SINCE Britain’s referendum on June 23rd, journalists and economists have spent much time gawping at the awful financial fallout. However, Brexiteers have jumped on anyone whom they think is exaggerating the economic impact of the decision to Leave (just read the comments on any of our articles). Leavers have always maintained that Remainers overplay the economic effects of Brexit (“Project Fear” and so on). This makes it important for journalists/economists to be as accurate as possible in what they are saying.
In this regard one problem has been the coverage of the plummet in the value of the pound. There has been much ink spilled on how sterling has reached a 30-, 35- or 40-year low against the dollar (depending on whom you read). But the really important exchange rate is not sterling-dollar, but a “trade-weighted” sterling index, which is adjusted for how Britain’s trading partners’ currencies are doing. The Bank of England has data on this, and while there has clearly been a big drop recently, it’s not quite as bad as the sterling-dollar rate. It was a lot lower in the 2008-09 financial crisis.
First published here: http://j.mp/29lrrD5