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Speaker 1: to work. Stocks rising the most in two months as
Speaker 1: increasing speculation the Federal reserveal raise rates. This summer spark
Speaker 1: gains in financial shares, while housing data signal the economy
Speaker 1: is strengthening enough to support higher borrowing costs. The SMP
Speaker 1: five hundred index up to what he's seven points now
Speaker 1: to two thousand, seventy four, a gain of one point
Speaker 1: three percent. Nes stack up ninety two, a gain of
Speaker 1: one point eight nine percent down, indust rolls up two
Speaker 1: oh seven, a gain of one point two percent. Ten
Speaker 1: yure down six thirty seconds, yield one point eight five percent,
Speaker 1: Gold falling to a drop of one point nine percent.
Speaker 1: Crude oil forty eight sixty four for a barrel of
Speaker 1: West Texas intermediate crude of fifty six cents. Again, of
Speaker 1: one point two percent. I'm Charlie Pellett and that's a
Speaker 1: Bloomberg business flash. The Brexit vote on Bloomberg Radio. The
Speaker 1: Brexit debaate and even more heated it in the British Parliament,
Speaker 1: as a Conservative lawmaker asked the head of the Bank
Speaker 1: of England Mark Arney of his former employer, Goldman Sachs,
Speaker 1: encouraged him to warn about the risk of the UK
Speaker 1: leaving the European Union. Can I'll just give you the
Speaker 1: opportunity to refute any suggestion that Goldman Sacks may have
Speaker 1: put pressure on your second Wow. Um, it's not an
Speaker 1: allegations refuge. Well, yes, I refute it categorically and and stunned. Stunned,
Speaker 1: says smart Kearney. Let's ask David Danny blanche Flower, professor
Speaker 1: of economics at Dartmouth College, if he was stunned by
Speaker 1: this question. Danny, a brit himself and a former member
Speaker 1: of the Bank of England's Monetary Policy Committee. Welcome back, Danny,
Speaker 1: be great to chat you. I was completely stunned too.
Speaker 1: I don't think in all the time I've listened to
Speaker 1: governors of the Bank of England answering questions in front
Speaker 1: of the Treasury Select Committee. I've ever heard a governor
Speaker 1: say wow. I mean he didn't have to say much. Yes,
Speaker 1: that was quite something. That and another another person asked
Speaker 1: him about whether he'd been leaned on by the government
Speaker 1: to say that the things that he'd said, and that
Speaker 1: that actually he'd been pushing government propaganda, and the governor
Speaker 1: was not very happy, shall we say, and I think
Speaker 1: it was out of line? Why was it out of line?
Speaker 1: What's wrong with at least asking the head of the
Speaker 1: Bank of England these questions? Well, I think, I mean
Speaker 1: it's I guess it's you know, the way the way
Speaker 1: it was said probably was a little bit too much,
Speaker 1: but you're right, I mean the job of the governors
Speaker 1: to explain what he's doing. I mean he actually said,
Speaker 1: this is actually part of my remit this is what
Speaker 1: I'm supposed to do. It was asserted that this vote
Speaker 1: for Brexit is like an election, but the governor I
Speaker 1: think made it very clear that that's not true, partly
Speaker 1: because we know what would happen to the Brexit. You
Speaker 1: would leave and then there'll be a lot of uncertainty.
Speaker 1: An election is not so clear, so that was the
Speaker 1: big issue. But I think the evidence is that from
Speaker 1: lots of sources that Brexit looks like an econog economically
Speaker 1: negative event for the UK and probably for the world.
