So the UK is to divorce itself from the EU and join in joyous matrimony with the loony right of the tory party – kitsch Dad’s Army imaginings are about to collide with cold hard reality.
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As the pound plunges and markets crash into turmoil, the UK may not have to wait long for the consequences of Brexit as the spectre of a credit crunch looms large over the UK’s huge debt mountains.
Of all the voices that spoke in the run up to the UK referendum on EU membership, one powerful voice got mostly drowned out as both sides ramped up the rhetoric of fear — the Bank of England.
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“Heightened and prolonged uncertainty has the potential to increase the risk premia investors require on a wide range of UK assets, which could lead to a further depreciation of sterling and affect the cost and availability of financing for a broad range of UK borrowers,” the BoE said in a statement from its Financial Policy Committee.
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A vote to leave the EU next month could precipitate a stock market crash and steep fall in house prices, the International Monetary Fund has warned. Christine Lagarde, the IMF managing director, also backed warnings from the Bank of England governor Mark Carney that Britain could fall into recession following a Brexit vote.
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So did many leading economists.
The possibility that British voters will choose to leave the European Union on Thursday is prompting increasingly dire warnings from top policy makers that the move would be a financial catastrophe for the United Kingdom.
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But one can look at easily available statistics oneself and see just how wobbly the whole situation is.
http://themoneycharity.org.uk/money-statistics/
there are many deeply worrying statistics on this page – look for yourself.
Long story short – mortgage lending is back at record levels, millions of families are piling up credit card debt to buy basic items like food and fuel, mortgage and consumer debt is back and beyond the levels that triggered the 2007/8 crash.
The last credit crunch was triggered by record levels of debt and the uncertainty caused by the collapse of Lehman Brothers back in 2007. Now we have record levels of debt again and a new cause of major uncertainty in the financial markets.
and what do we see this morning….
The FTSE 100 tumbled more than 8% within the first few minutes of trading on Friday morning, putting it on course for its biggest one-day fall since the collapse of the US investment bank Lehman Brothers in 2008.
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What’s worse, is that this time around, few of the financial weapons that the Bank of England used to stabilise the financial system last time around are available. Interest rates are at near zero already, the political climate for another multi-billion pound bailout of the banks is surely too toxic, quantitative easing (giving banks money) is already used up.
As always, the consequences of any ensuing chaos will not be borne by multi millionaire establishment figures like Nigel Farage but by the most vulnerable members of British society.
While the squeals of the tory shires about house prices will be heard on Mars – the real tragedy will be seen in the evictions, the bankruptcies, the homelessness and the misery of the UK’s growing class of the Precariat who already live uncertain lives of pay day loans, workfare, benefit sanctions and ‘jobs’ with poverty pay and zero hours contracts.
Expect more austerity and right wing brutality from a cock-a-hoop right wing of the tory party.
The UK has delivered itself into the hands of some of the most destructive ideological zealots in living memory – those who fight the good fight in the UK will have to pick up worn out tools and go again in what may well be tumultuous circumstances.
So the Brexit vote in the referendum is going to trigger – please note trigger, not cause – a credit crunch. BTW a credit crunch is defined as a risk averse banking system which will not extend further credit to investors or other banks due to the uncertainties of the macro-economic environment. The sine qua non for this was a binge of easy credit which fuelled asset-price bubbles in the housing market; particularly the sub-prime end of the housing market. This is what happened in 2008-09. And it is on the cards again only this time from even higher levels of debt.
You have to realise that if Brexit doesn’t cause the eventual bursting of the presently puffed up markets in bonds, stocks and property to historically unprecedented levels, then something else surely will. Something has got to give and it will give, if not Brexit then something else.