Following a record drop in value of British Pound, Mehr News Agency has talked to London-based Professor of binary economics Rodney Shakespeare to discuss why Theresa May’s remarks led to a devaluation of UK currency and what more is to be expected.
Here it’s the full text of interview.
Just a few days after Theresa May's announcement of March as time to implement Brexit, Pound dropped to lowest value in 31 years; no time before, even when Brexit was voted for, such a drop had happened. Why now this drop has occurred?
At present most market participants basically assume that things are broadly in balance and that, as long as there are no big shocks like Brexit, things will continue to be broadly in balance. Moreover, a large percentage of the traders are young people with little or no understanding of the lessons of history -- this is particularly so because economic history is generally not taught on the university economics courses.
So there has been a knee-jerk reaction against the UK pound.
That, in itself, is not necessarily a bad thing. An effective devaluation for the UK economy was needed -- and that is what has happened in practice.
As a result UK exports will substantially improve and people will be encouraged to take their holidays in the UK which is a country with many lovely and varied places to visit.
Does it mean that world has just realized that UK is really separating from the EU?!
Yes, the world is realising that the UK will separate from the EU. But, at the moment, the world is also failing to realise that much bigger shocks are in the offing for other countries and the UK will at least be a little better prepared for those shocks than the other countries.
For example, the EU is probably going to disintegrate and, as that happens, bigger shocks are in store. Germany's Deutsche Bank is in trouble with a huge derivative book in the form of an upside pyramid; the Italian banks are in big trouble and we may soon find that Italy is voting for the Five Star Movement and ITEXIT just as the French vote for Marine Le Pen and FREXIT.
And please remember that all the European banks are interconnected so the EU is probably in bigger underlying trouble than is the UK.
According to economics, is this drop natural and justifiable or just a media hype? is it something lasting?
Given the complacent assumptions of most market traders, the drop is probably inevitable. But overall debt levels (throughout Europe and the world) are much higher than in 2007/2008 and for the last five years the major economies have been engaged in competitive devaluation against each other which has not solved the basic problems.
The basic problems are that there is too much debt; a growing rich-poor division; and that, because of the technological shift, most new jobs are insecure, low-paid, temporary etc.
Shall we expect more and serious turmoil after March 2017 when Brexit is happened?
So we must expect much greater turmoil coming not because of Brexit but because the global economy is cracking and some sort of major implosion is coming during which the apparent troubles of Brexit will be minimal or even forgotten.
Conventional mainstream economics has little, indeed no, understanding of the huge danger in which the global economy now is. Mainstream economists have no understanding that their basic assumptions of equilibrium and 'free market' efficiency are profoundly false.
And more and more people are sensing that conventional economics has failed and they are voting against the elite and its complacent economics. NB Both Trump and Sanders in the USA are signs of a big revolt against the political and economic elite, just as Brexit is in the UK and there is similar anger in Italy, France and other European countries.
Does this pound value collapse have any impact on the EU and its economy?
The Americans keep accusing China of having an unfair advantage because of the low value of the Chinese money to the American dollar. Soon, various countries will be accusing the UK of having an unfair advantage.
How do you think it would affect Ireland and Scotland's consideration of remaining in the EU?
This is a big question but it is my view that, before Brexit actually happens, the EU will be in political and economic disorder. In short, that there will be a completely different situation with every country being in a new, unforeseen situation.
Professor Rodney Shakespeare is an author and was Visiting Professor of Binary Economics at Trisakti University, Jakarta where he taught on the international postgraduate Islamic Economics and Finance program.
Interview by Hamidreza Gholamzadeh
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