Brexit

[Ballinvarosig Investors]

Trying to think of historical examples of countries being better off after breaking up from a formed union. Can't think of any.

I can think of a few.

 

Finland separated from Russia and the gap between the two nations has widened to 3x GDP.

 

Ireland has 25% higher GDP than the United Kingdom today despite being about half the size after independence.

 

The states that emerged from Serbian dominated Yugoslavia like Slovenia and Croatia have been doing very well in comparison to Serbia.

[txitxo]

As a Norwegian minister once put it, “if you want to run Europe, you must be in Europe. If you want to be run by Europe, feel free to join Norway.”

 

http://www.economist.com/news/briefing/21693568-david-cameron-will-struggle-win-referendum-britains-eu-membership-if-he-loses

[Jurgis]

As a Norwegian minister once put it, “if you want to run Europe, you must be in Europe. If you want to be run by Europe, feel free to join Norway.”

 

http://www.economist.com/news/briefing/21693568-david-cameron-will-struggle-win-referendum-britains-eu-membership-if-he-loses

 

As usual, great article by The Economist. A+++. I probably should subscribe (again) just to support them.

[Aberhound]

Trying to think of historical examples of countries being better off after breaking up from a formed union. Can't think of any.

 

There are lots of examples of better off and worse off. Better off includes the US, Canada, New Zealand, Australia, Ireland (all from UK) Singapore (from UK then Malaysia), Taiwan (from China), Norway (from Sweden), Holland (from Spain). In each of these cases greater liberty and a less centralized and smaller government resulted in greater prosperity. So if you will enjoy greater liberty you should leave. On the other hand if you will enjoy less liberty if you leave, than you should stay unless it is close to the end and then you should leave to sooner start recovering from the inevitable collapse. The iron law of politics is that bad systems tend to get worse as moral degradation steadily worsens. Increasing centralization usually delays but worsens collapse as the State responds to each crisis by further restricting liberty and further increasing theft from the population and others.

[petec]

I would. But it would depend on the government - and that's clearly your chance to say "Aha, EU is not the good government" - and I may partially agree. :)

 

Not quite - but it is where I would say that, since you can't guarantee the quality of government in the future, I think government ought to be chosen at a much smaller level.  As I've said before, the bigger the area of government the less each vote is worth.  Also, there is HUGE value in having different governments trying different things in the world.  I view that as a massive-scale competition for ideas and even population (via migration) and I think a unified world government would be a total disaster for that reason.  Now, perhaps the optimum is 5 regional governments instead of 190 national ones.  Byt my suspicion is not.

 

IMO, pro-exit'ers are closing their eyes on benefits and perhaps some pro-EUers are closing their eyes on negatives.

 

I totally agree.

 

You mention the USA as a counterargument to my point that tensions can build up within a large unit of democracy.  But the USA is a key historical example that scares me.  States joined the union but then turned out to have different ideas of what that meant and the result was a civil war that killed more Americans than all of the USA's other wars put together.  I genuinely see that as a tail risk of future federalisation of the EU.  I truly hope I am wrong but I need a very good reason to take the risk.  Now clearly, Europe has proved that nation states can war very effectively too - but I don't believe the EU is the way to stop that happening again.

 

EDIT: thanks for taking the time on this.  I realise I look like I'm arguing back, but I am also learning new perspectives and getting less sure about my vote!

[petec]

The iron law of politics is that bad systems tend to get worse.

 

Exactly. 

[maxthetrade]

Niels C. Jensen has some good thoughts on the Brexit:

 

http://www.arpinvestments.com/downloads/Absolute-Return-Letter/2016/The%20Absolute%20Return_Letter%200416.pdf

 

[james22]

Dominic Cummings: how the Brexit referendum was won

 

http://blogs.spectator.co.uk/2017/01/dominic-cummings-brexit-referendum-won/

[Spekulatius]

I hVe no clue about British politics, but it seems like a hard Brexit is now reality and May has really no mandate to negotiate anything. This means that she veryblikely will have to step down. given the timelines and fact that there is no authority to negotiate on the British side, it seem like a hard Brexit is inevitable.

