Marshall Auerback — What Would Have Happened Had The UK Been In The Eurozone?

It is interesting to consider what would have befallen the UK had it been part of the Eurozone in 2008. To get a small sense of that, one should consider the period in the late 1980s and early 1990s, when the UK joined the Exchange Rate Mechanism (ERM), which was the forerunner to the European Monetary Union. One major reason for the collapse of the UK economy in the early 1990s was the property bubble crashing/bursting, although it was also a product of the UK’s stupid entry into the Exchange Rate Mechanism (ERM), which meant that the Bank of England was conducting monetary policy with a view toward sustaining an increasingly overvalued exchange rate (which meant higher and higher prices, which in turn crushed demand and killed the property boom). The existence of the property bubble made the fall that much more calamitous. But in fact, George Soros did the country a huge favour when he led a speculative attack on the pound, forced it to leave the ERM and thereby gave the UK economy the flexibility to grow again through a combination of sterling devaluation (which boosted exports – much like Canada in the early 2000s) and giving debtors a relief from high interest rates, which were abandoned when sterling was allowed to float freely again.

Macrobits by Marshall Auerback
What Would Have Happened Had The UK Been In The Eurozone?
Marshall Auerback