Brexit

Federberg

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Lol! A bit harsh :D

It's a bit of a quandary for them. I think they're right to try to hike rates. They'll need wiggle room when things go bad. Typically you get recessions every 7 or 8 years or so, so we're probably due now. Put it this way, we're closer to the next recession now, than the time since the last one. The US economy is chugging along not doing anything spectacular. The one interesting thing though is that cash levels are ridiculously high at the moment which is a bullish sign. Any hint that things are ok and people are going to be forced to buy stocks. Not as if there's any money in fixed income at the moment. There's no alternative
 
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DarthFed

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We were right on the cusp of all time highs a couple weeks ago and many people I follow think we will get there and beyond soon but that it will be short-lived. You can't fight the tape but the market can't stay irrational forever. Soon the economy will have to show real growth with the global market fears being somewhat restrained and that seems unlikely.

I think Brexit going through could trigger a real disaster...but I do have some puts on $DB that would pay really frickin nice if it does :dance3: $$$$$$
 
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britbox

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I'm not sure an out-vote would lead to a full blown Brexit as it could have a massive domino effect... expect the EU to come back to table with a much better package - economic with a much lesser political dimension...
 

Federberg

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yup I rather suspect we'll see new record highs before all is said and done and we get the next major correction. How long that lasts is difficult to say. I still don't think we've seen any real blow out tops like we've seen in the past. so there's a possibility that the market stays irrational longer than some might expect. I do agree though it will all end in tears. There's not much in the way of fundamentals backing this bull market. We have massive liquidity from central banks and corporates have spent massive amounts on buy backs by swapping equity into debt. So we'll end up with a fundamentally more fragile market than in the past with leverage ratios at ridiculous levels. But I think we're probably still a ways from that. The fact that ordinary punters aren't excited about stocks stops me from getting too bearish yet!

As I've said before I'm really sceptical about the polls. I'm still expecting a 3 - 5% win for the Remain vote. We shall see. @britbox you may well be right that it could tempt EU governments back to the table. That's a possibility, but an extremely unlikely one. Germany would be keen to keep the UK in, but many more countries would happily see Britain leave. As for a stronger negotiating position? Hmmm.. in the first instance, a much smaller UK would be trying to get back in, in your scenario. I guarantee you this, if Brexit happens, Scotland will become an independent nation and will immediately try to join. The UK will not have the strong hand you think it will. There would be bitterness and spite
 

Federberg

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The assassination of the MP by that far right nutter could be a knock against the 'Leave' campaign. A lot of people who are swaying might go against them purely because they don't want to be on the same side as individuals like him
 

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Federberg

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A piece written by one of my erstwhile colleagues, and I happen to agree. This is my fear...


It is no exaggeration to say that Britain stands at the edge of disaster. In two weeks time, UK voters will be making a momentous decision that will shape Britain’s future for generations. As the nation heads to June polls on whether to remain in or leave the European Union the stakes are high. A majority vote in favour of a British EU exit (Brexit) could lurch the country into chaos for years. Its impact will be felt around the globe.




Britain is heading into the unknown and the country seems worryingly split down the middle. Judging by recent surveys, public opinion seems to be edging towards the Leave camp. If this continues, the final run-in to the referendum will be an anxious time for the nation and a source of rising instability for Britain’s financial markets.




International confidence in the UK could be shaken to the core. Britain’s strong growth record, its leading role as a global financial centre and even the survival of the 300-year old British union will be under a cloud. If Britain crashes out of Europe, Scotland has threatened another independence vote in order to stay inside the EU. Britain’s influence as a leading international power would begin to wane.




The main credit ratings agencies have already warned they would take a dim view of UK assets on a British break from Europe, warning that a sovereign downgrade might be inevitable. International confidence in UK investments would suffer badly. Britain is no stranger to currency crisis and the pound could take a beating. International investors would shun stocks, government bonds and industrial assets in the uncertainty. And it might take years before the UK can strike a favourable EU trade deal and forge a new working relationship with Europe.




