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by H8crilA
1551 days ago
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They (UK govt at large) tried to keep the value of the Pound up, so that the UK could join the Eurozone, which was being constructed at that time. Large inflation started building up in the UK and there was not enough buy-in to do what's right (jack up the rates, cause a recession, clean the economy; like Volcker did in the US), so they eventually had to admit to their failure and let the Pound trade down. The "insight" that Soros and others like him had was when would this happen. It's been known to be unstable for years, it was known to break eventually (unless rates go up, by a lot), the only question was when. Also, this outcome was what "the people wanted". As I wrote above, there was not enough buy-in to jack up the rates and save the currency at the expense of jobs, so the opposite happened, jobs were saved at the expense of the currency. Low currency isn't necessarily bad - it's good for some people and bad for other people. In fact these days countries routinely accuse other countries of suppressing the value of their currency, to facilitate a desirable trade balance (China vs US, as an example; remember Trump's tariffs?). |
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Didn't this prove beneficial to the UK in the long run?
The Guardian speculated in 2013 (<http://www.theguardian.com/business/economics-blog/2013/jun/...>) that if Britain had joined the Euro:
* The mid-2000s British housing bubble, and its collapse in 2007, would have been even bigger.
* Britain would have had to ask the IMF, ECB, and EU for loans.
* The Tories would in 2010 have promised a referendum to leave the Euro and won a majority. Labour would have won fewer than 100 seats, and UKIP would have "made spectacular gains".
* The anti-Euro side would have won the referendum, and the currency would have collapsed.
* "after a deep and painful recession economic recovery began".
* "Britain would have destroyed the euro on departure, and would now be on the point of leaving the EU altogether. The idea that Farage might be the next prime minister would be quite credible."
And the UK not being part of the ERM or Eurozone in no way disadvantaged London from becoming the continent's financial capital during the 1990s and later.