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This generic explanation for everything always gets posted to HN whenever the UK comes up in any capacity, but it isn't "fact based economics". Inflation is sur

This generic explanation for everything always gets posted to HN whenever the UK comes up in any capacity, but it isn't "fact based economics". Inflation is surging throughout Europe and the world. Trading Economics has a useful map that visualizes it: https://tradingeconomics.com/country-list/inflation-rate https://tradingeconomics.com/country-list/inflation-rate Inflation is high because governments printed enormous sums of money to fund lockdowns and furloughs. Helicopter drops of money creates inflation, it's as simple as that. This effect was predicted right at the start of lockdowns and now it's here. Moreover Brexit only actually took effect at the very start of 2020 so there was all of a few months to do anything before COVID hit and the government had no time to actually do much with its new powers. Honestly, it's very tiring to see these kind of unsubstantiated comments so systematically rise to the top. If you want to prove something is causally linked to leaving the EU you need to prove it, not simply assert it and then declare anyone questioning that assertion is engaged in "denial".

jmfldn 4y ago
Is the OBR's own analysis of Brexit evidence enough for you? Even Jeremy Hunt has conceded Brexit is causing problems! https://www.politico.eu/article/brexit-had-significant-adverse-impact-on-uk-trade-says-public-finances-watchdog%EF%BF%BC/ https://www.politico.eu/article/brexit-had-significant-adver...
- mike_hearn 4y ago
  Jeremy Hunt campaigned for Remain and then pushed for a second referendum when his side lost, so it's unclear why you think his anti-Brexit stance is worth remarking on. Are you thinking of someone else, perhaps? Re: OBR. We're talking about food price inflation. The article you cite in turn cites the OBR, but (a) contrary to what you're suggesting the OBR doesn't have seem to have done any of its own analysis and (b) it only mentions Brexit twice, once about immigration and the other is a single paragraph which isn't about food price inflation. It says: "Our trade forecast reflects our assumption that Brexit will result in the UK’s trade intensity being 15 per cent lower in the long run than if the UK had remained in the EU" They don't define what "long run" means and they don't state where this assumption came from. That's the quality of the OBR's in-house analysis: there isn't any. That's not a huge surprise. The civil service has a poor track record of economic forecasting in all respects, but especially on anything to do with Brexit. The government forecast before the vote that voting to leave (not leaving, just voting to leave) would trigger an immediate recession in which between 500,000 and 800,000 jobs would be lost, due to "uncertainty". In fact the economy grew and unemployment fell. They do then mention the "latest evidence suggests a significant adverse impact on UK trade", and cite two other papers. Both are only about claimed changes in UK/EU trade, not UK trade as a whole. The first ESRI paper relies on such complicated modelling it's not worth spending time on and their abstract asserts a dubious assumption right up front. The LSE paper states: "Second, the implementation of the TCA triggered a small and only temporary decline in relative UK exports to the EU in 2021. These sharply fell in January, immediately following the introduction of the TCA, but quickly recovered within half a year" It does say that the UK reduced imports from the EU significantly, but this would be expected given the currency value decline and that the EU external tariffs no longer discourage UK companies from importing from outside of Europe. The UK trade balance hasn't had a sudden improvement so it just means imports are now more balanced w.r.t. ROW.
  - jmfldn 4y ago
    Why mention Jeremy Hunt? Just the small matter of him being the Chancellor of the Exchequer of the UK govt with a track record of good analysis. Believe what you want at the end of the day. I would love to have to been proven wrong, but Brexit is an unmitigated disaster to almost every expert worth listening to.
    - mike_hearn 4y ago
      But you said "even Jeremy Hunt has conceded", implying his position is new. It isn't. Hunt's previous analysis of Brexit, from the original campaign: https://www.theguardian.com/politics/2016/mar/26/nhs-under-threat-from-brexit https://www.theguardian.com/politics/2016/mar/26/nhs-under-t... "The National Health Service will face budget cuts, falling standards and an exodus of overseas doctors and nurses if the UK leaves the European Union" NHS budget has dramatically grown since leaving the EU and so has NHS employment of immigrant workers: https://www.nuffieldtrust.org.uk/chart/number-of-eu-and-non-eu-nurse-registrations-uk-1990-91-to-2020-21 https://www.nuffieldtrust.org.uk/chart/number-of-eu-and-non-... i.e. his predictions were wrong and his track record is therefore not good.
      - jmfldn 4y ago
        My point is that, as Chancellor of a government which accepts Brexit as a done deal, it is interesting for him to do anything other than shower Brexit with praise. Criticism from within the ranks of the Tory government is significant and a sign of shifting tides. This is the sense in which he 'conceded'. Until recently this was omerta. As I say, believe what you want, I genuinely want to be wrong as I feel ever-growing despair at what has happened to my country, not least under recent Tory governments. We are a country in decline. I'm now pretty certain of it.
        mike_hearn 4y ago