International investors could lose out heavily, especially those that were coaxed into investing into Britain under Margaret Thatcher’s private sector renaissance in the early 1980’s, when international companies began flooding into the UK. Under sweeping structural reforms, Britain became a Promised Land of free enterprise and market-friendly deregulation for foreign investors. The added advantage was free admission into Europe’s single-market, with front-door access to the EU’s 500 million-strong consumer market.




Over the years, this has reaped rich rewards for Britain and brought strong inflows of foreign direct investments (FDI). Inward FDI has helped finance the UK’s current account deficit and provided vital support for the UK’s asset markets. The UK now stands as the world’s third largest destination for inward FDI behind the US and China, with the stock of FDI investments in Britain currently around 1.7 trillion US dollars. The UK is the top target for FDI flows into Europe thanks to Britain’s track record on providing a safe port for foreign money. All this could change very dramatically.




A beneficiary has been the UK car industry where Asian companies are major stakeholders. Since the 1980s, Japan’s Nissan, Toyota and Honda have built up significant UK manufacturing presences, while India’s Tata Motors has owned Britain’s Jaguar Land Rover since 2008. Any threat to Britain’s free trade access into Europe would cast these investments into doubt. Any barriers to free trading would be bad news for UK-based manufacturers and momentum to quit Britain and switch production to Europe could turn into a stampede.




As the United States learnt to its cost under the strong dollar regime during the mid-1980s, when many US companies switched manufacturing overseas to stay competitive, it has been extremely hard to win back business that has moved offshore. The US’s yawing trade gap is testament to that. Britain could end up in the same boat if international companies panic about losing eligibility for free trade status in Europe. FDI inflows would reverse, tearing a large hole out of Britain’s industrial capacity in the process. It would be bad news for UK growth prospects, for the balance of payments and for British industrial prestige.




Indeed, there is a possibility that Tata Steel’s recent decision to quit UK steelmaking is less to do with global over-supply and heavy loss-making in their UK plants and more to do with a loss of confidence in Britain’s industrial future due to Brexit fears. In addition, recent news of Tata Motors plans to build a factory in Slovakia, its first European JLR car plant outside the UK, could be a bad omen for British car manufacturing shifting into Europe if Brexit takes off.




Brexit also poses serious risks to Britain’s future as a global financial centre. The UK financial services sector is a vital part of the economy, employing over one million people, accounting for 12 per cent of total output and 11.5 per cent of UK government revenues. The City of London is not only home to over 250 foreign banks, but also the European headquarters for many of them. If Britons vote to leave the EU, London faces losing one of its top money spinners – the multi-trillion euros traded-derivatives business which the ECB would like to see housed on European and not UK soil. Furthermore, many foreign banks based in the UK might find it more prudent to comply with the EU’s regulatory framework by moving to Frankfurt or Paris. Brexit could spark a major bank drain out of Britain.




Britain’s economy looks vulnerable. Since the global financial crisis, the UK has grown faster than its Group of Seven partners, but only thanks to the economic fizz of zero interest rates, quantitative easing and loose fiscal policy. Without these policy boosts, underlying UK growth potential would be nearer to 1.5 per cent than the latest 2.0 per cent headline rate. The shock of Brexit, a quick foreign exodus out of UK investments and a collapse in British productive capacity and jobs could hit confidence hard, tipping the economy into a nasty recession.




In the worst case scenario, the UK could fall into a deep depression. Unfortunately, UK policymakers are running out of options to deal with new crises. UK interest rates are already at rock bottom and QE has already run its course. A sharply weaker pound would only be a small fillip for what little would remain of UK manufacturing locked outside of Fortress Europe. Foreign investors would be hit hard by the fall in their sterling-based assets. For international manufacturers, banks and financial services companies there are compelling reasons to get out quick while the going is good.
 

britbox

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Lot of over the top stuff in there Federberg even if there are some valid points tucked in.

It is no exaggeration to say that Britain stands at the edge of disaster. In two weeks time, UK voters will be making a momentous decision that will shape Britain’s future for generations. As the nation heads to June polls on whether to remain in or leave the European Union the stakes are high. A majority vote in favour of a British EU exit (Brexit) could lurch the country into chaos for years. Its impact will be felt around the globe.

Yes, it is an exaggeration. Staying in the EU might also lurch the country into chaos for years also... not immediately but when the Eurozone finally collapses.

