The vote is done and counted. The United Kingdom has chosen “exit”. The wailing and gnashing of teeth has begun.
I’ve had a long enough news cycle to have sampled fairly widely. One surprise was just how snarky / mean the “progressive” media has been. Not only is there a great load of FUD Factor (Fear Uncertainty & Doubt) being pushed (even now that the vote is done) but even the straight stories tend to the mean and nasty.
I also find that I’ve even been pulled in by one of them. Before I’d noticed it was a pattern, I let one of the news “reports” that Scotland was looking for a do-over on their UK Exit Vote and maybe even North Ireland would want to join the Republic Of Ireland, shift my attention. I was busy enjoying the returns on the news and not engaging as many critical faculties as normal ( a few pints of Grolsch will do that to you) and got carried away with the idea of a Gaelic Reunion, inside a Greater UK, in a comment here:
While doing my regular “news cycle” that same idea, that Scotland would exit the UK and “stay” in the EU, and North Ireland would join with the Irish Republic to stay in the EU, came around no less than three times in rapid rotation. On MSNBC, CNN, and PBS. All “left leaning” and strongly pro EU. One of them even had a EUrocrat making the suggestion. They also reported that the EU Ministers were meeting with part of the agenda being to “make it painful” for the UK to exit so that others would be “discouraged”.
Well, it may be a dim lightbulb, but it finally lit up. The E.U. and their sycophants were the ones promoting the dissection of the UK as punishment.
Sidebar on Clubs:
Once upon a time, the kid across the street had a “club”. It was a bit of tacky crap nailed together and to the fence, but it was his “club house”. To join his “club”, you had to do what he said. He said to walk on broken glass he had spread in the alley behind his house. Being all of about 5 years old, I considered it for about 30 seconds. Then declined to join his “club”. Now in my small town, you had a choice of ONE set of folks to know and with which you attended school. Being the same age, I had to cope with this guy for the next dozen years. He decided to be very mean to me ( i.e. be a bully) due to my not wanting to “join his club”. That was my first experience with sociopaths.
Well, after a dozen years + 1 or so, he “woke up dead” out at the river. The story around town was that either the KKK or the Neo-Nazi (back then they were just called Nazi as the Neo part wasn’t around yet) had killed him off for “giving them a bad name”. Yeah, that bad. The local police investigated thoroughly, but could never identify the killer. (That is, they went to the river, looked at him, and said “Yup, looks like it’s him. Looks dead to me.”… Yeah, that bad…)
After a small amount of rejoicing in the town, life moved on. But it left me with a deep appreciation for the sociopathic mind (though I didn’t have the name for it then) and for the idea that any “club” with pain to enter and penalties to exit was no club I ever wanted to be part of.
Back at the EU:
So here we have the EU. It has a load of “pain” to enter. You have to walk on their version of broken glass and be subject to “their rules” (that also includes taking your money – ask Cyprus) and now with talk of “penalties” to exit. Now where have I seen that before…
And it was just these folks that were talking up the dismemberment of the UK so as to carve off chunks of it to keep “in the club”. And I’d not noticed at first blush.
In general, I’ve found that when someone is doing that kind of thing, stating it in public to their face is often the best cure. Shady dealers do not like public view.
As I see it, Scotland can’t just “vote to stay” in the EU. That club nas “rules” for joining. As an independent Scotland would be a new country, it could not be just grandfathered in based on a different country.
For North Ireland, it is a more complicated story. While the CNN news had a nice simple graphic showing ALL of North Ireland as “remain”, it was pointed out that was a lie.
h/t Paul, Somerset same thread as above link:
Paul, Somerset says:
24 June 2016 at 11:48 pm
Would US readers please beware of all the maps painting Northern Ireland as entirely “Remain”. They are incorrect. The border areas and a couple of parts of Belfast voted that way. The areas such as Antrim closest to Scotland were solidly “Leave”.
There was no mandate for any unification with the Republic of Ireland, Scotland or anywhere else, and as someone old enough to remember the misery caused by those arguing over that cause in the past, I’d be grateful for it not to be promoted again.
