Will the EU elections spark off a currency crash?
Dear Reader, The results are in. And they confirmed what I’ve been warning Europe is coming apart at the seams – financially and politically. First it was Brexit. Then the Italians challenged EU authority over spending. Then the Yellow Vest protestors brought France to its knees. Britain, France and Italy all saw big ‘anti-establishment’ votes at the weekend. In particular the Italian government saw its position strengthened… with Matteo Salvini getting ready for another big fight with the EU (the last one helped trigger a near 20% selloff in the markets, with the entire European banking system going deep into the red). Salvini had this to say over the weekend: “I’m told a letter from the European Commission on the Italian economy is on its way. I think Italians gave me and the government a mandate to completely, calmly and constructively re-discuss the parameters that led to unprecedented job instability, unemployment and anxiety.” In other words: bring it on. I called all this over a year ago. Now I’m making a new prediction. I want to give you a step by step account of where we go next. Full disclosure: I think we’re moving unstoppably towards a new currency and banking crisis. I lay it all out in my best-selling hardback book. A book that you can get hold of for just £5 today (while stocks last). Get yours here while you can. Best, Nick Hubble Chief Strategist, Southbank Investment Research
|The calm before the storm|
|Dear Reader, I’m talking about the UK Uncensored inbox. After a few |
days when hardly any Brexit-related emails arrived, suddenly there’s been a flood of responses to our last article and also to the latest political events. Today I’ve again taken some excerpts. Please forgive me if your own observations aren’t included below: we don’t have space for everything we’ve received. But I’d like to thank all contributors – we do appreciate the favourable comments that several people have made.
Mind you, some of you who don’t like what we’ve written! For example, ‘A’ has criticised my description of Theresa May’s effect on the Tories… “Ripped asunder, torn asunder, but shattered asunder? If you are going to write something PLEASE make sure it makes sense in English”. As asunder means ‘into several pieces’, I’d beg to differ about my use of words. To me, “shattered asunder” looks a reasonable description of the present state of the Conservative Party.
After all, it has just suffered its worst election result since the Reform Act in 1832! And ‘P’ reckons I “clearly understand nothing about politics & even less about Jeremy Corbyn” when I say that the latter’s “willingness to say absolutely anything simply to get elected as PM (like that would help the country at the moment?) isn’t working either”. OK, maybe I don’t understand politics – I normally avoid writing about it.
But by according Labour just 14% of the overall European election vote, the British electorate appears to agree with me that Mr Corbyn’s campaign strategy was badly flawed and that he wouldn’t exactly be the PM the UK needs right now.
Meanwhile, ‘M’ is puzzled that “a referendum campaign which contained more ‘lies’ than any previous political campaign and asked a ridiculous binary question on an extremely complex subject is being portrayed as the ‘will of the people’ while a second vote, on real options far less unknown, is somehow ‘undemocratic’!
The current ‘will of the people’ is probably for a narrow Remain win on the basis of the last three years’ demographic changes.” ‘H’ doesn’t believe that “much consideration was put into the Brexit vote by UK farmers (although a vast majority of them voted to leave)”.
“Michael Gove’s promise that Britain’s farmers will be protected from overseas produce prices is an empty one. We cannot expect (say) New Zealanders to agree to duty-free entry of UK goods while we impose import duty on their lamb and dairy produce.” ‘N’ is also concerned about “misperceptions or downright inaccuracies”, starting with “the perception that the EU is an outside party, mainly dominated by Germany, dictating to the UK. In fact Britain has been one of the strongest voices determining EU policy and also the prime instigator of the European Court”.
And ‘E’ says that he knows “how awful it is to only hear one’s own opinions reflected back to oneself and how this goes to reinforce one’s own prior opinion”. “The Remain camp, because of its foolish attachment to honesty, presented its economic case… from a multiplicity of independent ‘best effort’ models of the UK economy.