Let's dispense of all the nonsense that the EU is some sort of sanctuary of Economic strength... Half of the Eurozone is teetering on the brink of disaster. It only takes one or two of these countries to sneeze and it could have a massive knock on effect.

Britain leaving will have consequences... I have no doubt about it, but I think in a 5-10 years time it would be regarded as a very prudent decision.
 

Federberg

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Hard to say if it's an exaggeration or not. We'll see how the markets take it. The volatility I'm seeing in currencies right now is crazy. You can't get a streaming price from GBP/USD volatility anymore, you have to request it.

You need to make a distinction between the euro and the Eurozone mate. That's very important. I think the euro is an ill conceived idea, and I think there's a very good chance it gets discarded at some point. The UK will be affected by a euro break up whether it's in the EU or not, let's be clear about that. Leaving puts the entire financial sector in jeopardy, as many of the major investment banks will move to Dublin, Frankfurt or Paris. That's a huge number of jobs right there. On top of that Scotland will leave the union which is unacceptable to me. I don't think I've ever said the EU is a sanctuary of economic strength. It's the best option for the UK. If your argument is that you want the UK to leave because you are worried about the economic consequences of problems in the EU, then it's futile. The UK will be negatively impacted by that whether or not we remain. Ironically the best way to prevent disaster in the EU is for the UK to remain. Some of the best changes to EU policy over the last 30 years have come from the UK. If we leave, the idea that we might be able to negotiate our way back in with better terms is almost certainly naive. Other countries, notably Poland and Denmark have quite a lot of Euroscepticism as well, and if you think the EU will offer friendly terms to the UK you're not thinking through the politics properly. The UK will be used as an example to dissuade others from taking similar steps. They simply can't have a situation where other countries try to extort better terms from the group. They're not stupid
 

britbox

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Ironically the best way to prevent disaster in the EU is for the UK to remain

I buy that... on a short term premise. I think the UK leaving will have big repercussions on the EU which will in turn cause blowback (significant) to the UK and and the remaining EU countries... but it's something I'd be willing to accept... on the basis that the EU is a failure of a project and the break up will only be a matter of time in any event... the whole project is destined to fail.... eventually - politically for sure and economically eventually.

The other huge issue for me is sovereignty... you never addressed my initial points on that matter further back in the thread... the whole narrative has been based on economic reasons. You, (I think) are aware that you're kissing goodbye to any right to self determination and long term democracy... the EU project you're voting for is not what you have in store for the future, it's not the status quo you have now. It's where this whole failed project is heading... economically - yes countries are grouping together - it's a trend, and politically you know the reverse is true... the EU project is based on both binding together and doomed to long term failure.
 

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Ah yes! I apologise, I've just been too busy to really sit down and address all your points. I agree there will be huge repercussions for the EU if the UK leaves, but it will be much much bigger for the UK, we need to be clear about that. For the EU there will be a break up premium attached to euro denominated assets if the UK leaves, for the UK there will be capital flight. The UK has been dominating FDI inflows for decades because of it's relationship with the EU, a lot of that money will try to exit. Even George Soros is saying that this could be as bad if not worse than the ERM debacle. As for the EU being a failure I disagree. The euro? yes abolutely. But not the EU. There's a big difference, which I'm not sure you're separating.

As for sovereignty issues? This is where I have some sympathy with your view. I don't think that the institutions in the EU are democratic enough, and there needs to be change. I however do not believe that we will regain as much sovereignty as you might think if we leave. The UK is a small country, it will be smaller if we leave, we might we able to legislate without interference, but whether our legislators will actually feel able to do much with their independence is open to question, because the UK will be far less influential, and far less economically powerful. Finally I would just add that democratic freedoms are largely an illusion in this plutocratic world that we all live in. Our votes count for far less than we might like to believe unfortunately. Elites have their way with us, and there's not much that our democratic institutions are able to do about it. To me it's largely a red herring
 

britbox

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I disagree with your first point... the repercussions will be far bigger for the EU as it might cause a domino effect that could be unrecoverable. That's what leads to me think that a No vote will end up resulting in a second referendum... with far more favourable terms... a two speed Europe which is based on political AND/OR economic integration. If you put a common market to the vote without the political dimension, you'd have a favourable vote... that's what will happen in the event of Brexit... because a full Brexit will sow the seeds to destroy the whole EU project... not an option for the EU elites.
 