Which has this graph in it:
Look closely at North Ireland in the right picture. It is half and half. While the net is for “remain”, it is NOT uniform. There is no consensus in North Ireland for “remain”, so can be no consensus to “stay in the EU” via binding to any other party after cleaving from the UK.
In short, that “scenario” must be a fabrication. The general pattern of mixed yellow and blue is not significantly different from patches of England and Wales.
Now who would want to do that…
In oh so “concerned” a voice, the folks at CNN were terribly worried about The City and went to great lengths to stress that services could not be imported to the EU from outside without a special dispensation (that they called a ‘passport’) and they were certain that would not be issued by Brussels so as to “punish” the UK and discourage others from thinking of exiting. Then time was spent contemplating where to relocate London Financial Services out of London and into the Rump EU. Dublin was suggested, as was France. One even stressed that Switzerland was not allowed to “export services” into the EU.
Unmentioned was that Switzerland seems to be doing fine, thanks…
Then there was pants wetting and hand wringing over the “next two years” of “uncertainty” for businesses and the “30% of employees from other EU nations”. Really? You can’t figure out that having some of them “gone home” is a feature? So pack up the “EU” sales department and send it to a local sales office “back home”. Everyone will be happy.
Oh, and great chalkboards of nails of complaints were spent on how hard and long and drawn out it would be to “negotiate trade deals”. Well, only if you load them up with all sorts of crap like the TPP with secret courts that can enforce climate doctrine. If all you want to is trade there are a few simple paths.
1) Unilaterally state your trade terms. This was common when I was a kid. A country just posts their tariffs, if any, and is done. Things like “10% on manufactures in the FOO industry” and “5% on all other goods” were common (especially where the FOO industry had connections in government). The EU members can accept them and trade, or not sell any Mercedes in the UK.
2) Negotiate a simple direct deal. Don’t make it a Christmas Tree for every loony pathological idea your Staff has, or your political class wants. It doesn’t take long at all to negotiate “We have a zero tariff between the EU and UK, and any goods legal in the EU can be traded”, for example.
Then, my favorite, as it doesn’t need the EUrocrats to do anything:
3) Set in law a “symmetrical tariff scheme”. The UK passes a law that states: For any nation or collection of nations with which no other trade agreement exits, the tariffs on goods imported shall be set to match their tariffs on our exports to them. Any goods forbidden by them for import to them are forbidden for import from them.
Your part is done. They can now choose to pay tariffs, or not.
All up, I’d figure about a week to get #3 passed.
The R.O.W. row
The Rest Of World is just waiting for you to join it. This will cause a row inside the E.U. as you sign up partners and shift focus elsewhere. So what. What are they going to do, kick you out?
So starting Right NOW, send off trade envoys to the FBE Former British Empire. We all know you are looking for action, and we all know that the EU barriers will soon be gone. “Cut deals” that say “Like this now, like that after exit from the EU”. Or just have open trade deals and let the EU swear at you. Why care?
As I read “Article 50” (or at least the summaries of it) they say you have 2 years to “negotiate the terms of exit” and then you are out. It doesn’t say you can’t be out earlier. It doesn’t say you can’t do things while you negotiate. It says that 1/2 the remaining rump nations in the EU have to ratify the new deal for it to be accepted, but doesn’t say you can’t just do what you want anyway. (See item #3 above…)
So draw up a document that says:
In the absence of any other agreement to the contrary, all EU enacted rules, regulations, and laws are rescinded in the UK. Tack on a #3 above. Put in a term about “Non-UK Citizen residents of the UK have a year to apply for a resident work visa or wind up their affairs and depart the country”. Also add one or two lines like those for whatever else I’ve forgotten. Then sign it and ship it. Maybe something like “EU Passport holders will have visa free access to the UK for one year from the BREXIT vote” just to make them feel warm and fuzzy.
You are now “negotiating from strength”. They can choose to cut a better deal with you, or not. Not your problem. As a Sovereign Nation, you get to set your own rules, and you have.
Frankly, I’m not seeing the problem.
