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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Treasury Dodgy Dossier Claims 6% BrExit Price for Freedom, But Bank Bailouts Cost 16%

ElectionOracle / EU_Referendum Apr 19, 2016 - 04:13 AM GMT

By: Nadeem_Walayat

ElectionOracle

The UK Government (Treasury) has released its latest 200 page dodgy dossier as part of the REMAIN establishment camps FEAR campaign on the forthcoming EU Referendum / Vote for Freedom (June 23rd). Today the Chancellor George Osborne led the charge of the light brigade by publishing a report that concluded that leaving the EU would cost the UK potential future GDP growth of 6.2% (Canada model) per annum by 2030 in relative terms i.e. that if BrExit happened annual GDP whilst still growing would be 6% lower by 2030 than if Britain had Remained within the EU.


The Treasury went further to give a figure in terms of the annual cost to the average household of £4,300. Which implies that the average household earns about £69k per annum i.e. £4,300/6.2*100 = £69k, but according to the ONS average household income is just £45k. Why the £24k difference? We'll that's why it's a dodgy dossier that just does not add up!

However, the first gaping hole in the governments propaganda, is that the government cannot even forecast accurately 12 months forward let alone 14 years! For instance a year ago the UK was forecast to grow in 2016 by 2.6%. Whilst today that has been cut to 2% with 9 months to go!

Secondly, that the UK Treasury is forecasting the impact on total GDP rather than GDP per capita. Because the Treasury model has another 14 years of out of control immigration built into it's calculation, whereas leaving the EU would result in far less immigration and hence higher per CAPITA GDP. For instance if net immigration fell to 100k per annum against the present trend towards 400k per annum then that would amount to a population difference of 4.2 million, or about 6.5%, which on it's own demolishes the claims of the governments dodgy dossier, all without considering ANY of the POSITIVE economic consequences of BrExit such as bringing immigration under control which the dodgy dossier again fails to include.

Furthermore if the same SAME formulae were used to calculate the loss of potential GDP i.e. the difference in GDP if the Banking crash and bailouts never happened that tax payers were forced to fund to the tune of £500 billion via the Bank of England and taking on £4 trillion of banking sector liabilities that resulted in the Great Recession, with GDP slumping by 5% by Mid 2009 coupled with the collapse in interest rates that still persists.

Initial collapse in GDP to -5% is a permanent ongoing annual loss of output for the next 22 years (2008 to 2030), so the starting point is that GDP in 2030 is going to be 5% lower than potential.

Secondly, the continuing bailout of the banking system by means of ZERO interest rates and QE with signs that rates may even go negative so as to allow customer bank deposits to be stolen. Then this continuing banking system support costs Britain an estimated 1% loss of GDP PER YEAR i.e. each years growth on average tends to be 1% BELOW potential that COMPOUNDS, for instance this year the UK will likely grow by 1.6% against potential for 2.5%. In fact the Bank of England was forecasting 2.5% growth for GDP but as has been the case for virtually EVERY year since 2008 tends to cut the forecasts as reality dawns, the net effect being persistent 1% under performance every year that feeds through to the following year.

This 1% under performance over 22years converts into a huge difference in potential of 11% (22x1/2)! Therefore the total actual and potential cost to the British economy of the consequences of bailing out the banking crime syndicate is approx 16%! Many multiples of the UK Treasury estimate of potential loss of 6%, and again this does not take into account the positive impact in terms of per capita output as there would be approx 4.2 million LESS migrants settling in the UK by 2030 than would otherwise be the case.

And following the UK Treasury's conversion of the percentage into impact on household income at the same rate then converts into a loss to every household of £11,096 by 2030 EVERY YEAR! THAT is the REAL cost of Britain's insidious banking crime syndicate whom most of the politicians serve, and which I warned at the time (2008) in numerous articles that ordinary people would end up paying the price for the bank bailouts for a decade to come!

Freedom Always Carry's A Price

The bottom line is that a BrExit WILL carry a cost, but that cost is unlikely to result in a permanent lost of GDP i.e. my consistent analysis has concluded that BrExit would likely cost between 2% to 5% of GDP per annum for the first 5 years or so following BrExit, which would be followed by a period of out performance and thus result in GDP per CAPITA being at least 6% HIGHER in relative terms by 2030.

03 Feb 2016 - David Chamberlain Cameron, Britain's Last Chance for Freedom From Emerging European Super State

Britain's Last Chance to Gain Freedom from Emerging European Super State

What most pundits fail to recognise or lack experience of is trend and momentum both of which for the past 40 years have been moving in one direction that for the emergence of a highly centralised European super state that the financial crisis and subsequent economic depression of southern europe is accelerating the trend towards.

So whilst it is too late for the euro-zone members who for better or worse are locked into a death embrace that has all but nullified democracy for most of the euro-zone states as the elections in Greece, Spain and Italy have clearly demonstrated the lack for even radical governments such as Syriza to do anything other than obey their German paymasters who control the euro currency and can within a couple of weeks bring fellow euro-zone members to the brink of collapse as was repeatedly demonstrated by Greece last year.

Thus, for Britain the saving grace of not being in the euro-zone offers the UK a unique final opportunity to make the choice of either FREEDOM or become another satellite state revolving around a German centre that will increasingly dictate terms and conditions.

Therefore, given that there would probably not be another referendum for at least 20 years, then this really is Britain's VERY LAST CHANCE. There WON'T be another opportunity because with each passing year the price for a BREXIT increases, and we are not that far off from the point of no return when an exit would result in an economic collapse, much of the situation the euro-zone members have been since they signed up to scrap their currencies and join the Euro-zone.

Of course both the LEAVE and the REMAIN camps put out a lot of propaganda and spin on the others consequences. For LEAVE it's a case of everything smelling of roses in a Britain that has been freed from increasing European bureaucracy and interference, that would be in full control of Britain's borders. Whilst the REMAIN camp paints a picture of FEAR, of economic and financial catastrophe coupled with punitive terms for exit that would seek to punish Britain for daring to exit the euro-zone, so much for so-called european unity built on common purpose and friendship instead the European Union is increasingly a club of FEAR and PARALYSIS.

The Price for Freedom

The truth is that a BREXIT WILL BE ECONOMICALLY PAINFUL despite all of the benefits of being outside of the E.U. The cost of BrExit will be anywhere from 2% to as high as 5% of GDP if the euro-zone is determined to make an example of Britain to act as a warning to others by raising punitive tariffs on trade. However remember that attaining FREEDOM ALWAYS carry's a PRICE, in which respect even the worst case scenario for a 5% loss of GDP in the grand scheme of things does not compare against the infinitely greater price the people of Britain paid for their freedom in both past World Wars and so it is now THIS generations turn to pay a price for the freedom of future generations.

What the people of Britain need to fully understand is that this really is their VERY LAST CHANCE for Freedom!

https://youtu.be/MF3QLhoxkwQ

And also see my facts check of the Conservative Governments propaganda leaflet.

https://youtu.be/_AaU3ZgRkeU

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By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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