Links 5 December 2018

 Global Macro / Markets / Investing:








    • ResearchtimeMEMBER

      When Tony Blair and Boris Johnson unite in their condemnation of the “deal” under which Theresa May proposes that the UK should leave the EU, you know something has gone badly wrong. The withdrawal agreement is less a carefully crafted diplomatic compromise and more the result of incompetence of a high order. I have friends who are passionate Remainers and others who are passionate Leavers. None of them believe this deal makes any sense. It is time to think again, and the first step is to reject a deal that is the worst of all worlds.

      There have been three episodes in modern history when the British political class let down the rest of the country: in the 1930s, with appeasement; in the 1970s, when the British economy was the “sick man” of Europe and the government saw its role as managing decline; and now, in the turmoil that has followed the Brexit referendum. In all three cases, the conventional wisdom of the day was wrong.

      In the first two instances, it took a revolution: in 1940, the dismissal of the prime minister and his replacement by someone better suited to the role of wartime leader; in the 1970s, a political and intellectual upheaval, and a radical new government capable of changing course. Both times, the country escaped ruin by the skin of its teeth. Today’s challenge is of a similar order.

      Britain is not facing an economic crisis. It is confronting a deep political crisis. Parliament has brought this on the country. It voted overwhelmingly to hold a referendum. The public were told they would decide. And the rules of the game were clear: Fifty percent of the vote plus one would settle the matter. The prime minister and the chancellor of the exchequer at the time said unequivocally that Brexit meant leaving Europe’s single market and customs union. This was the Brexit that, after the referendum, both main political parties promised to deliver.

      But a majority of members of Parliament were against leaving, and both parties were split down the middle. For members of the Labour opposition, the opportunity to undermine the government outweighed their views on the issue at hand, momentous though it was. A divided governing party was unable to rely on a majority to support any plan to deliver Brexit.

      To be sure, no coherent plan has ever been presented. There are arguments for remaining in the EU and arguments for leaving. But there is no case whatever for giving up the benefits of remaining without obtaining the benefits of leaving. Yet that is exactly what the Government is now proposing. It simply beggars belief that a Government could be hell-bent on a deal that hands over £39 billion, while giving the EU both the right to impose laws on the UK indefinitely and a veto on ending this state of fiefdom.

      Preparations for Brexit based on trade under WTO terms should have started in 2016, immediately after the referendum, as I said at the time. Britain needed a fall-back position — it is foolish to negotiate without one — and that was the form it should have taken. An immigration policy for the post-Brexit world could and should have been published in 2016. But there was no such planning.

      Instead, the Government pretended that everything could be postponed until an imaginary long-term deal could be negotiated. This was naïve at best, and in the event has proven disastrous. And so Project Fear turned into Project Impossible. It is incompetence on a monumental scale.

      Before the referendum, official economic projections intended to scare the country into voting Remain didn’t succeed. Based on flimsy and arbitrary assumptions, they were subsequently proved wrong. The same strategy has resurfaced.

      It saddens me to see the Bank of England unnecessarily drawn into this project. The Bank’s latest worst-case scenario shows the cost of leaving without a deal exceeding 10 percent of GDP. Two factors are responsible for the size of this effect: first, the assertion that productivity will fall because of lower trade; second, the assumption that disruption at borders — queues of lorries and interminable customs checks — will continue year after year.

      Neither is plausible. On this I concur with Paul Krugman. He’s no friend of Brexit and believes that Britain would be better off inside the EU — but on the claim of lower productivity, he describes the Bank’s estimates as “black box numbers” that are “dubious” and “questionable.” And on the claim of semi-permanent dislocation, he just says, “Really?” I agree: The British civil service may not be perfect, but it surely isn’t as bad as that.

      The UK is a European country, and always will be. Trade and contacts among the nations of Europe can and should continue much as before. And I have no doubt they will do so. But the political nature of the EU has changed since monetary union.

      The EU failed to recognize that the euro would demand fiscal and political integration if it was to succeed, and that countries outside the euro area would require a different kind of EU membership. It was inevitable, therefore, that, sooner or later, Britain would decide to withdraw from a political project in which it had little interest apart from the shared desire for free trade.

      Leaving the EU is not the end of the world, any more than it will deliver the promised land. Nonetheless the country is entitled to expect something better than a muddled commitment to perpetual subordination from which the UK cannot withdraw without the agreement of the EU.

      Many MPs will argue that “we are where we are,” that it’s too late to change course, and that May’s deal is the only deal available. But remember, this is a political not an economic crisis. If Blair and Johnson, from opposing political viewpoints, can see the fatal weaknesses of this proposed deal, politicians of all hues should try to do the same. This deal will not end the divisiveness of the debate about Britain’s relationship with the EU.