Federberg

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My first point is about economics. The UK will face capital flight which is a magnitude more serious than risk premia rising in the Eurozone. There's simply no comparison.

As for a second vote, that's possible but as I said it's fanciful. Having listened to many senior European government officials, their primary concern would be minimising the risk of other countries wanting to leave, or at least extort better deals. They are far more likely to go hard at the UK than offer more favourable terms. From their perspective if they do that, they open themselves to the risk that the Poles, Danish possibly even the Dutch will try the same thing. That's unacceptable to them. Don't underestimate the ability of the Eurozone elites to keep the project alive. Far more likely the rid themselves of the UK and offer more favourable terms to the rest. It's real politics mate
 

britbox

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Senior EU Government Officials don't really matter in the long term largely because they are puppets of the elites you mention... and the elites in the EU are the huge corporates who govern and basically write EU policies... yes, write them (in many cases). Those corporates including Phillips, Mercedes, Siemens etc... have a huge UK export market... so I don't underestimate the EU elites... it's more a case of framing who the elites are... and they aren't the politicians. The way to keep the project alive in the event of a Brexit vote is to vote again... on different terms. I think you underestimate the knock on effect of a Brexit on the EU Project... I agree, it's something they will want keep alive and seeing a UK, which is the second biggest economy in the EU leaving.. and possibly managing OK isn't something they could possibly ignore, because the knock on effect could be immense.
 

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One thing I don't do is underestimate the impact of Brexit on the EU. I'm constructing trades for it! All I am saying is that the impact of Brexit will be much bigger on the UK than the EU. That's just a fact. You're talking about a small country versus a continental economy. It's simple maths
 

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This is a bit naughty, but here's an FT Editorial that nicely puts forth my own point of view on this issue....

Why true democrats should vote to remain in the EU
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Gideon Rachman


Europe is the friend of democracy, not its enemy
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I
just want the EU referendum to be over now. The horrific killing of Jo Cox, only a week before the vote, will overshadow the result, whatever it is.

The killing of the opposition Labour party MP, a passionate believer in British membership of the EU, was an act of deranged evil that cannot be blamed on the Leave campaign. But it took place against the backdrop of an increasingly bitter referendum process, in which words such as traitor, liar and racist are being chucked around all too frequently.

Referendums are not like elections, whose results can easily be reversed a few years later. They feel like historic turning points. That makes people desperate and sometimes angry. I know because, as someone who strongly wants Britain to remain inside the EU, I have felt my own emotional temperature rise during the campaign. I have cursed at the television, fired off intemperate tweets at Leave campaigners, written furious emails to friends and enemies on the other side of the debate — and then usually had the wisdom not to press send.

In my calmer moments, I know that these politically charged rows serve no purpose other than to alienate friends. More important, if I am honest with myself, there are actually parts of the Leave case that I agree with.

I cannot dispute that the EU is a dysfunctional organisation. Nobody looking at the euro crisis — with its bitter divisions, deep recessions and endless emergency summits — could regard it as a triumph of public policymaking. The migrant crisis has once again exposed deep rifts within the union; and constitutional structures that make it all but impossible to frame effective policies quickly. None of this makes me optimistic about the EU’s ability to respond nimbly to future crises.

I also think that the questions of immigration and sovereignty stressed by the Leave campaign are legitimate issues. Some of the Leavers’ rhetoric has strayed into racism and dishonesty. But it is not inherently unreasonable for voters to want to control the numbers of immigrants that Britain receives from the rest of the EU.

So I will not be surprised if Britain votes to leave. And I do not think that all Leave voters must be cretins or racists, which sometimes seems to be the unstated assumption of a few Remain campaigners.

Given all that, why am I still on the Remain side? My reasons are practical and emotional; political and economic.

