A prominent pro-Leave businessman thinks the government should consider pegging the pound to the dollar

A former Labour party donor turned prominent Brexiteer said the pound's crash will prove helpful for the British economy by lowering the country's balance of payments deficit, and rebalancing the economy away from services and towards manufacturing.

John Mills, the founder of consumer company JML, told journalists on Tuesday that a cheap pound would make British exports more competitive, boosting economic growth.

Mills told Business Insider that a "realistic" target for the pound in the future would be "around 1.10 against the dollar, and 1.00 against the euro."

He then argued that the British government and the Bank of England could potentially pursue a fixed exchange rate policy to keep the pound down, pegging sterling at the levels previously mentioned. 

The peg would be similar to the Swiss National Bank's ceiling on the Swiss franc between 2011 and 2015. That peg against the euro kept the franc artificially depressed, and when it was removed in January 2015, the currency jumped almost 30% in a single session, causing chaos in the currency markets.


As a recent column from Guardian economics correspondent Phillip Inman says, the central premise of Mills' argument "is that once a relatively low exchange rate is established, investors and businesses have a clear view of the better profit margins on offer from exports and will invest more in the latest machinery and industrial processes."

"To enable us to compete in the world, to get our growth rate up to 3% to 4% every year and to get back to full employment, we need an exchange rate about one third lower than it is right now. Manufacturing would then revive, the number of jobs would soar upwards, businesses and individuals would pay more taxes, the government would stop running up debts and living standards would rise again," a mission statement from The Pound Campaign, a lobby group created by Mills, says.

During the same meeting with BI, Mills said that he believed that Britain's economy would be "somewhere between Greece and Portugal" if the UK had chosen to join the euro in the early 2000s.

Mills is not alone in believing that the pound's unprecedented crash could actually be a boon for the UK, and that the currency was substantially overvalued prior to the Brexit vote. In October, notoriously bearish Societe Generale strategists Albert Edwards argued that the falling pound will benefit the UK by stimulating inflation, something that virtually every single developed nation is struggling to achieve right now. "I don�t call that bad news. I call that a much-needed normalisation," he wrote in a note to clients.

Mills is also backed by a handful of other commentators and economists, including Telegraph International Business Editor Ambrose Evans-Pritchard, and former IMF deputy European director Ashoka Mody. "Brexit has fortuitously corrected this long-standing distortion in the British economy," Mody wrote in The Independent on Monday.

"It is desirable from every point of view. The idea that Britain is in crisis or is on its knees before the exchange rate vigilantes is ludicrous," Evans-Pritchard added in a column for The Telegraph.

Article reposted from Business Insider

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