Brexit discussion thread XIII (Please read OP before posting)

Lumen

View wrote: »

BIB - There is no evidence that “sitting outside the Eurozone” proved beneficial to the U.K.

The reality is that it is Sterling that has slowly but consistently lost value against the Euro, not the other way round, since the latter’s inception in 1999.

In addition, even with the constant ongoing devaluation, the U.K. has still managed to run increasing trade deficits with the rest of the EU countries, which is particularly ironic since it was their “unsustainable trade deficit” with the rest of the EU countries that supposedly made their position in the ERM untenable back then.

Mild inflation is considered by many mostly non-German economists to be economically net positive, as it counteracts wage stickiness.

Sam Russell

Lumen wrote: »

From what I've read, membership of the Euro would have almost certainly prevented Brexit, since Brexit would have resulted in an uhsustainable foreign-denominated debt or default (or equivalent to default, like unilateral redenomination).

This was discussed a fair bit by nerds during the run up to the Scottish independence referendum.

It was also discussed widely during the Greek crisis. It has also been considered by Italy.

Leaving the Euro would require a collection of actions that need to be tightly controlled from a timing point of view, and also from a control pov.

Assume the UK had joined the Euro some time ago.

1. The Euros in circulation need to be repatriated to the issuing central Bank. Each Euro note identifies the issuing CB. Essentially, each country would fish out all UK Euro notes from circulation and destroy them (or mark them indelibly), billing the UK CB.

2. The UK CB would need to create a new currency, with new notes - probably with a created value GB(New)£ = €1 for ease in treating balances in bank accounts. Obviously the new notes would be printed ahead of time, but they could try and go cashless - at least temporally.

3. The internal billing between the other Euro CBs would be carried out - resulting in some friction, but needed o be carried out quickly with the banks closed. Some thing like this happened in Greece and Cyprus.

4. The reason for leaving the Euro would be to either devalue or revalue. The probable immediate action would be to let the markets decide. Probably a 20% devaluation would be likely. I would not think leaving the Euro would occur for less than a 20% devaluation.

Possible to achieve as above, but best carried out over an extended close down of the markets. It would be a seismic crisis.

Lumen

Bank deposits and cash in circulation isn't really the issue, it's the debt that the problem.

Unilateral redenomination of bonds into a new currency could be considered a form of default.

It's a big deal when you're carrying debt around 100% of GDP.

Sam Russell

Lumen wrote: »

Mild inflation is considered by many mostly non-German economists to be economically net positive, as it counteracts wage stickiness.

If hey have an independent currency, a devaluation creates the same effect, and more efficiently.

Inflation feeds on itself - "Why are prices going up? - it's because of inflation".

Inflation gets built into lots of economic activity, even when it is not relevant. For example, toll charges on our motorways are tied to the RPI, but some element should be tied to interest rates, as that is what they are supposed to be for - repaying the capital cost of the infrastructure.

Sam Russell

Lumen wrote: »

Bank deposits and cash in circulation isn't really the issue, it's the debt that the problem.

Unilateral redenomination of bonds into a new currency could be considered a form of default.

It's a big deal when you're carrying debt around 100% of GDP.

That is why it would not be done for less than a 20% devaluation. Technically, it would be the same currency, just floated. It is also why it would have to be done quickly with the markets shut down.

I think it would not be an action taken lightly.

View

Lumen wrote: »

Mild inflation is considered by many mostly non-German economists to be economically net positive, as it counteracts wage stickiness.

That’s a bit irrelevant as all developed economies have had mild inflation in almost all of the last thirty years. It certainly doesn’t “prove” a case that the U.K. is better off from having left the ERM due to a massive temper tantrum by the Conservatives at the time.

View

Lumen wrote: »

From what I've read, membership of the Euro would have almost certainly prevented Brexit, since Brexit would have resulted in an uhsustainable foreign-denominated debt or default (or equivalent to default, like unilateral redenomination).

This was discussed a fair bit by nerds during the run up to the Scottish independence referendum.

