Miscellaneous News

[PanAsian]

Certainly.
Status quo is pretty much guaranteed to be gone.

All the toy models I have seen have different percentage points assigned across a timeline, but as Yellen said there currently is no clear way of knowing exactly what the overall outcome would be, either positive or negative in different time scale. Smart money have stayed sideline throughout. For an event at this scale, it went down with a certain degree of British orderliness. No liquidity crisis.

If China plays it well, she could be one of the real winners out of this mess, or opportunity.

Same for the US, Japan, Russia, or anyone else for that matter which is not part of the EU and competes with it in some fashion.

 

[Yvrch]

For those fishermen it is 100% of their living, good for them for standing up for themselves because obviously who else will?

Actually I agree with the narrative of little guys flipping a bird at Euro bureaucrats and standing up for themselves.
These wooden bureaucrats tend to make decisions that someone else suffers with no consequences to themselves, a pure and simple case of moral hazard.
One case in point is Spain.
Spain was growing faster and running higher inflation, while Germany was growing around 1 % or less at the turn of 2000.
ECB kept the interest rate low, in pure interest of Germans, the biggest kid on the block, who were having recessions, in contrast to Spain's robust growth.
So what happened to the poor Spain? Cheap money overheated their economy, inflation shot up, bubbles formed when even more German investments flooded in seeking for higher returns. Spaniards imported German goods en mass feeling the wealth effects from the bubbles.

We all knew the rest of history when the bubble burst in 2008.

 

[PanAsian]

Actually I agree with the narrative of little guys flipping a bird at Euro bureaucrats and standing up for themselves.
These wooden bureaucrats tend to make decisions that someone else suffers with no consequences to themselves, a pure and simple case of moral hazard.
One case in point is Spain.
Spain was growing faster and running higher inflation, while Germany was growing around 1 % or less at the turn of 2000.
ECB kept the interest rate low, in pure interest of Germans, the biggest kid on the block, who were having recessions, in contrast to Spain's robust growth.
So what happened to the poor Spain? Cheap money overheated their economy, inflation shot up, bubbles formed when even more German investments flooded in seeking for higher returns. Spaniards imported German goods en mass feeling the wealth effects from the bubbles.

We all knew the rest of history when the bubble burst in 2008.

The little guys are flipping a bird through Euro bureaucrats to UK politicians who traded their interests away either because they chose to cater to or are in the pockets of big business interests in multiple EU countries, the third target of the bird.

 

[Yvrch]

Same for the US, Japan, Russia, or anyone else for that matter which is not part of the EU and competes with it in some fashion.

Exactly.
UK will be busy knocking doors in all capitals in major trading economies.
EU wise, it is Germany that matters in what EU decides, the rest just tags along. Being a trading nation herself Germany would bargain for the best deals in town, rather than totally shutting down trade relations with UK and completely stonewalling UK trade. That would be nearly impossible. At the same time they can't show weakness. Market would be in a prolonged slide. Another Soros would come along and would attack one of the weakest sovereign debts.

 

[AndrewS]

For those fishermen it is 100% of their living, good for them for standing up for themselves because obviously who else will?
[\quote]

Now you're talking about vastly more jobs being lost elsewhere, in order to save a few fishermen.

 

[AndrewS]

Wolfie

Let me play a devil's advocate here.
Personally speaking, I have no skin in the game as of last Thursday, 15 minutes right after your polls closed.

It is as much a political issue as an economic one.

I agreed UK can be stronger, richer and all that overall staying in EU, but what is not clear to me is to what extent. Not all countries inside EU, especially in eurozone, are not that great, given all the benefits you brought up. Case in point, Spain, Greece etc. If it is all good why are they suffering? Something is not fitting in the picture.

That brings us to the fact that UK, more or less, has its own house in order and has her own innate competitive advantage, while the weaker countries suffer at the EU trade, ie Greece. UK was smart enough to run 5 tests to keep her own Sterling.

I think eurozone running on cheap money in one unified direction is a double edged sword. I'd rather fear a euro-exit than a Brexit. I wouldn't bet there is not a secret German plan for a euro-exit sitting somewhere. Inquiring mind needs to know. When EU, for that matter euro, dies, it would be a death of thousand cuts, a piece by piece slow-mo death.

Footsie fared better than those in other European countries, Spain and Italy worst. It showed UK's innate strength.

She would get FTA up and running no matter what. So I think UK would be much better position longer term staying on its own strength.

I'm not commenting on what politicians say.

The Southern European economies have very high (endemic) levels of corruption and political dysfunction, which means they find it very difficult to enact reforms.