On the practical side, I think a vote to leave the EU will open the door to years of economic and political chaos. The Leave campaign’s demand to “take back control” of immigration policy will mean that Britain has to opt out of free movement of people within the EU — and with it, the EU’s internal market. So we are likely to face tariffs on manufactured goods and non-tariff barriers to vital service industries such as finance.

I also can see no way that the EU and the UK will be able to conclude a new trade deal quickly. The negotiation process will be protracted and difficult, and that will create an increasingly acrimonious relationship between Britain and its neighbours.

That kind of division and anger within the community of European democracies is not just unnecessary; it is also dangerous. We are no longer living in the post-political paradise of the 1990s.

The Middle East is imploding, military tensions between Russia and the west are rising, the US is flirting with electing a race-baiting demagogue as its next president and an authoritarian China is intent on becoming the dominant power in Asia. In this kind of international environment, it would be madness for Britain to devote the next five years to arguing with our friends and neighbours in Europe.

The Leavers say that their campaign is all about saving British democracy, by restoring the sovereignty of parliament. But in the European context the EU is the friend of democracy, not its enemy. The countries that joined the EU after the fall of the Iron Curtain were leaving behind authoritarian systems and signing up to a charter of civil and political liberties laid out in the EU treaties.

The “Brussels bureaucrats” may infuriate some in Britain. But elsewhere in Europe they stand for the rule of law and equal rights for all citizens and nations. Those in Britain who doubt that should look at the forces in continental Europe clamouring for the destruction of the EU — they are the nationalists, the racists, the authoritarians, the far right and the far left. These are the people who would feel strengthened and emboldened by Britain leaving the EU. Cox’s killing reminds us that dark political forces, nourished by hatred and violence, can also flourish in the UK.

For all its flaws, the EU remains the best guarantee of co-operation between the people and nations of Europe. All those enervating EU summits serve a vital purpose. They force the leaders of Europe to work together as colleagues rather than screaming at each other from behind national ramparts.

A British vote to leave the union now would pour fuel on to the fires of nationalism that are smouldering just beneath the surface in the EU. It is in the interests of both the UK and Europe that Britain plays its part in keeping those fires at bay. I will vote for a Britain that remains at the EU table — and that can be a respected, engaged and wise voice in helping the whole of democratic Europe to negotiate the crises to come.

gideon.rachman@ft.com
 
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Federberg

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I'll say this for him. He makes his case very clearly. However... it is factually incorrect to suggest that 59% of new laws come from the EU. It's actually less than 15%, but why let the facts get in the way of a good argument? As I've said before I have some sympathy with some of the arguments the 'Leaver's put forth. Not least the issue of laws being introduced from an essentially unelected body. But let's be clear here... most of the laws come from the European Parliament, the democratic gap actually comes primarily from the fact that the Council of Leaders can veto some of this legislation. While the Council of Leaders are democratically elected in their own countries they don't have a democratic mandate where the EU is concerned. Am I arguing for a United States of Europe? Certainly not. But I would like to see efforts made to close this democratic deficit. Where economics is concerned the guy is way off the reservation. I repeat... the argument that the EU needs us economically more than we need them is a factual inaccuracy of the highest order. I'm not surprised he made that argument, he is after all on the side of leaving. I'm not impressed by his accusing politicians of playing with the facts only to see him expose his own mendacity. Anyway.. for me it all boils down to a couple of things, the economics don't make sense to me and I don't want to see Scotland break away which will probably happen.

I like what a recent FT editorial says about the matter..."In making this decision, rational voters must understand the asymmetry in the decision. As a sovereign country, the UK can change a decision to remain. But it cannot change a decision to exit. Voters should exercise the option to leave if and only if they are certain they will never regret their doing so. They cannot be certain. So the decision to exercise their option now would be irrational."

If there comes a time when we actually have a good reason to leave I want to have the option. Until then I'm all for staying.
 

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by the way, I'm not even bothering to make a response to Minford's nonsense. When you use the extreme illustrations of an economist trying to prove a specific point you open the way for anyone to come up with all kinds of rubbish. Actually very unworthy of him. He doesn't talk about the exposure the UK has to foreign ownership of gilts. The fact that we could be hit by a double whammy of falling house prices and much higher rates. Why would he? That scenario doesn't suit his own agenda.
 
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