Follow the money: advice from top economist at the Rutland Biz Club

An understanding of how financial liquidity flows shift around the world shows that China is set to dominate the global economy, while the UK will thrive post-Brexit, according to economist and CrossBorder Capital CEO Michael Howell, at the Rutland Biz Club.

Speaking to attendees at their monthly lunch, held in the Falcon Hotel in Uppingham, Mr Howell said that the low cost of sterling, plus the potential for deregulation post-Brexit, will see the UK booming in the next couple of years, providing a greater say over its destiny.

He added that long term demographics will also play a part, with the UK’s population predicted to overtake Germany’s in around 35 years’ time, to help make it one of the biggest economies in Europe.

He said: “I think voters took a very prescient long-term view about the prospect for Europe and the UK in the referendum. One thing we know, looking at economic data on capital flows, is that the world’s economy is moving at the rate of 100 miles a year eastwards. The UK is in a better position than many because of its links with America and if it maintains access to the global economy with open borders and ability to trade, that will give it an edge. However, you can’t change geopolitics that easily and if there’s a shift eastward the UK will be in a weaker position and will have to adapt”.

Mr Howell also said the outcome of Boris Johnson’s Brexit deal will have an impact because the UK and Germany are currently the only two sizeable net payers into the eurozone.

He said: “Once the UK leaves the EU it’s doubtful the Germans alone will want to put their hands in their pockets for the other 26 countries demanding money. The eurozone has got a situation similar to America and the UK where a fixed exchange rate system operating across regions makes the rich regions richer and the poor poorer. It’s mitigated in the UK by regional development aid and the social security system and in the US with military bases and hardware procurement based in poorer states. But there’s no mechanism sufficient to address such imbalances in the eurozone. The eurozone is shifting eastwards with future decisions made by Germany. In the next ten years, one could be on whether to allow Ukraine to join the EU and let Italy or Greece leave.

He explained that the eastward shift is due to the magnetic effect of China’s expansion with a population of 1.5bn people who want to get rich and the fact that their economy went almost vertical after being allowed to enter the World Trade Organisation (WTO) on very favourable terms under Clinton and George W. Bush. Change is coming up fast with China’s economy predicted to get even bigger, with the potential to help fulfil its ambition of becoming the economic powerhouse of the world with the Yuan displacing the America dollar as the major currency.

He concluded: We at CrossBorder can get data on how the world invests its money – what the composition of investment portfolios are worldwide with a two to three day lag. We’re talking $225trn of wealth. To picture this, think of £50 sterling for every tree in every country in the world. So, the sure ways to make money is to follow where it goes”.

Biz Club President Geoffrey Pointon said: “Once again the Biz Club has attracted a high profile and influential speaker to inform us in Rutland what is going on in the world’s currency market and how the movement of the market can show what is happening in geopolitical terms”.