These were incomprehensible to the great majority of the public who chose instead to believe the simplistic lies presented by the Leave camp (immediately on the side of a bus, but basically emanating from the side of a fag packet)… in what was a deeply-flawed referendum”.
Also, “the public wasn’t adequately presented with the arguments concerning the possibility of the break-up of the UK”, while many “were persuaded that ‘immigrants’ were a direct and significant factor in their misery concerning insufficient housing and an overwhelmed NHS. But there is no inherent shortage of housing land while the proposition about the NHS is false: indeed the latter is highly reliant upon immigrant labour”. Never let it be said that we don’t publish Remain views when we receive them!
Please note these are not the views of the editor.
Conservative leadership candidate Rory Stewart has apologised for smoking opium in Iran.
Jet setter Mr Stewart, who is currently the International Development Secretary, smoked the class-A drug while in Iran.
When asked about the opium on Sky News, Mr Stewart admitted that it was against the law in the country at the time when he took it.
“I think it was a very stupid mistake and I did it 15 years ago, and I actually went on in Iran to see the damage that opium was doing to communities,” Mr Stewart said.
Image copyright Charles Close 2019, Heathrow
Watch: I will not serve under Boris, vows Stewart (Evening Standard)
May’s deal is not Brexit, and neither is ‘Common market 2.0’ – they both mean economic serfdom
Early life and start in politics
The only child of an Anglican minister, Theresa Brasier grew up in rural Oxfordshire. She attended both state-run and private schools before matriculating at the University of Oxford, where she studied geography. At a dance at Oxford, another student, Benazir Bhutto, the future prime minister of Pakistan, introduced Brasier to Philip May, whom she married in 1980. Both she and her husband undertook careers in banking. She worked for the Bank of England before moving on to the Association for Payment Clearing Services (APACS), where she served as head of the European Affairs Unit and senior adviser on international affairs.
Our political elite, many are ‘Uni’ girls have no idea of what life is like for the lower orders, like me. Picture below, me driving my truck down Westway into Central London June 3rd 2019. I passed the ruins of Grenfell Tower on my way in.
26/03/2019by Harry Western 3,207 Views6 min read
Written by Harry Western
The government is claiming that, if its Withdrawal Agreement is rejected, parliament will take over and impose a ‘softer’ form of Brexit. This line of argument is dishonest, because the differences between the economic end-state that would result from the government’s WA being passed, and the end-state resulting from ‘Common Market 2.0’ or ‘Norway plus’, are almost non-existent.
- The government is now trying to force MPs to vote for its withdrawal agreement by threatening that parliament will impose an ‘even softer’ form of Brexit such as a ‘permanent customs union’, ‘Common market 2.0’ or ‘Norway plus’
- The choice the government is trying to force MPs to make is a false one. The differences between its withdrawal agreement and so-called ‘soft Brexit’ options are miniscule: both would result in non-voting versions of EU membership that would deny the UK all the main benefits of Brexit while keeping most of the costs of being in the EU
- The government’s claim that parliament might impose a ‘permanent’ customs union as part of a ‘soft’ Brexit is also dishonest: the withdrawal agreement it is trying to push through also creates an indefinite customs union
- The only Brexit option offering a genuine exit now is a WTO exit, which is perfectly manageable and would probably lead to a free trade deal with the EU over the medium term
The UK government’s withdrawal agreement (WA) with the EU has now been decisively rejected by parliament on two occasions. However, rather than pushing ahead and leaving the EU on schedule without such an agreement, the UK government is delaying and still trying to push its WA through.
The government’s latest tactic is to claim that, if the WA is rejected, the UK parliament will take over and impose a ‘softer’ form of Brexit. This might take the form of a ‘permanent’ customs union, or so the so-called ‘Common Market 2.0’ or ‘Norway plus’ options being touted by some MPs.
This line of argument is dishonest, because the differences between the economic end-state that would result from the government’s WA being passed, and the end-state resulting from ‘Common Market 2.0’ or ‘Norway plus’, are almost non-existent.
Let’s first consider what these alternative ‘softer’ Brexit options involve.