Membership of the Euro would no more have prevented Brexit, were the U.K. determined to do it, than Sterling being Ireland’s currency prevented us a hundred years ago from leaving the then U.K. of GB & I.

And there’s no reason to suppose that Brexit would have led to an “unsustainable foreign-denominated debt or default” unless you assume that the newly relaunched (post-Euro) Sterling would have immediately plummeted in value against the Euro. And that of course would only happen if Brexit were fundamentally an economically and politically stupid idea for the U.K. to pursue, rather than one leading to the “sunlit uplands” that Brexiters have promised the British people.

Sam Russell

View wrote: »

That’s a bit irrelevant as all developed economies have had mild inflation in almost all of the last thirty years. It certainly doesn’t “prove” a case that the U.K. is better off from having left the ERM due to a massive temper tantrum by the Conservatives at the time.

It was not a temper tantrum, it was the shorting of their currency that crashed then out of the ERM. They were in at the wrong value.

Their economy was in bad shape at the time and they were trying to big it up, unsuccessfully, because it was very vulnerable to attack and succumbed.

View

Sam Russell wrote: »

It was not a temper tantrum, it was the shorting of their currency that crashed then out of the ERM. They were in at the wrong value.

Their economy was in bad shape at the time and they were trying to big it up, unsuccessfully, because it was very vulnerable to attack and succumbed.

Leaving the ERM was unquestionably a temper tantrum.

The Conservatives could easily have just devalued and stayed in the ERM as many other countries, including us, did at the time.

Zubeneschamali

Lumen wrote: »

So putting aside all the understandable pessimism, and assuming that international market forces and its flexible labour market will produce something productive out of this, what does the most positive picture of a properly independent UK look like?

I'd say the best model is Norway, but it'll take them 20 to swallow their pride and admit it.

Sam Russell

View wrote: »

Leaving the ERM was unquestionably a temper tantrum.

The Conservatives could easily have just devalued and stayed in the ERM as many other countries, including us, did at the time.

Well yes, hey did a bit of megaphone diplomacy, and devalued anyway. A Major mistake.

Nody

Zubeneschamali wrote: »

I'd say the best model is Norway, but it'll take them 20 to swallow their pride and admit it.

Disagree, they don't have the natural resources to pull it off.

I think the best bet and this will require a bit of squinting the eyes and magic jelly beans approach is to try to keep London relevant. Make it the European timezone to deal with finance, insurance etc. Cut regulation, cut legislation and let it rip.

The reason for my thinking here is relatively simple, UK has no real competitive advantage in terms of EU access anymore etc. That means their competitive advantage then relies on timezone & history, for obvious reasons there's a lot of finance there already etc.

They can't compete on manufacturing even if they cut the minimum wage in half simply because there will be no real export market for them. EU would simply add tariffs and claim unfair competition, USA already do tariffs and the rest of the world is to far away to be competitive.

They can't compete on natural resources because they already export their fish and they can't pump enough oil and gas to compete with the big guys.

They can't compete on tourism simply because they are not in the right climate for it. Yes the likes of Oxford etc. will bring in some nice money from foreign students it's not enough to live on and most tourists simply don't see UK as a more than a weekend drop in kind of place. They might get away with trying to become a Dubai of kitsch with claiming it's tradition but between weather and alternatives I simply don't see it working far enough to carry the country's economy.

If you want a slight more optimistic view you could argue innovation due to their universities etc. but honestly with being locked out from EU funding on science and co-operation I simply don't see them being able to pull it off. There will always be larger markets with more capital (Silicon Valley, China, EU etc.) for the scientists to go instead.