 

https://www.bbc.com/news/world-europe-46216415

 

I am looking at this with an eye towards investment opportunities in British stocks, not political discourse per say. I think LYG presents a nice business, but not so much when Britain slides into a recession, which IMO is quite likely. the British banks didn’t do too well in the latest EU stress test due to sensitivity to mortgages and consumer loans, but their business model is more like that for US banks (similar NIM’s too) and more profitable than US peers. a company like BP for example, which does business worldwide, wouldn’t care much about Brexit, so that’s another angle.

[Hielko]

Why do you think hard brexit is now a reality??? There is a deal...

[petec]

Why do you think hard brexit is now a reality??? There is a deal...

 

Yes, but no guarantee that Parliament will back it. (I suspect they will bottle it at the last minute and back it, but there's no guarantee.)

[Hielko]

Why do you think hard brexit is now a reality??? There is a deal...

 

Yes, but no guarantee that Parliament will back it. (I suspect they will bottle it at the last minute and back it, but there's no guarantee.)

Sure, still anything is possible. Who knows, maybe even remain could still gain popularity once people see that leaving isn't the win/win/win scenario that was promised. But I'd say that getting a deal for sure makes a hard brexit less likely, not more.

[Spekulatius]

Why do you think hard brexit is now a reality??? There is a deal...

 

There is a deal with the EU and May‘s Team, but it appears that May has no mandate and can’t get anything ratified. Time is also running out and November was mentioned as the last possible time at which negotiations have to be concluded, which means it’s either the current draft or nothing. Looks like nothing to me. Next steps are hard Brexit, possibly Labour government and a recession.

 

Lloyd trades at 55.4 p as we speak, just a hair above the 52p (?) tangible book value. The GBP actually has been surprisingly strong until today , so I think it may come down some more too.

[Spekulatius]

Looks like the British government is incapable to get anything done or decided. It’s looked more and more like a hard Brexit to me. Dragging it out won’t nexessarily help either . I am surprised that Britain’s economy is holding up as well as it does, but my guess is that at least a garden variety recession in Britain is very likely.

 

https://www.bbc.com/news/business-47753125

[scorpioncapital]

UK is a hostage of geography. I read a book once that explained how each country in the world is highly influenced by its physical location on the planet. The EU is a continental club. If they decide they don't want to trade with UK and instead pivot east say toward balkans, ukraine, they have far more resources. So unless entire armies of ships will sail to UK to provide them with 'stuff' from around the world and they in turn send ships with their 'stuff', I don't really see the UK as having almost any bargaining power here.

 

 

[SharperDingaan]

Referendums are very dangerous things.

If the MAJORITY decision doesn't go your way, you're trapped in an outcome that you don't want to do; and there is no 'un-do' button.

There are no 2nd, or 3rd referenda, until you get the decision you want.

 

In most places, the existing government falls, and there's a general election; where the deciding issue is the referenda question. In the UK case, if the winning party is for an exit, a brexit will take place. If the winning party is for remaining in the EU, there will not be a brexit. The MAJORITY decision prevails, and the issue is resolved upon election of the new government.

 

Most people would think that by mid-summer, this will be resolved.

And by the folks who have to live with it.

 

Different POV.

 

SD

 

[Gamecock-YT]

Looks like the British government is incapable to get anything done or decided. It’s looked more and more like a hard Brexit to me. Dragging it out won’t nexessarily help either . I am surprised that Britain’s economy is holding up as well as it does, but my guess is that at least a garden variety recession in Britain is very likely.

 

https://www.bbc.com/news/business-47753125

 

Actually, I think quite the opposite. Indicative votes on Monday should get to Customs Union 2.0 or another referendum as the choice over May's deal. All the brexiters voted for May's deal on Friday because they know it's increasingly more likely that soft brexit/no brexit is now in the cards.  Only way a hard brexit occurs is if the UK/EU are too pigheaded to agree on an extension date that satisfies both parties. But recessions to both factions being a nuclear deterrent, they'll get an extension done. 