‘Common Market 2.0’ or ‘Norway plus’ mean:
- The UK remaining in a customs union with the EU, with no say
- The UK aligning entirely with EU single market rules, on an ongoing basis, with no say. This might occur via a mechanism similar to the EEA agreement which governs the relationship between the EU and Norway, Iceland and Liechtenstein
It is clear from this that both ‘Common Market 2.0’ and ‘Norway plus’ are misnomers. The ‘common’ market would actually be the EU market; a complete ‘rule taking’ position for the UK, whereby all key decisions on tariffs, quotas, product regulations and standards, environmental and also some tax rules will be taken by the EU, with no UK say.
Meanwhile, the ‘Norway plus’ option is actually nothing like the deal Norway has with the EU: Norway is not part of a customs union with the EU – it has an independent trade policy.
So, it’s certainly correct to say that ‘Common Market 2.0’ or ’Norway plus’ are ‘soft’ Brexit arrangements. But crucially, the government’s WA will lead the UK to the same place, economically, as these ‘softer’ options would: there is essentially no difference between them.
Under the government’s WA, the UK will effectively remain a non-voting EU member for two years. After that, the ‘backstop’ arrangements will kick in, unless a ‘final deal’ supersedes them. Under the backstop, the UK will:
- Remain in a customs union with the EU and will only be allowed to leave it if the EU agrees. This is essentially a permanent arrangement – there is no exit door for the UK
- Northern Ireland (NI) will implement all EU single market regulations. And, to prevent a ‘regulatory’ border appearing between NI and the rest of the UK, the UK government has recently committed to the rest of the UK to following all these regulations too
So, under the backstop, the UK will effectively remain a non-voting member of the EU customs union and EU single market.
And, crucially, there is no prospect of this changing as a result of a ‘final deal’. The EU will only accept a final deal that is almost identical to the backstop arrangements, as it has already made clear. The Political Declaration that accompanies the WA also states this quite plainly; it talks of the future relationship being based on a single customs territory with no rules of origin checks – conditions only possible in a customs union.
With no exit clause in the WA, there will be nothing the UK can do to get around this – all roads under the WA lead to a customs union and de facto single market membership, with no say.
Indeed, it is quite likely any ‘final deal’ flowing from the WA will be even more restrictive of the UK’s economic freedom than the backstop is. This is because the backstop has some very unpleasant features for the UK including a costly and cumbersome system of movement certificates for UK exports to the EU. In order to get rid of these elements, the UK is likely to have to concede on other key issues such as fishing and freedom of movement.
From the above, some crucial conclusions flow:
- Threats about the UK being forced into a ‘permanent’ customs union if the WA fails are empty. The WA already leads the UK into such an arrangement.
- Threats that parliament will impose a ‘softer’ Brexit if the WA is rejected are also empty. The WA already implies a Brexit that will be a Brexit in name only, with no economic upsides and no way out. The ‘softer’ arrangements being threatened are just a re-badged version of the same thing.
- MPs who think that supporting the WA now will allow the UK to negotiate a ‘looser’ Brexit arrangement later are fooling themselves. There is simply no mechanism to do this under the WA: all the exits have been blocked.
Both the government’s WA and alternative ‘soft’ Brexit options would leave the UK as essentially a non-voting EU member and remove any scope for the UK to reap the potential economic benefits of Brexit: no free trade deals with third countries, no gains from better regulation, no benefits for consumers from lower tariffs, no control of EU immigration. Both would also leave key UK industries like financial services at risk of regulatory assault from the EU and leave the UK under the jurisdiction of the ECJ, which will have become a foreign court.
The only route to a genuine Brexit now is for the UK to reject the WA and leave the EU on time, trading with the EU under WTO rules. Preparations over recent months now mean this is a perfectly viable option, and over the longer term the trade and regulatory freedom it would grant could yield major economic benefits for the UK – up to £80 billion per year.
Harry Western is the pen-name of a senior economist working in the private sector.