The EU are the ones who need to decide the “rules” for UK citizens living outside the UK in the rump EU, not you. They will do what they want anyway, so make it their problem. IF they want to be tough about it on UK citizens, you tighten your terms to match.
I’ve negotiated a LOT of contracts, and the one tool that has done far more for me than any other is the rule of symmetry. Wherever there are two lines of text saying “I get FOO” and “You get BAR”, change them to one line saying “We both get FOO”. Any “you must do FOO” becomes both parties must do FOO. The only real deviation is when real asymmetry exists. So “both parties charge 25% tariff on lamb” doesn’t mean much if you don’t import lamb… Instead, change it to “All agricultural and food products for both parties will have the same tariff of __%” and ask what number they want there…
Generally that cuts negotiation time down “right quick” as most bad things get rapidly removed. The one or two “odd cases” can be resolved fast, then.
I did notice that MSNBC? said fully 1/3 or 1/2 of UK Gin was shipped to the EU. IFF, for whatever reason, they start giving you grief, publicly start negotiating to sell it to the Russians and Chinese. Just state, blandly, that the EU is being a pill about (whatever it is) and that for this reason you have (size of Big Gin) to redirect from them to a new market and invite Russia, China, and “any other interested party” to contact you.
There is nothing like the prospect of no Gin Martinis and no Gin and Tonic to get someone’s attention and cause them to sober up. Voluntarily or not…
To me, it looks like the EU Powers That Be want to play mean and insist you stay in the club or at least walk barefoot on broken glass to get out. Simply pick up their shoes and say “After you”…
Their basic position is “Our Club is Exclusive and YOU can’t play in it without our favor.” Your position of strength is “We have the whole world, your club is cute, but if you don’t want to play fair, well, I’ve got the whole world to deal with… oh, look at the time…”
First off, they panic over anything. Something like 70% of trades are now done by computers anyway, and they just scan key words and react for news driven events, Then price action drives them into odd extremes on major events. So ignore them for at least a day and a half. (One day already in the bag).
I’m going to do a full on posting a bit later. For now, just look at the top numbers. EU stock markets down about double the UK market. 3.x% and 6.x% tells you that THEY are the ones in trouble, not you.
Talking heads are saying all sorts of silly things. Like that the £ is at levels not seen for a decade or some such. Well, that means it WAS at about that level once before and you did just fine. They also don’t say “crossed against who?” so it really is a useless statement. Against the $US when it is particularly strong? That’s not a £ issue, but a $ issue.
This is a 5 year chart. It is for ETFs. That is colored by the fact that ETFs using futures and similar contracts have a slow decay built in (‘tracking error’) so it isn’t clear if the general downtrend is due to $ strength, or just that this is a 5 year chart and tracking error via fees is adding up. So only look at the relative position of the lines, not the slope per-se.
Yes, the £ is down 10% in $ terms over 5 years. Yes, it took an added 5% plunge down on the news. (That last bar). But look at the Swiss (FXF) Franc and the Euro and the Yen! About a match to the Swissy, beating the Euro handily, and the Yen only started coming up off the floor at the end!
ANY currency that matches the Swiss Franc is NOT a weak currency nor in trouble.
Yes, crossed against the $US and with ETF tracking error / fees, you have a drop. That just means the USA is in trouble with a strong dollar and that over the long term ETFs tend to drift down from fees and leakage.
I hope to find decent long term real currency cross charts this weekend. I don’t normally trade currencies, so need to search a bit.
UPDATE: FX Cross charts are in the followup article:
But even with ETF issues, it is very clear that it isn’t the £ in trouble, but the €.
It sure looks to me like the FUD Machine continues to operate. Deception and dirty tricks are not just for campaigns, it seems.
It is my opinion this will not get better in the next year. Prepare a pound of salt to help ease the attempted force feeding of this kind of thing from the MSM. Mainly Slime Media. Avoid the pants wetters and the chicken littles and “carry on”.
Stride boldly onto the world stage and state that Great Britain is now free to do business with all. Terms available upon request.