This pretty much leaves Finance and making it so tempting and good place to be for companies that you remain the European finance hub. Of course making your economy even more reliant on London will not go down well with the masses and other countries either; but hey it's a dog eat dog's world out there. The benefit here is you don't have to rely on a FTA for it and you can sort of shadow some aspects of the EU rules as needed without committing to them. You don't want to go down the tax heaven route further simply because it's not going to be competitive enough. But you can allow new derivatives, new financial products to tempt EU capital to invest in things with higher growth than before (same way done with the subprime bubble etc.) esp. in this low interest economy. Then you spin everything else around the London finance hub and service them. The waitresses will need their take out etc. and you can let the rest of UK slowly decay into mulch to be bought by rich stockbrokers as estates with beautiful nature and forests to hunt fox in. And for the Tories that's perfectly fine anyway because they will get their "consultant gigs" afterwards to help make it a reality. Only concern would obviously be some kind of Labour revolt in election but that seems quite a bit away and by then Labour don't have a choice or their tax money walks away crashing the economy even further. Better to rely on London and send out a bit more taxes to the rest of the UK.

Capt'n Midnight

Zubeneschamali wrote: »

I'd say the best model is Norway, but it'll take them 20 to swallow their pride and admit it.

LOL

Norway could loose the plot if the UK get a better deal than they do. Both the EU and UK will need gas come January. Norway will have influence.


Norway means autonomy on fishing and agriculture and raw materials but with tariffs on them.

Norway means single market access, at a price the UK won't pay.

Norway means Four freedoms. And negotiating an opt out from Schengen, which the UK will get it but it will cost them something. Especially if we put the boot in and demand Schengen for lolz and leverage.

Norway is paying about the same per capita to the EU as the UK did because the UK used to get a rebate.

Norway means EEA and EFTA rules or equivalent or the most favoured nation rules apply and that means most EU directives and the EFTA Court which is more or less the ECJ because of those EU directives. The UK will not be getting a 50:50 court.



The UK's feelings about the ECHR which is not related to the EU won't improve relations with Norway or anyone elese. While Norway can't vote on internal EU matters they can make their preferences known.

CelticRambler

Nody wrote: »

I think the best bet and this will require a bit of squinting the eyes and magic jelly beans approach is to try to keep London relevant. Make it the European timezone to deal with finance, insurance etc. Cut regulation, cut legislation and let it rip.

The reason for my thinking here is relatively simple, UK has no real competitive advantage in terms of EU access anymore etc. That means their competitive advantage then relies on timezone & history, for obvious reasons there's a lot of finance there already etc.

While I agree with your "what else? nothing much" analysis, and that all the British eggs will almost inevitably end up in the City basket, I'm not sure that tradition alone will be enough to keep the City relevant to the same extent. If they're not going down the anything-goes-light-touch regulation (further than they already are) then what advantage is it to EU investors to trade in London instead of with, say, Zurich? If they're more-or-less aligned to the EU rules, then there will probably be at least a marginal advantage for intra-EU operations; and if they go all-out tax-havenish, the EU/ECB will fast-track every possible financial service relocation out of London and into Paris/Frankfurt/Dublin/Riga/wherever ...

Similarly, why would non-European traders want to do business with London when all the creative accounting has to be based on hard assets somewhere, and the vast bulk of those will be in various EU countries? There may be some short-term gain buying up whatever's left in a fire-damaged post-Brexit Britain, but once they've been scavenged, and the population's already on the hook for Wonga-rated sovereign debt repayments for 100 years, what particular advantage can London offer that can't be matched by New York or Singapore?

Sam Russell

Sam Russell wrote: »

They also have a high rate of genetic intolerance to alcohol.

[Not relevant to this, but indicative to local and cultural differences. In that part of the world they drink tea, not beer].

The Japanese are massive drinkers, as are the Koreans. Their intolerance just means they get absolutely obliterated drunk.

Sam Russell

Deleted User wrote: »

The Japanese are massive drinkers, as are the Koreans. Their intolerance just means they get absolutely obliterated drunk.

That is the intolerance kicking in.