        "Criticism from within the ranks of the Tory government is significant and a sign of shifting tides" Well, the Conservatives officially campaigned to remain and Boris had to kick out dozens of MPs at the last election to even be able to implement the vote at all. Whether someone is a truly reformed Remainer or not has been a question at every leadership contest since. So there's nothing significant or new about Tories disagreeing with Brexit, it's a pretty standard position within the party. "We are a country in decline. I'm now pretty certain of it." I am too! We don't actually disagree on that. The GDP/capita trends are pretty clear there, especially when compared to the USA. It's not relevant to food price inflation which has different causes, however. The difference between us is I think the issues long pre-date 2016, are mostly to do with entrenched social attitudes, were made worse/locked in place by EU membership and therefore that Brexit is a necessary (but not sufficient) condition for reversing the decline. Whereas you see a decline as a recent thing and Brexit/the ruling party as the cause.
klelatti 4y ago
If you read my comment you will find no link between Brexit and inflation. Rather that Brexit had undermined the discourse about how to manage the economy. I gave two specific examples of how this is happening. This is clearly relevant to any discussion of the U.K. economy.
VBprogrammer 4y ago
There is no reasonable way of proving casually in a world where we have been subjected to a permicrisis, some of it outside of our control, for the last 7 years. You can't easily separate one element of a multidimensional puzzle which is the state of a whole counties economy. However, the idea that leaving the biggest trading block in the planet in exchange for a couple of piss poor (by the admission of those people who negotiated them) trade deals with small economies on the other side of the world hasn't damaged our economy is the more extraordinary claim.
- mike_hearn 4y ago
  It's not particularly extraordinary because the UK's economy is dominated by services companies, and the EU single market never really made progress for services. They only developed and enforced a single ruleset for goods. Attempts were made from time to time to liberalize the market in services but usually failed because it would have benefited the UK at the cost of France/Germany, whereas for goods it was the other way around. That's why exports to the EU haven't changed much (see my other comment). Imports did fall, but that the UK continues to import from elsewhere so it's unclear why people in Britain should care. The EU lost an export market, the UK didn't really (because the EU rules weren't benefiting that market in the first place). This is the sort of thing I mean - there are a lot of people who very much want leaving the EU to be a disaster for long term ideological reasons. To determine whether it actually is or not requires a holistic analysis that goes well beyond economics, but at the moment even establishing basic economic facts like "inflation is not caused by Brexit" is apparently hard.
deleted 4y ago
[deleted]
ColonelBlimp 4y ago
Inflation has a supply dimension that should be mentioned too. Not everything can be explained by excessive consumer demand.
davewritescode 4y ago
We have evidence that Brexit is making food imports more expensive and the UK has been slow to tackle inflation in the first place. Like yes, increasing the money supply is the root cause here but nobody ever states what the alternative should’ve been.
- Taurenking 4y ago
LightG 4y ago
I'm quite sure the OP was responding to the assertion that the UK was declining, not that current inflation is just a UK specific problem (though I could easily point to some Brexit specific issues that have made it worse than that which other countries are experiencing) I hope this clarification has made you feel less tired.
- mike_hearn 4y ago
  The OP was responding to the article not another comment, and the article doesn't make any generalized claims about decline, so I don't think they were responding to anyone's assertion but rather making their own.
legulere 4y ago
Printing money only leads to inflation, if it ends up in hands that spend it, which didn’t really happen. We have massive supply side issues though: extreme gas prices in Europe, raised gas prices in the rest of the world and raised oil prices in the world because of the Ukraine war. Extreme electricity prices in Europe because of failing French nuclear reactors. Missing parts from China because of a continuing zero-covid strategy there.
- mike_hearn 4y ago
  It's both: the UK printed money on a vast scale and then gave it directly to people via cash transfers, whilst simultaneously shutting down things it might have got spent on. It was being handed out so easily that they estimate £17 billion were lost to fraud alone. Spending on furlough was approx £70bn, and the population of the UK is only officially 67.3 million so that was basically cash handouts of ~£1000 to every single man woman and child in the country. As a consequence, savings broke records over the pandemic period [1]. Now restrictions are gone that money is flooding into the economy as everyone tries to buy things. Simultaneously supply chains are still recovering and energy/gas supplies are limited, this is true. Nonetheless, you can't print thousands of pounds per person and not expect that to create large price increases. [1] https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/articles/economicmodellingofforcedsavingduringthecoronaviruscovid19pandemic/2022-06-06#:~:text=Using%20an%20econometric%20model%20of,of%20annual%20household%20disposable%20income https://www.ons.gov.uk/economy/nationalaccounts/uksectoracco....