[petec]

The way that Parliament is ignoring what the people voted for (arguably twice, since both major parties stood on a Brexit platform at the last election) is breathtaking. If there is an extension, we may see a complete reshaping of British politics at the next election. Interestingly we may see a reshaping of EU politics before that: if the U.K. participates in the EU parliament elections in May, there’s a possibility that the multinational anti-EU bloc in that parliament will grow big enough to have a blocking minority (35%). That arguably raises the risks for the EU. My view is that a WTO Brexit might be the best thing for both sides now. They’ve both royally f***ed up the negotiations and are staring at the consequences, which include the fact that the Leave vote isn’t going to go away and might be big enough to cause chaos.

[Spekulatius]

The way that Parliament is ignoring what the people voted for (arguably twice, since both major parties stood on a Brexit platform at the last election) is breathtaking. If there is an extension, we may see a complete reshaping of British politics at the next election. Interestingly we may see a reshaping of EU politics before that: if the U.K. participates in the EU parliament elections in May, there’s a possibility that the multinational anti-EU bloc in that parliament will grow big enough to have a blocking minority (35%). That arguably raises the risks for the EU. My view is that a WTO Brexit might be the best thing for both sides now. They’ve both royally f***ed up the negotiations and are staring at the consequences, which include the fact that the Leave vote isn’t going to go away and might be big enough to cause chaos.

 

The Brits have the right to determine their own destiny and leave the EU, if they so desire. However, it appears to me that the political system in the UK is not able to make a positive decision on how to do it. It is also noticeable that all the pro- Brexiter (Boris Johnson) are all gone and let May deal with how to get the job done. It looks to me like the EU has done their part, but the politicians and in the UK haven’t done theirs. I think the EU should should not let it default into a hard exit make the rules as far as it pertains to EU sovereignty as they please and let the U.K. figure out things as they go. EU is much larger than UK, so the fallout will hit the UK much much harder than the EU. Sorry lads, but bad things can happen when you let idiots run your country.

[mjm]

20% of german car exports go to uk i will mention

[Spekulatius]

The way that Parliament is ignoring what the people voted for (arguably twice, since both major parties stood on a Brexit platform at the last election) is breathtaking. If there is an extension, we may see a complete reshaping of British politics at the next election. Interestingly we may see a reshaping of EU politics before that: if the U.K. participates in the EU parliament elections in May, there’s a possibility that the multinational anti-EU bloc in that parliament will grow big enough to have a blocking minority (35%). That arguably raises the risks for the EU. My view is that a WTO Brexit might be the best thing for both sides now. They’ve both royally f***ed up the negotiations and are staring at the consequences, which include the fact that the Leave vote isn’t going to go away and might be big enough to cause chaos.

 

I don’t think it is even an option for the EU to let the UK vote for the EU parliament, when they clearly want out. This would not even remotely make sense.

[Spekulatius]

20% of german car exports go to uk i will mention

 

Yes it’s significant. However looking at this in another way , 40% of all U.K. exports go to other EU countries, but the fraction of EU exports going to the UK is only 8%. So for the UK, trading with the EU is 4x more important than the other way around. The EU can clearly live without the UK, but the UK has a really hard time with out the EU.

 

Anways, trading between the UK and the DU would hardly stop with a hard Brexit, the EU could simply assume standard WTO conditions and be done with it.

[petec]

The way that Parliament is ignoring what the people voted for (arguably twice, since both major parties stood on a Brexit platform at the last election) is breathtaking. If there is an extension, we may see a complete reshaping of British politics at the next election. Interestingly we may see a reshaping of EU politics before that: if the U.K. participates in the EU parliament elections in May, there’s a possibility that the multinational anti-EU bloc in that parliament will grow big enough to have a blocking minority (35%). That arguably raises the risks for the EU. My view is that a WTO Brexit might be the best thing for both sides now. They’ve both royally f***ed up the negotiations and are staring at the consequences, which include the fact that the Leave vote isn’t going to go away and might be big enough to cause chaos.

