How About a Brexit From the IMF

If the world was waiting for a demonstration of the futility of Ph.D. standard monetary system, it is being furnished this week by Britain, where the institution of the gold standard set the stage for glorious growth over the 200 years ending in World War I. Today the pound is collapsing to little more than a dollar. Britain’s central bank has been contending with what the Financial Times calls a “hole in the Bank of England’s balance sheet” while it seeks to aid pension funds facing huge “mark-to-market” losses.This is the context in which the International Monetary Fund has piped up against the supply-side tax cuts being advanced by Britain’s new prime minister. Think of it. The Mother of Parliaments quits the EU to gain, among other things, control of its own fisc. It announces for the sunlit uplands of liberty. Yet when it proposes pro-growth tax cuts, it gets jumped by unelected bureaucrats representing no country, democratic or otherwise.The best move for Prime Minister Truss is to tell the IMF to take a hike. And to prepare to quit the Fund at the first chance. If Britain wants to be a truly sovereign country, which is what Brexit was all about, it would be the best move. One could even call it Brexit+. First Britain quits the European Union, saying sayonara to the continental dirigistes. Why not quit the arm of world government plumping for universal Keynesianism?We comprehend that there is no Brexit+ movement, at least not at the moment. All the more reason to proffer the thought. The IMF, after all, tangled with Britain before, most famously during the sterling crisis of 1976, which followed a burst of Keynesian spending. It wasn’t turned around until Margaret Thatcher acceded to prime minister offering such supply-side measures as privatization, deregulation, and tax cuts.The IMF’s comments Tuesday are all the more galling for their offhand provenance. They were not the result of any special review of economic data but, rather, sprang forth in response to an inquiry from Reuters. “We do not recommend large and untargeted fiscal packages at this juncture,” the IMF harrumphed, adding “it is important that fiscal policy does not work at cross purposes to monetary policy.”Such bureaucratese is window dressing for the crux of the IMF’s objection, namely the supply-side, pro-growth budget put forward Friday by the new premier, Elizabeth “Liz” Truss, and her Treasury chief, Kwasi Kwarteng. They are incompatible with the global fund’s Keynesian impulses. “The nature of the UK measures will likely increase inequality,” the IMF representative explained.What causes inequality is fiat money’s incentives for speculation. Credit goes to the erstwhile Brexit minister, Lord Frost, a Truss ally. “The IMF,” he noted, “has consistently advocated highly conventional economic policies.” This approach, he said, has yielded “years of slow growth and weak productivity,” when the “only way forward” is “lower taxes, spending restraint, and significant economic reform.”Which brings us back to the Ph.D. standard. Who can define a British pound? On the gold standard it was 113 grains of the specie, worth $4.87. Britain abandoned the gold standard in World War I. The pound never recovered. It was pegged to the gold-backed dollar at $4.03 under Bretton Woods. It was downhill from there. The pound hit $2.80 in 1949 and $2.40 in 1967. Today it’s trading at $1.09.Only the Wall Street Journal editorial page seems aware that the pound “was falling long before the supply-side economic proposals were introduced” and that pro-growth policies are the path to recovery. Yet the Times reports that Labor, “seizing the moment to present itself as the party of fiscal responsibility,” is echoing the IMF, claiming that Ms. Truss “crashed the pound” to push “tax cuts for the richest 1 percent in our society.”Count on Labor to back higher taxes — and a reversal of Brexit. A better approach, put forward by our Conrad Black, is for Britain to forge closer economic ties with the Commonwealth, mainly Canada, Australia, New Zealand, and Singapore. The economic size of these former colonies, Lord Black reckons, would create a global bloc ranking only behind America, the EU, and China. That would revive Britain — and the pound.

How About a Brexit From the IMF

How About a Brexit From the IMF

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