WEBVTT - Blanchflower: Turmoil Amongst Conservatives on Brexit (Audio)

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<v Speaker 1>to work. Stocks rising the most in two months as

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<v Speaker 1>increasing speculation the Federal reserveal raise rates. This summer spark

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<v Speaker 1>gains in financial shares, while housing data signal the economy

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<v Speaker 1>is strengthening enough to support higher borrowing costs. The SMP

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<v Speaker 1>five hundred index up to what he's seven points now

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<v Speaker 1>to two thousand, seventy four, a gain of one point

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<v Speaker 1>three percent. Nes stack up ninety two, a gain of

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<v Speaker 1>one point eight nine percent down, indust rolls up two

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<v Speaker 1>oh seven, a gain of one point two percent. Ten

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<v Speaker 1>yure down six thirty seconds, yield one point eight five percent,

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<v Speaker 1>Gold falling to a drop of one point nine percent.

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<v Speaker 1>Crude oil forty eight sixty four for a barrel of

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<v Speaker 1>West Texas intermediate crude of fifty six cents. Again, of

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<v Speaker 1>one point two percent. I'm Charlie Pellett and that's a

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<v Speaker 1>Bloomberg business flash. The Brexit vote on Bloomberg Radio. The

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<v Speaker 1>Brexit debaate and even more heated it in the British Parliament,

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<v Speaker 1>as a Conservative lawmaker asked the head of the Bank

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<v Speaker 1>of England Mark Arney of his former employer, Goldman Sachs,

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<v Speaker 1>encouraged him to warn about the risk of the UK

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<v Speaker 1>leaving the European Union. Can I'll just give you the

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<v Speaker 1>opportunity to refute any suggestion that Goldman Sacks may have

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<v Speaker 1>put pressure on your second Wow. Um, it's not an

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<v Speaker 1>allegations refuge. Well, yes, I refute it categorically and and stunned. Stunned,

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<v Speaker 1>says smart Kearney. Let's ask David Danny blanche Flower, professor

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<v Speaker 1>of economics at Dartmouth College, if he was stunned by

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<v Speaker 1>this question. Danny, a brit himself and a former member

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<v Speaker 1>of the Bank of England's Monetary Policy Committee. Welcome back, Danny,

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<v Speaker 1>be great to chat you. I was completely stunned too.

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<v Speaker 1>I don't think in all the time I've listened to

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<v Speaker 1>governors of the Bank of England answering questions in front

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<v Speaker 1>of the Treasury Select Committee. I've ever heard a governor

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<v Speaker 1>say wow. I mean he didn't have to say much. Yes,

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<v Speaker 1>that was quite something. That and another another person asked

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<v Speaker 1>him about whether he'd been leaned on by the government

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<v Speaker 1>to say that the things that he'd said, and that

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<v Speaker 1>that actually he'd been pushing government propaganda, and the governor

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<v Speaker 1>was not very happy, shall we say, and I think

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<v Speaker 1>it was out of line? Why was it out of line?

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<v Speaker 1>What's wrong with at least asking the head of the

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<v Speaker 1>Bank of England these questions? Well, I think, I mean

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<v Speaker 1>it's I guess it's you know, the way the way

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<v Speaker 1>it was said probably was a little bit too much,

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<v Speaker 1>but you're right, I mean the job of the governors

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<v Speaker 1>to explain what he's doing. I mean he actually said,

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<v Speaker 1>this is actually part of my remit this is what

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<v Speaker 1>I'm supposed to do. It was asserted that this vote

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<v Speaker 1>for Brexit is like an election, but the governor I

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<v Speaker 1>think made it very clear that that's not true, partly

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<v Speaker 1>because we know what would happen to the Brexit. You

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<v Speaker 1>would leave and then there'll be a lot of uncertainty.

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<v Speaker 1>An election is not so clear, so that was the

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<v Speaker 1>big issue. But I think the evidence is that from

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<v Speaker 1>lots of sources that Brexit looks like an econog economically

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<v Speaker 1>negative event for the UK and probably for the world.