 

I don’t think it is even an option for the EU to let the UK vote for the EU parliament, when they clearly want out. This would not even remotely make sense.

 

No, it doesn’t. But I suspect the EU wants to wear the UK down so that it remains. I suspect that the EU will grant another extension if the UK asks for one, comes up with a plan, or calls a general election. And if they grant one, they’ve already said that the UK must participate in the elections.

[petec]

The way that Parliament is ignoring what the people voted for (arguably twice, since both major parties stood on a Brexit platform at the last election) is breathtaking. If there is an extension, we may see a complete reshaping of British politics at the next election. Interestingly we may see a reshaping of EU politics before that: if the U.K. participates in the EU parliament elections in May, there’s a possibility that the multinational anti-EU bloc in that parliament will grow big enough to have a blocking minority (35%). That arguably raises the risks for the EU. My view is that a WTO Brexit might be the best thing for both sides now. They’ve both royally f***ed up the negotiations and are staring at the consequences, which include the fact that the Leave vote isn’t going to go away and might be big enough to cause chaos.

 

The Brits have the right to determine their own destiny and leave the EU, if they so desire. However, it appears to me that the political system in the UK is not able to make a positive decision on how to do it. It is also noticeable that all the pro- Brexiter (Boris Johnson) are all gone and let May deal with how to get the job done. It looks to me like the EU has done their part, but the politicians and in the UK haven’t done theirs. I think the EU should should not let it default into a hard exit make the rules as far as it pertains to EU sovereignty as they please and let the U.K. figure out things as they go. EU is much larger than UK, so the fallout will hit the UK much much harder than the EU. Sorry lads, but bad things can happen when you let idiots run your country.

 

The political system is quite capable of making the decision. It just might take an election first. We have a Remain parliament trying to implement a Leave vote. It may take an election to either confirm the public does not want a WTO Brexit, or to replace the members of Parliament so that it gets one.

 

The Brexiters like BoJo are far from gone. They resigned from government when May refused to implement the Brexit they wanted, but they are still heavily involved and BoJo is a leading candidate for the next leader of the party.

 

I think the EU has been a bit shortsighted. They insisted we negotiate the divorce settlement first and the future relationship later, with the result that Parliament won’t back the deal because they don’t know what the future holds. That wasn’t smart. Varoufakis has described the deal as something a country would only sign if it had been defeated at war. If that’s even half accurate then they’ve overplayed their hand and raised the risk of a no deal Brexit.

 

Will it hurt the UK more than the EU? Of course, to start with. But if we are smart enough to cut corporate tax to 10%, tariffs to zero, deregulate, sign a trade deal with the US, and join the CPTPP - all of which are quite possible - then who knows? Certainly beating the EU’s lacklustre economic performance shouldn’t be hard.

 

I’m coming across as a diehard leaver. In fact I voted to remain. But I do believe we need to respect the vote.

[Spekulatius]

I think the UK will be fine in the long run, but the short term might be ugly and probably means a lower standard of living via higher inflation.

 

Corporate taxes aren’t really the problem in Europe, they have been substantially lowered over time, it’s the individual taxes they are too high. Germany at least could easily reduce the tax burden, there is 60B Euro Budget Surplus and interest rates are negative for short term Bund notes, what are they waiting for?

 

The issue of blame aside, any idea what happens to the U.K. economy if we get a hard exit at default conditions? i thought it might be similar to the impact of the GFP for Britain and maybe a weak  recession for the EU. The stock market especially in the U.K. doesn’t seem to think so or it would be 30% lower, or are investor there just putting their head into the sand? I am guessing they I must be wrong, I wouldn’t touch U.K. stocks (in general) with long pole right now, but clearly many think differently.