J Mysterio

Guardian: Johnson will wait for US election result before no-deal Brexit decision

Ivan Rogers, former UK ambassador to the EU, says prime minister will think ‘history was going his way’ if Donald Trump is re-elected

Rogers said: “Several very senior sources in capitals have told me they believe Johnson will await clarity on the presidential election result before finally deciding whether to jump to ‘no deal’ with the EU, or to conclude that this is just too risky with Biden heading for the White House, and hence live with some highly suboptimal (for Johnson) skinny free-trade agreement.”

The former ambassador to the EU – who quit under Theresa May’s premiership because of disagreements over Brexit strategy – remains in regular contact with senior government figures in EU capitals."

Nothing like gambling the future of your nation on DT, and his capriciousness, and just ignore the warnings from the Ways and Means Committee etc.

CelticRambler

Given that the definitive results of that election might not be known till the end of November - or even some time in December - that's a fairly dodgy strategy.

Making it a classic "paint me into a corner" Johnson strategy. :rolleyes:

Sam Russell

CelticRambler wrote: »

Given that the definitive results of that election might not be known till the end of November - or even some time in December - that's a fairly dodgy strategy.

Making it a classic "paint me into a corner" Johnson strategy. :rolleyes:

I don't think Johnson has a strategy of 'paint me into a corner' - because that would assume he would realise that he was painting himself into a corner ahead of noticing too late that he was already in that corner with no easy escape.

To avoid 'painting yourself into a corner' then you need a planned future position and a plan that will always give you an adequate future strategy should things go awry, with several reasonable alternatives.

Surely that is what Johnson follows.

Nody

J Mysterio wrote: »

Nothing like gambling the future of your nation on DT, and his capriciousness, and just ignore the warnings from the Ways and Means Committee etc.

What I don't get is why does he bank on a FTA with US? It's not like Trump will pull any punches in the FTA with UK knowing he got UK bent over a barrel tied up (and that's before we add Trump being Trump to the equation). The FTA with USA will by definition be even more one sided than with EU and will involve several items that even Boris supporters are against such as lowered food standards on imports (chlorinated chicken, hormone beef etc.), sell out of NHS ("open for fair competition"), higher medication cost ("paying their fair share") etc. I could go on listing the items USA has listed on their website along with statements on requirements from a UK deal.

Sure; he got a FTA but the FTA will not actually do anything to fix the day 1 issues he'd face. A FTA is not going to save the car manufacturing, it's not going to create new jobs for the unemployed, it's not going to give an export market for fresh fish, it's not going to fix travel to EU (see passport issue) or import/export issues etc. In short; a FTA with USA will in no way actually resolve or fix any of the issues caused by a crash out brexit. Sure he can claim USA wants to deal with us but any benefits will be years away were as the Brexit crash out issues are day 1 issues that needs dealing with. Distractions don't work well if you've just been fired and then have your PM claim the great benefits of the FTA with USA will not put food on your table.

Joe_ Public

Leaving aside the obvious fact that the democrats will still hold an effective veto over any trade deal via congress, the notion that under Trump they'd be able to negotiate some amazingly favourable trade deal is almost touching. In the immortal words of the brexiteers, the us would hold all the cards and threatening to walk away is not even an option for optics.

Leroy42

If true, what it really means is that even at this late stage, the UK still doesn't know what it actually wants.

Strazdas

Joe_ Public wrote: »

Leaving aside the obvious fact that the democrats will still hold an effective veto over any trade deal via congress, the notion that under Trump they'd be able to negotiate some amazingly favourable trade deal is almost touching. In the immortal words of the brexiteers, the us would hold all the cards and threatening to walk away is not even an option for optics.

Leaving themselves at the mercy of an election in another country shows just how disastrous a thing Brexit is. If it was a good idea, and the right way to go for the UK, it wouldn't need the election of a right wing demagogue in another country to make it work.

Tell me how

Strazdas wrote: »

Leaving themselves at the mercy of an election in another country shows just how disastrous a thing Brexit is. If it was a good idea, and the right way to go for the UK, it wouldn't need the election of a right wing demagogue in another country to make it work.