Speaker 1: Why for our listeners, who maybe are not following it
Speaker 1: as closely, why will Brexit be so negative? Well, I
Speaker 1: think the first thing is we've already seen some slowing
Speaker 1: in the UK economy, We've seen a rise in uncertainty
Speaker 1: about what the future might bring. But I think you
Speaker 1: and I have talked on this before. I mean, it's
Speaker 1: quite clear that this would be in a sense the
Speaker 1: first domino that might generate other other countries to fall
Speaker 1: next it, if you like, um, the Netherlands leaves or
Speaker 1: the Grease leaves or whatever. So the breakup of this
Speaker 1: huge economic area would be a very big deal. But
Speaker 1: I think the evidence certainly looks that it would generate,
Speaker 1: certainly in the short term, some considerable slowing of the
Speaker 1: UK economy which could feed through to the rest of
Speaker 1: the world. I mean, the FED is going to be
Speaker 1: mindful it makes a vote on very little time prior
Speaker 1: to that Brexit vote, so that that in itself is
Speaker 1: going to have an implication. I mean, obviously, if it
Speaker 1: looks like it's not going to pass, that's one thing.
Speaker 1: But if it looked like it did, if you were
Speaker 1: sitting at the FED, you'd be mindful of this to
Speaker 1: be a worldwide event. Then I just want to push
Speaker 1: back a little bit of this on the on the
Speaker 1: domino theory. I mean, domino theories have been used in
Speaker 1: the past, and they've been shown in the past and
Speaker 1: not be accurate. So rather than speculate on it, is
Speaker 1: there any way to sort of just quantify what No' Well,
Speaker 1: I don't think there's a way to quantify what the
Speaker 1: Bank having has done, which I don't think is crazy,
Speaker 1: is they have seen slowing already. Um, they've attributed half
Speaker 1: of that slowing to the fears of Brexit. We've actually
Speaker 1: seen contracts, apparently commercial property contracts that have had clauses
Speaker 1: put in them which says that in the event of Brexit,
Speaker 1: the deal won't go ahead. And that's that's obviously the
Speaker 1: first thing. But I do think that that that it
Speaker 1: has political implications, probably more than economics to other parts
Speaker 1: of Europe, and there are movements in other countries. In
Speaker 1: France and as I said in the Netherlands, that suggests
Speaker 1: that um, if a country can leave and nobody thought
Speaker 1: they could, then others could too. Remind us Danny of
Speaker 1: what the pro brexit argument is Internet sell Well, the argument,
Speaker 1: more than anything is that the UK needs its own sovereignty,
Speaker 1: it doesn't need rules set out to for it by
Speaker 1: the European community. And even though they haven't set out
Speaker 1: what brex it would look like, I mean, some of
Speaker 1: them will argued it would look like the Albanian model,
Speaker 1: that that would absolutely be wonderful and they could re
Speaker 1: negotiate all kinds of deals separately and they would have
Speaker 1: control over immigration. But but sadly they haven't really persuaded
Speaker 1: people as far as I can see in international groups
Speaker 1: around the world, including the o E, c D and
Speaker 1: the I m F. And President Obama has said, this
Speaker 1: really does not look credible, and you're not going to
Speaker 1: be very able quickly to negotiate trade deals and all
Speaker 1: the countries you're going to need to do that with.
Speaker 1: So that's so the theory is obviously that's a negative event.
Speaker 1: Is there any a fear that there will be a
Speaker 1: backlash from the electorate, from all the people explaining why
Speaker 1: a vote to leave is terrible. Well, I certainly think
Speaker 1: that's a likelihood of that, not least in fact in
Speaker 1: the government. I mean, David Cameron looks to be in
Speaker 1: trouble whichever way it goes. If there's a vote for Brexit,
Speaker 1: then obviously I think it's very likely have to have
Speaker 1: to quit. And if there's a vote not to leave,
Speaker 1: and it's pretty narrow now he's got a split party. Um, politically,
Speaker 1: this is a highly charged event. So yes, I think
Speaker 1: it's going to have implications later, but probably not least
Speaker 1: amongst the governing Conservative Party, where you actually have got
Speaker 1: some government ministers on each side. So I think that's
Speaker 1: where the biggest term was going to be. Thank you
Speaker 1: very much. Danny blanche Flower, Professor of Economics, Dartmouth College,
Speaker 1: on Twitter at d underscore a blanche Flower about the
Speaker 1: Brexit vote on June. This is Bloomberg Radio. Location, Location,
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