What should have happened is that they:

1. Should have have devalued
2. Run a government spending deficit
3. Received more transfer payments from the central Brussels budget

But Germany dominated decision-making in the Euro, in large part because the UK stayed out of the Euro.

===

Note that the UK had already received guarantees on market access to the EU, which were better terms than anything the UK can hope to negotiate in the future. Now we're talking about a painful 5years to to renegotiate worse FTA terms with the EU and the rest of the world, which will easily drag out much longer once Scotland votes to leave.

 

[AndrewS]

You made it sound like 1930's all over again.

Affordable housing problem is not unique to UK, or the overall general affordability in major metropolitan areas throughout the world. It's more of a city level issue and how to tax foreign ownership to temp down foreign speculation and house flipping. If need be UK government could draw up a social policy just like in US to support home ownership, if they haven't done it already. It's not an Oh there's no way out issue.



Probably you forgot Brent, a benchmark for all to watch daily.
It just showed again how diverse UK economy is and her strength, not the other way around.
UK economy is still bigger than that of Russia, even given the huge oil advantage for Russians.

Well if 60% of your car exports are going to EU currently, that's hard to ignore but UK itself is a pretty big market herself nonetheless. So there still is a give and take. Japanese FDI into UK won't dry up altogether as they don't have that many places to park their money, as I believe FDI into US is pretty much at the higher bound, several times bigger than those in UK.

People still buy from British insurance underwriters just so you know, for marine cargo it's the biggest I believe. And it's not going to change anytime soon.

UK banks are in a way better position than those in EU eurozone area, where national banks are allowed to grow bigger than they need, without the national central bank. That's where all the trouble begins.

I agree it won't be the 1930s, but it's not going to be pretty.

Plus the fundamental issue around affordable housing is that construction has been nowhere near the demand due to population growth.

Brent as an oil benchmark is becoming irrelevant as oil production declines. Plus what does having a benchmark actually add to the economy?

Also, the UK is not a large car market, as it's only 2.6million vehicles sold, which is roughly 3% of global sales. In comparison, China is at 25million, USA is at 17million, the rest of the EU is at 10million.

Japanese FDI in the UK will reduce as they need access to the EU market, which is now in doubt.

I would agree the Marine insurance industry will remain, but it doesn't actually support that many jobs

 

[solarz]

Ability or inability of a country to absorb immigrants, at whose expense while who benefits, are fair practical concerns deceptively mischaracterized as prejudice by the Remain campaign and comments such as yours.

Taken in isolation, I would have no problem agreeing with your point. However, let's not forget that the current refugee crisis is a direct result of European and American interventionism.

While this may not be palatable public discussion points, the leaders of the EU will not be likely to forget that the UK was more than willing to participate in the spoils of war, but isn't willing to share the burden of repercussions.

The economic repercussions of Brexit is complex and unpredictable. However, that was never the real issue to begin with.

 

[AndrewS]

I would suggest that the Brexit posts should be moved to an entirely separate thread.

This is going to go on for at least months, but more likely years.

And a breakup of the EU or reversion to an EC (European Community) is now a distinct possibility.

 

[Yvrch]

The Southern European economies have very high (endemic) levels of corruption and political dysfunction, which means they find it very difficult to enact reforms.

What should have happened is that they:

1. Should have have devalued
2. Run a government spending deficit
3. Received more transfer payments from the central Brussels budget

But Germany dominated decision-making in the Euro, in large part because the UK stayed out of the Euro.

===

Note that the UK had already received guarantees on market access to the EU, which were better terms than anything the UK can hope to negotiate in the future. Now we're talking about a painful 5years to to renegotiate worse FTA terms with the EU and the rest of the world, which will easily drag out much longer once Scotland votes to leave.

So it's a common understanding that each country has its own unique circumstances and where it stands on the economic pecking order. That's where the straight-jacket one size fits all values and norms create more problems than it solves.
What are you going to devalue when what you got is only one common currency?
You don't have the control over money base so national central banks from south are at the mercy of northern brethren to extend a lending hand.
With over Euro 1 trillions already in the hole, core member countries are not really entertaining the idea of throwing good money after the bad, they are not entirely sure how or when they would be paid back.
It's just a peanut what they dole back out to members since their budget itself is much smaller compared to national budgets and those funds don't even have anything to do with the national governments as they would normally go straight to programs they want to fund.
So much for fiscal policy that members enjoy.

That's why one should be very wary of straight jacket universal norms and values arbitrarily imposed on sovereign states without considering their circumstances and where they are along the development path.