      The Remain camp will continue to argue, correctly, that to align the country indefinitely with laws over which it has no influence is madness, and a second referendum is vital to escape from this continuing nightmare. And the Leave camp will argue, also correctly, that it is intolerable for the fifth largest economy in the world to continue indefinitely as a fiefdom.

      If this deal is not abandoned, I believe that the UK will end up abrogating it unilaterally — regardless of the grave damage that would do to Britain’s reputation and standing. Vassal states do not go gently into that good night. They rage. If this parliament bequeaths to its successors the choice between a humiliating submission and the abrogation of a binding international treaty, it will not be forgiven — and will not deserve to be.

      • David Vance who has the informants thinks the government does not have the numbers to get the deal through.

      • Austerity always ends the same RT, fobbing it off on strawmen aside, and lest we forget the whole deal was a knee jerk with regard to labour and environmental laws e.g. the ultra conservatives bane …. Then again Thatcher ushered in neoliberalism and was crucial in establishing the neoliberal aspect in the EU, back in the day, only thing that saved her was that little war, then Labour mimicked its American DNC counter parts and went third way.

        Best bit or own goal is due to this right wing paradigm the solution always seems to be more or extreme right wing political policies.

        How is it that the same ideological sorts constantly fail upwards and then proclaim the mantle of guardians of the people, when like Bush Jr said I know who my base is … e.g. oligarchs and the wealth set or aka the winnars ….

      • ResearchtimeMEMBER

        Telegraph view – Theresa May’s authority is draining away – her Brexit plan has crumbled into parliamentary shambles

        Night had long fallen over Westminster before Theresa May got to her feet to open the momentous five-day debate on her Brexit deal with the EU. Another dramatic day at Westminster began with a motion tabled by Labour declaring the Government to be in contempt of Parliament for refusing to publish the legal advice it had received about the ramifications of the Withdrawal Agreement, in breach of an instruction from MPs.

        There have been many unusual events linked to Brexit, but it is unheard of in modern times for a government to be found in contempt. As a result, it will disclose the legal advice in full today.

        Perhaps there will be a surprise but that feels unlikely. Geoffrey Cox QC, the Attorney General, gave a candid account of its contents to the House on Monday, making clear that the UK might be trapped indefinitely within arrangements it does not like. But it was not clarity that Labour sought but a defeat for Mrs May, and it was duly delivered both on the Government’s amendment and then on the main contempt motion as the DUP once again deserted its erstwhile parliamentary allies.

        The symbolism of the Government suffering a succession of defeats mattered more than the disclosure of the law officer’s advice which has set a precedent that Labour will come to regret when the boot is on the other foot.

        The Commons then agreed the timetable for the debate and inflicted another defeat on the Government by passing an amendment tabled by Dominic Grieve, the Tory Remainer, seeking to give MPs a greater say over what happens should Mrs May’s deal be voted down on Tuesday. The Prime Minister then opened the debate with a powerful speech setting out her arguments in favour of an agreement that at the moment seems to have little chance of getting through Parliament. Despite her best endeavours, her authority is draining away.

        Yesterday’s events were emblematic of the mess the Government is in – assailed on all sides and buffeted by events over which it has no control. The plan was for Mrs May, having secured a deal with the EU, to persuade her colleagues of its efficacy, thereby securing a narrow win. But it began to go awry last Monday when the extent of the opposition on her own benches became apparent. In truth, it began to go awry when Mrs May lost her Commons majority last June.

    • HAH! I’m waiting with bated breath for the day when they will be using bitcoin nano-particles to detect cancer…

      Because – you see, bitcoin is so much like gold, it’s the gold replacement – only more better at everything gold does.

      Come on, little bitcoin! Do your magic!

  1. News Com Au article republished by The New Zealand Herald …

    Aussie house prices could crash by 50 per cent in worst case scenario – NZ Herald
    Pavletich earlier comment on Ireland …
    Deutsche: Australian property to crash like Ireland – MacroBusiness Australia

    • All, more Australian than pavlova itself! *snerrk!*

      (kinda’ reminds me of the day, many moons ago, when we ended up on mt Coot-ha about the time a few bus-loads of students which appeared to be of aśian descent dressed in what seemed to be replicas of Sailor Moon outfits. Well, most were absolutely butt-ugly and (no points for guessing who) someone said to the rest of the group “Well, no Sailor Moons around here, but plenty of Sailor Uranus…” )