Well, Mark Carney wasn’t shy yesterday was he? He called out Britain’s current account deficit. He pointed out that when you import more than you export, and when you spend more than you earn, you have to “finance” the deficit by importing capital. It makes you dependent on “the kindness of strangers”.
By “strangers” he means creditors
And as long as creditors want to invest in Britain – property, gilts, stocks and factories – you can run a current account deficit equal to 4 or 4.5% of GDP. It’s when those stranger/creditors lose confidence in your economy that they stop buying your assets. You lose your financing and the currency falls.
Carney is worried that the longer the Brexit debate goes on, and the more uncertainty there is about the outcome, the greater the possibility of a “risk premium being attached to UK assets”. Translation: the more bitter the Brexit debate, the worse it could be for the current account deficit and the more British investments would have to pay strangers/creditors to entice them to buy our assets.
Category: Brexit