Thread by @Helenreflects

Brexit seems to be the solution to all our economic woes (short thread)

E.g., Hannan thinks that Brexit will be great because house prices will crash by 1/3. That will be great for first-time buyers, right?

https://twitter.com/DanielJHannan/status/1040375431826944000

Problem is last time house prices crashed (2008) home ownership in younger people did not increase. It decreased by quite a bit as can be seen in this graph. 2/

That's because housing prices are connected to lots of other things in the economy, such as job prospects, lending criteria. It's not that people in 2008 were like "Hey look, all those houses around us have become cheaper. Now we can finally buy!" 3/

As this piece by the ONS says "The economic downturn in 2008 had a considerable impact on the UK housing market. The decline in house prices was accompanied by reduced mortgage availability and stricter lending criteria".
ons.gov.uk/peoplepopulati… 4/

A housing crash does not take place in isolation. It tends to take place in the context of economic armageddon. As a result, younger buyers won't be able to benefit from the cheaper houses, as they'll likely be most adversely affected by the economic downturn 5/

The last economic crisis still has consequences for people today, including a permanent reduction in real earnings since 2008. This graph (ONS) shows that age cohort 30-39, who are most likely to be first-time buyers, are most affected. 6/

So a house price crash is not going to provide any solace to first-time buyers.
It's also going to push current mortgage holders into negative equity.
Hannan either doesn't understand this (scary seeing he's part of the people who run this country) or willfully ignorant. 7/

Who benefits? That's always the question: Qui bono?
Buy-to-let landlords would benefit. Mind, not the small fish who have a couple of properties. Why not? Because buy-to-let mortgages will be more difficult to obtain when the economy crashes (see 2008)
telegraph.co.uk/finance/person…

Last time house prices crashed, lenders tended to "offer a maximum loan-to-value (LTV) of 75pc, and the best deals require even larger deposits." But no worries, those who are "cash rich and canny have been busy targeting distressed sales and making rock-bottom offers." 9/

Who will be insulated from potential economic devastation brought on by no-deal Brexit? Many of our MPs are landlords, it seems, and many have extensive properties as you can see here: publications.parliament.uk/pa/cm/cmregmem… 10/

They will snap up any deals that come along as first-time buyers are squeezed by recession and small buy-to-let landlords cannot afford the tighter lending conditions.
So the lower house prices will benefit someone. But it won't be first time buyers 11/

Now about Rees-Mogg's suggestion to unilaterally cut tariffs on imports on food and clothing so as to make those things cheaper for the poorest. How noble of him. bristolpost.co.uk/news/bristol-n… 12/

It's kind of the reverse of Trump. Trump wants to escalate tariffs. Rees-Mogg wants to axe them. First thing to note, most of the food we import is from the EU 13/ gov.uk/government/pub…

And for those food imports we will face increasing hurdles. If we do not and slash tariffs unilaterally, as well as checks, this will create problems for quality control as detailed here: politics.co.uk/blogs/2018/07/… 14/

Now Rees-Mogg is actually right that axing tariffs is a good thing. It facilitates trade and will make things cheaper. That makes you wonder, if axing tariffs is so great, why don't other countries take this as a default? Why didn't anyone think about this earlier? 15/

Oh wait, the EU actually did conceive of that, taking into account potential problems (such as dumping of inferior goods) by installing sensible checks and balances, such as standards that food has to adhere to and protections of local products 15/

We won't have any of those checks and balances left once the chlorine-washed chicken and the growth-hormone laced milk comes into this country, tariff free.
Farmers will surely be thrilled (given the UK high standards for keeping cattle) to see those goods arrive here /16

Without tariffs, the UK will not have much of a negotiating position to do all those wonderful trade deals to trade with the rest of the world.
Please, Japan, we want to trade with you, kindly cut your tariffs on the imports of British goods, and in return... /17

Oops. In return we can't really offer much since we've already cut our tariffs.
Keep also in mind the power differential. The UK (65 million people) is a much smaller market than the EU (500 million people). To see how this plays out look at the China-Switzerland deal /18

Switzerland is a much smaller market, and so, to get the FTA with China, had to accept that China could keep tariffs on Swiss imports for up to 10 years, whereas Switzerland axed their tariffs on almost (99.7%) of all Chinese imports 19/

Delicious irony? Tariffs on Chinese clockmaker tools were immediately abolished. But in China, Swiss watches will only see their tariffs reduced after 10 years. For some kinds of watches and clocks, the tariffs will be reduced to 5-8%, not eliminated. /20

And this unilateral cutting of tariffs by Swiss for a period of 5-10 years was not applauded as a great thing for the poorest Swiss ("Yay, they'll now be able to buy cheap Chinese food and clothing!") /21

Rather, it was a calculated move by the Swiss who took the long-term view and calculate that Chinese middle class will be able to buy more watches, chocolate, cheese, Swiss luxury products. The difference in tariff schedule was due to differences in power /22

Now, if the UK starts out with cutting tariffs, which the Swiss only grudgingly did because they are hoping to see Chinese buying chocolate, cheese and watches in 5-10 years, what possible great trade deals will the UK do without negotiating power? /23

How will they make sure standards of health and safety will be maintained? ESPECIALLY since the Brexiters want to stop border checks to make things go smoother. This won't benefit the poorest.
I see no economic upsides to Brexit, only considerable downsides /ends