Heard that exact message on a podcast recently. Think it was The Stand. Someone was saying that Dominic Cummings project is massively dependent on Trump being re-elected.

I think this is for 2 reasons. One, the message from Trump will be pro-nationalist and will encourage the British that they were right to split from the EU, even as the US look to pillage them in trade negotiations.
Two, Trump's behaviour and diplomacy has emboldened other governments to be less conscientious of the public perception of their actions. I think some of the policies and language in relation to stopping migrants reach the UK would not have been as forceful without the lowering of the tone from the US.

ancapailldorcha

J Mysterio wrote: »

Guardian: Johnson will wait for US election result before no-deal Brexit decision

Ivan Rogers, former UK ambassador to the EU, says prime minister will think ‘history was going his way’ if Donald Trump is re-elected



Nothing like gambling the future of your nation on DT, and his capriciousness, and just ignore the warnings from the Ways and Means Committee etc.

This is just utterly ridiculous.

One of these two men will be US president come 2021. Biden has made encouraging noises about protecting the GFA and much of the Democratic establishment will be loathe to see one of their foreign policy triumphs undermined by nativism.

That leaves Donald Trump. For some reason, Brexiters seem to think he can and will give the UK a favourable trade deal. I've always struggled to understand this. He and various Members of Congress from rural states will be under pressure from lobbyists to make sure he can open up the British markets for their subpar, toxin-riddled exports. He wasn't kidding when he said "America First". His isolationist foreign policy has been one of the few constant themes of his presidency. Some of the Tory party may welcome such a deal but all it would really achieve is to push the UK in a Socialist direction as it must now subsidies individuals, farms and businesses in much the same way it is now to keep afloat. Of course, this all ignores the Democrat-controlled Ways & Means Committee which has jurisdiction over trade deals.

Joe_ Public

Strazdas wrote: »

Leaving themselves at the mercy of an election in another country shows just how disastrous a thing Brexit is. If it was a good idea, and the right way to go for the UK, it wouldn't need the election of a right wing demagogue in another country to make it work.

Yes, but it's also predicated on the assumption that they'll be treated very favourably if it's a Trump administration when the reality is they'd almost certainly end up ceding as much, if not more, sovereignty than in any deal with the eu, whether in the form of "poison pill" clauses or otherwise.

Strazdas

Tell me how wrote: »

Heard that exact message on a podcast recently. Think it was The Stand. Someone was saying that Dominic Cummings project is massively dependent on Trump being re-elected.

I think this is for 2 reasons. One, the message from Trump will be pro-nationalist and will encourage the British that they were right to split from the EU, even as the US look to pillage them in trade negotiations.
Two, Trump's behaviour and diplomacy has emboldened other governments to be less conscientious of the public perception of their actions. I think some of the policies and language in relation to stopping migrants reach the UK would not have been as forceful without the lowering of the tone from the US.

100% : "Trumpism" has been an entirely negative phenomenon. I would say even some of the very hostile and aggressive behaviour we see on social media has its roots in he being elected.

Tell me how

Joe_ Public wrote: »

Yes, but it's also predicated on the assumption that they'll be treated very favourably if it's a Trump administration when the reality is they'd almost certainly end up ceding as much, if not more, sovereignty than in any deal with the eu, whether in the form of "poison pill" clauses or otherwise.

Yes, But Trump would be telling them how much of a friend they are, how brave they were to stand up to the dictatorship which is the EU and that message would be valued more to the Brexiteers than retaining standards.

moon2

J Mysterio wrote: »

Guardian: Johnson will wait for US election result before no-deal Brexit decision

Or, this is simply another way for johnson to delay the announcement by pretending he's waiting for an unrelated announcement to be made.

The UKs sovereignty is hardly based on who the US president is... or is it?

moon2

moon2 wrote: »

Or, this is simply another way for johnson to delay the announcement by pretending he's waiting for an unrelated announcement to be made.

The UKs sovereignty is hardly based on who the US president is... or is it?

It is dependent on whether he has a friend or foe in the white house.