jmfldn 4y ago

Is the OBR's own analysis of Brexit evidence enough for you? Even Jeremy Hunt has conceded Brexit is causing problems! https://www.politico.eu/article/brexit-had-significant-adverse-impact-on-uk-trade-says-public-finances-watchdog%EF%BF%BC/ https://www.politico.eu/article/brexit-had-significant-adver...

mike_hearn 4y ago
Jeremy Hunt campaigned for Remain and then pushed for a second referendum when his side lost, so it's unclear why you think his anti-Brexit stance is worth remarking on. Are you thinking of someone else, perhaps? Re: OBR. We're talking about food price inflation. The article you cite in turn cites the OBR, but (a) contrary to what you're suggesting the OBR doesn't have seem to have done any of its own analysis and (b) it only mentions Brexit twice, once about immigration and the other is a single paragraph which isn't about food price inflation. It says: "Our trade forecast reflects our assumption that Brexit will result in the UK’s trade intensity being 15 per cent lower in the long run than if the UK had remained in the EU" They don't define what "long run" means and they don't state where this assumption came from. That's the quality of the OBR's in-house analysis: there isn't any. That's not a huge surprise. The civil service has a poor track record of economic forecasting in all respects, but especially on anything to do with Brexit. The government forecast before the vote that voting to leave (not leaving, just voting to leave) would trigger an immediate recession in which between 500,000 and 800,000 jobs would be lost, due to "uncertainty". In fact the economy grew and unemployment fell. They do then mention the "latest evidence suggests a significant adverse impact on UK trade", and cite two other papers. Both are only about claimed changes in UK/EU trade, not UK trade as a whole. The first ESRI paper relies on such complicated modelling it's not worth spending time on and their abstract asserts a dubious assumption right up front. The LSE paper states: "Second, the implementation of the TCA triggered a small and only temporary decline in relative UK exports to the EU in 2021. These sharply fell in January, immediately following the introduction of the TCA, but quickly recovered within half a year" It does say that the UK reduced imports from the EU significantly, but this would be expected given the currency value decline and that the EU external tariffs no longer discourage UK companies from importing from outside of Europe. The UK trade balance hasn't had a sudden improvement so it just means imports are now more balanced w.r.t. ROW.
- jmfldn 4y ago
  Why mention Jeremy Hunt? Just the small matter of him being the Chancellor of the Exchequer of the UK govt with a track record of good analysis. Believe what you want at the end of the day. I would love to have to been proven wrong, but Brexit is an unmitigated disaster to almost every expert worth listening to.
  - mike_hearn 4y ago
    But you said "even Jeremy Hunt has conceded", implying his position is new. It isn't. Hunt's previous analysis of Brexit, from the original campaign: https://www.theguardian.com/politics/2016/mar/26/nhs-under-threat-from-brexit https://www.theguardian.com/politics/2016/mar/26/nhs-under-t... "The National Health Service will face budget cuts, falling standards and an exodus of overseas doctors and nurses if the UK leaves the European Union" NHS budget has dramatically grown since leaving the EU and so has NHS employment of immigrant workers: https://www.nuffieldtrust.org.uk/chart/number-of-eu-and-non-eu-nurse-registrations-uk-1990-91-to-2020-21 https://www.nuffieldtrust.org.uk/chart/number-of-eu-and-non-... i.e. his predictions were wrong and his track record is therefore not good.
    - jmfldn 4y ago
      My point is that, as Chancellor of a government which accepts Brexit as a done deal, it is interesting for him to do anything other than shower Brexit with praise. Criticism from within the ranks of the Tory government is significant and a sign of shifting tides. This is the sense in which he 'conceded'. Until recently this was omerta. As I say, believe what you want, I genuinely want to be wrong as I feel ever-growing despair at what has happened to my country, not least under recent Tory governments. We are a country in decline. I'm now pretty certain of it.
      - mike_hearn 4y ago
        "Criticism from within the ranks of the Tory government is significant and a sign of shifting tides" Well, the Conservatives officially campaigned to remain and Boris had to kick out dozens of MPs at the last election to even be able to implement the vote at all. Whether someone is a truly reformed Remainer or not has been a question at every leadership contest since. So there's nothing significant or new about Tories disagreeing with Brexit, it's a pretty standard position within the party. "We are a country in decline. I'm now pretty certain of it." I am too! We don't actually disagree on that. The GDP/capita trends are pretty clear there, especially when compared to the USA. It's not relevant to food price inflation which has different causes, however. The difference between us is I think the issues long pre-date 2016, are mostly to do with entrenched social attitudes, were made worse/locked in place by EU membership and therefore that Brexit is a necessary (but not sufficient) condition for reversing the decline. Whereas you see a decline as a recent thing and Brexit/the ruling party as the cause.

