The Brexit vote clearly presaged an impending economic disaster. Hate crimes are up by 41%. A report from Euler Hermes, the world’s largest trade credit insurer, this week said hard Brexit would put more than 1,400 UK companies into insolvency. They argued that much of the damage would come from falling trade levels and lower consumer confidence.

The pound has been in freefall. This week, it went below $1.22 and €1.11 and there is no floor in sight. I had expected sterling to drop to a low of maybe $1.20, but even I hadn’t expected the fall to be so rapid. It is not implausible that the pound could reach parity with the dollar. That isn’t good.

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Every time the prime minister or her band of hardline Brexiter ministers prognosticate on their plans for a hard Brexit, the pound drops precipitously. Various EU leaders have made it clear that the terms the UK is proposing are unacceptable and impossible. Surprise, surprise. The experts said that would happen all along, Mr Gove. The worry is that there is no credible opposition to hold the government to account. The Labour party is 17 points behind in the polls.



The markets appear to have no confidence in the negotiating powers of the government. Bond yields have risen. Theresa May is already being called “Mayhem”, as she has increased the risk premium the UK will have to pay to borrow. As Martin Wolf noted in the Financial Times (£): “Unwise words have consequences.” The markets, thankfully, will probably prevent the government from doing or saying more stupid stuff.

Some have argued that the pound is overvalued and the fall is welcomed. The drop is clearly a boost to the UK economy, as it makes exports cheaper, but a weaker pound lowers living standards, as the price of imported goods rises. Voting for sovereignty was all very well, but the question is: at what price? What if there is a 5%, or even 10%, or a not inconceivable 20% drop in living standards? Then sovereignty doesn’t look so great.

A good way of getting at the extent to which the pound is overvalued is the Big Mac index, which looks at whether currencies are at their “correct” level. The cost of a burger and bun is worked out and the price calculated in dollar terms.

In July 2016, UK burgers cost less than in Switzerland, Norway, Sweden, the US, Canada, Denmark, Israel, Australia, New Zealand and the eurozone. The Big Mac index doesn’t suggest that the pound was overvalued. The pound is the share price of UK plc. I am not impressed.