among member states as “highly divisive” and “inefficient”. It didn’t take long before the EC Commissioner for migration described Tusk’s statement as “unacceptable” and “anti-European”, adding “it disrespects all the effort we have made over the last years. It undermines one of the key pillars of the European project: the principle of solidarity. Without solidarity, the EU cannot work.”

Note the words

I assume that by now you are getting the socialist message that underpins the aspirations and objectives of the EU project’s leading proponents, and can see where this is leading. The clue to its real nature lies in its sinister linguistic style – terminology sufficiently imprecise to conjure up the opposite of what it really means. Not quite in the category of referring to a concentration camp as a picnic spot, yet far more than a mere euphemism.

The “harmonisation”, “equalisation”, “convergence”, “stabilisation” “equivalence” and “solidarity” programmes now on the regulatory agenda will, for example, compel the East European low-tax states to adopt tax-rate hikes that will rob them of their competitive tax advantages and finally confront them with the undemocratic consequences of losing their erstwhile autonomy. To quote Edmund Burke, “the people never give up their liberties but under some delusion”.


a sea of uniform mediocrity


All these innocuously sounding words are designed to submerge any notion of the uniqueness of individual worth – the very essence of what makes the fruitful division of labour possible – in a sea of uniform mediocrity. The insane, unworkable tax equalisation aspirations apply to the entire gamut of regulatory “equivalence” (including welfare systems on the French model) all of which are being adopted in formal policy statements by terribly important, highly paid people in Brussels, Strasbourg and Luxembourg who, let’s face it, have nothing better to do than instruct other people how to live their lives.

Regulatory lunacy

There are in force in the EU between 30,000 and 40,000 regulations from which the UK is in process of selectively divesting itself. Although many of these embody laudable and worthwhile aims, why on earth do they need to be enacted and enforced at the most senior pan-European level, when their nature is so routine that any mandated local government agency or council could pass them? Why do citizens of every member state need a European regulation on the maximum permitted suction power of a domestic vacuum cleaner? Or a European regulation on the exact proportion of a cigarette packet that must be taken up with health warnings? Or permitted ingredients of common weed killers? A plastics tax? Workers’ rights? Clean beaches?

The answer is an all-consuming obsession with the imposition of regulatory conformity across all 27 states, leading to a level of dictatorial, illiberal and interventionist pettiness that has already become the very antithesis of democracy.

Get it?