klelatti 4y ago

If you read my comment you will find no link between Brexit and inflation. Rather that Brexit had undermined the discourse about how to manage the economy. I gave two specific examples of how this is happening. This is clearly relevant to any discussion of the U.K. economy.

VBprogrammer 4y ago

There is no reasonable way of proving casually in a world where we have been subjected to a permicrisis, some of it outside of our control, for the last 7 years. You can't easily separate one element of a multidimensional puzzle which is the state of a whole counties economy. However, the idea that leaving the biggest trading block in the planet in exchange for a couple of piss poor (by the admission of those people who negotiated them) trade deals with small economies on the other side of the world hasn't damaged our economy is the more extraordinary claim.

mike_hearn 4y ago
It's not particularly extraordinary because the UK's economy is dominated by services companies, and the EU single market never really made progress for services. They only developed and enforced a single ruleset for goods. Attempts were made from time to time to liberalize the market in services but usually failed because it would have benefited the UK at the cost of France/Germany, whereas for goods it was the other way around. That's why exports to the EU haven't changed much (see my other comment). Imports did fall, but that the UK continues to import from elsewhere so it's unclear why people in Britain should care. The EU lost an export market, the UK didn't really (because the EU rules weren't benefiting that market in the first place). This is the sort of thing I mean - there are a lot of people who very much want leaving the EU to be a disaster for long term ideological reasons. To determine whether it actually is or not requires a holistic analysis that goes well beyond economics, but at the moment even establishing basic economic facts like "inflation is not caused by Brexit" is apparently hard.

deleted 4y ago

[deleted]

ColonelBlimp 4y ago

Inflation has a supply dimension that should be mentioned too. Not everything can be explained by excessive consumer demand.

davewritescode 4y ago

We have evidence that Brexit is making food imports more expensive and the UK has been slow to tackle inflation in the first place. Like yes, increasing the money supply is the root cause here but nobody ever states what the alternative should’ve been.

Taurenking 4y ago

LightG 4y ago

I'm quite sure the OP was responding to the assertion that the UK was declining, not that current inflation is just a UK specific problem (though I could easily point to some Brexit specific issues that have made it worse than that which other countries are experiencing) I hope this clarification has made you feel less tired.

mike_hearn 4y ago
The OP was responding to the article not another comment, and the article doesn't make any generalized claims about decline, so I don't think they were responding to anyone's assertion but rather making their own.

legulere 4y ago

Printing money only leads to inflation, if it ends up in hands that spend it, which didn’t really happen. We have massive supply side issues though: extreme gas prices in Europe, raised gas prices in the rest of the world and raised oil prices in the world because of the Ukraine war. Extreme electricity prices in Europe because of failing French nuclear reactors. Missing parts from China because of a continuing zero-covid strategy there.

mike_hearn 4y ago
It's both: the UK printed money on a vast scale and then gave it directly to people via cash transfers, whilst simultaneously shutting down things it might have got spent on. It was being handed out so easily that they estimate £17 billion were lost to fraud alone. Spending on furlough was approx £70bn, and the population of the UK is only officially 67.3 million so that was basically cash handouts of ~£1000 to every single man woman and child in the country. As a consequence, savings broke records over the pandemic period [1]. Now restrictions are gone that money is flooding into the economy as everyone tries to buy things. Simultaneously supply chains are still recovering and energy/gas supplies are limited, this is true. Nonetheless, you can't print thousands of pounds per person and not expect that to create large price increases. [1] https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/articles/economicmodellingofforcedsavingduringthecoronaviruscovid19pandemic/2022-06-06#:~:text=Using%20an%20econometric%20model%20of,of%20annual%20household%20disposable%20income https://www.ons.gov.uk/economy/nationalaccounts/uksectoracco....