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<v Speaker 1>Why for our listeners, who maybe are not following it

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<v Speaker 1>as closely, why will Brexit be so negative? Well, I

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<v Speaker 1>think the first thing is we've already seen some slowing

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<v Speaker 1>in the UK economy, We've seen a rise in uncertainty

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<v Speaker 1>about what the future might bring. But I think you

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<v Speaker 1>and I have talked on this before. I mean, it's

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<v Speaker 1>quite clear that this would be in a sense the

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<v Speaker 1>first domino that might generate other other countries to fall

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<v Speaker 1>next it, if you like, um, the Netherlands leaves or

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<v Speaker 1>the Grease leaves or whatever. So the breakup of this

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<v Speaker 1>huge economic area would be a very big deal. But

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<v Speaker 1>I think the evidence certainly looks that it would generate,

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<v Speaker 1>certainly in the short term, some considerable slowing of the

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<v Speaker 1>UK economy which could feed through to the rest of

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<v Speaker 1>the world. I mean, the FED is going to be

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<v Speaker 1>mindful it makes a vote on very little time prior

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<v Speaker 1>to that Brexit vote, so that that in itself is

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<v Speaker 1>going to have an implication. I mean, obviously, if it

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<v Speaker 1>looks like it's not going to pass, that's one thing.

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<v Speaker 1>But if it looked like it did, if you were

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<v Speaker 1>sitting at the FED, you'd be mindful of this to

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<v Speaker 1>be a worldwide event. Then I just want to push

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<v Speaker 1>back a little bit of this on the on the

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<v Speaker 1>domino theory. I mean, domino theories have been used in

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<v Speaker 1>the past, and they've been shown in the past and

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<v Speaker 1>not be accurate. So rather than speculate on it, is

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<v Speaker 1>there any way to sort of just quantify what No' Well,

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<v Speaker 1>I don't think there's a way to quantify what the

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<v Speaker 1>Bank having has done, which I don't think is crazy,

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<v Speaker 1>is they have seen slowing already. Um, they've attributed half

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<v Speaker 1>of that slowing to the fears of Brexit. We've actually

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<v Speaker 1>seen contracts, apparently commercial property contracts that have had clauses

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<v Speaker 1>put in them which says that in the event of Brexit,

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<v Speaker 1>the deal won't go ahead. And that's that's obviously the

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<v Speaker 1>first thing. But I do think that that that it

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<v Speaker 1>has political implications, probably more than economics to other parts

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<v Speaker 1>of Europe, and there are movements in other countries. In

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<v Speaker 1>France and as I said in the Netherlands, that suggests

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<v Speaker 1>that um, if a country can leave and nobody thought

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<v Speaker 1>they could, then others could too. Remind us Danny of

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<v Speaker 1>what the pro brexit argument is Internet sell Well, the argument,

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<v Speaker 1>more than anything is that the UK needs its own sovereignty,

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<v Speaker 1>it doesn't need rules set out to for it by

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<v Speaker 1>the European community. And even though they haven't set out

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<v Speaker 1>what brex it would look like, I mean, some of

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<v Speaker 1>them will argued it would look like the Albanian model,

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<v Speaker 1>that that would absolutely be wonderful and they could re

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<v Speaker 1>negotiate all kinds of deals separately and they would have

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<v Speaker 1>control over immigration. But but sadly they haven't really persuaded

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<v Speaker 1>people as far as I can see in international groups

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<v Speaker 1>around the world, including the o E, c D and

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<v Speaker 1>the I m F. And President Obama has said, this

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<v Speaker 1>really does not look credible, and you're not going to

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<v Speaker 1>be very able quickly to negotiate trade deals and all

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<v Speaker 1>the countries you're going to need to do that with.

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<v Speaker 1>So that's so the theory is obviously that's a negative event.

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<v Speaker 1>Is there any a fear that there will be a

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<v Speaker 1>backlash from the electorate, from all the people explaining why

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<v Speaker 1>a vote to leave is terrible. Well, I certainly think

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<v Speaker 1>that's a likelihood of that, not least in fact in

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<v Speaker 1>the government. I mean, David Cameron looks to be in

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<v Speaker 1>trouble whichever way it goes. If there's a vote for Brexit,

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<v Speaker 1>then obviously I think it's very likely have to have

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<v Speaker 1>to quit. And if there's a vote not to leave,

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<v Speaker 1>and it's pretty narrow now he's got a split party. Um, politically,

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<v Speaker 1>this is a highly charged event. So yes, I think

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<v Speaker 1>it's going to have implications later, but probably not least

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<v Speaker 1>amongst the governing Conservative Party, where you actually have got

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<v Speaker 1>some government ministers on each side. So I think that's

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<v Speaker 1>where the biggest term was going to be. Thank you

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<v Speaker 1>very much. Danny blanche Flower, Professor of Economics, Dartmouth College,

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<v Speaker 1>on Twitter at d underscore a blanche Flower about the

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<v Speaker 1>Brexit vote on June. This is Bloomberg Radio. Location, Location,

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<v Speaker 1>Location coming up. The head of the International Council Shopping

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<v Speaker 1>Center says that's what's going to make the difference for

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<v Speaker 1>brick and mortar retail Live from Las Vegas coming up

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<v Speaker 1>on Bloomberg Radio.