Friday 8 December 2017

UK trade stats, Brexit and economic rebalancing

UK October trade stats out. If we are running about £120bn trade deficit, mostly with China and the EU, at a 35% tax rate and say an average manufacturing wage of £35k, that is worth 3.4 million good quality jobs and £42bn of direct taxes. You would also get indirect jobs and taxes from the secondary effects of more domestic activity.

Not that surprising Germany doesnt want to change anything in the EU. When elections/ referedum do force the change, Germany will have a final demand crisis. Even 18 months after the Brexit vote it astounds me that politicians like May dont understand how it happened, while others like Corbyn get it but are forced by New labour MPs to argue for a continuation of the status quo. 

A wealthy country with a balanced economy should be running a surplus of a few % of GDP, so the actual delta on a rebalancing would be even bigger than the numbers above. 

It will happen as the economy rebalances to higher wages, high investment and saving and higher exports. Continuing negative real rates, tight employment and an infrastructure/ house building programme should push things in the right direction.

That change also represents a massive rebalancing of economic sectors in the UK, and similarly the US.

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