Well it’s happening. The world has woken to the Brexit challenge. Much as the UK could not believe anyone would be dumb enough to vote Trump in, but it's becoming a frightening possibility, the US didn’t really believe that the UK could vote to leave the EU, though that is also a frightening possibility. Not so much frightening because of the terrors of what would happen if the UK leave, but more the terrors of what people think will happen should Britain leave the EU.
I know that the press is full of Brexit this weekend and I am pretty sure that Sterling is going to take a dump this week, UK corp get knee-jerk sold, comparisons to early 1980s GBP/USD levels quoted and all hell let loose, but I am not going to go on and on about Brexit other than to say three things.
1- Cable's natural level is 1.6000. Cheeky bids 1.20 and below will pay off.. one day.
2 - UK is not Greece so please don't draw up parallels.
3- All of this ->
First, I think Cameron missed a trick in the negotiations. He should have regularly and very visibly jetted off to Moscow refusing to tell anyone why. That would have put the heebie-jeebies up them. But we are where we are and it looks as though what we have is as far as it goes with regards to compromise.
I am not at all decided which way I am going to vote, my heart says leave and my need for security says stay, which is the card that Cameron is playing with his new sound bite 'the leap into darkness’. But leaping into darkness is very often the better alternative to going down with the ship, remaining in a burning building or staying any longer in Sandford.
Sandford. Sandford was the fictitious village in the film 'Hot Fuzz’ where the community was run by the Neighbourhood Watch committee who were a law unto themselves. They ran the village on their own terms showing no mercy to anyone who stood in their way towards - ‘the common good’. It was a village that won ‘best village' award year after year and though everything looked wonderful on the surface the murderous village committee had a cellar full of the corpses of anyone who didn't fit in. In the film an out-of-town supercop arrives to try to clean up the village and see justice done. He won. Cameron hasn’t.
Like most organisations run by committee, the EU has ended up unresponsive to emergencies as decisions are buried in consensus and consensus takes longer to achieve the more there are involved. I will now shamelessly repost something I wrote in June 2012, with the last paragraph further supported by the last three years in Syria.
The feeling that the present system is failing is picking up steam. Of course there is rarely a demand for change when the populace is vaguely contented, no matter how useless the ruling body - it's when things go wrong that the mettle of the rulers is tested. Until a couple of years ago the Euro-project had been an easy run, but complacent growth (funded by sovereign profligate spending, funded by profligate lending) together with a self-regulated administrative budget has created a "Jabba the Hutt" of a European Parliament. Bloated, self important, dictatorial, living in a luxury created at the expense of its subjects only to succumb when confronted by a "Hans Solo" of a problem that they thought was dead. They are completely useless in time of crisis.
So knowing that we cannot rely on European Central Command to make a decision in this time of stress, we look to the European states themselves to unite and provide strong leadership, combined with an ability to make difficult decisions, despite populist concerns. Worryingly, policy appears to be set by consensus rather than coalition due to a misunderstanding that 'consensus politics' are the same as 'coalition politics'. They are not. During World War II the UK ran a coalition government, however decisions were delegated to individuals who were given absolute power in their fields. Trying to run a war on consensus is impossible, yet Greece and Greater Europe are both trying to make some very difficult decisions by consensus, rather than by strong coalition. Not surprisingly they are failing miserably, leaving TMM wondering where the strong group leadership is going to come from.
While we ponder the path of Pan-European rulership as current consensus democracy is failing, we are seeing Arab nations fighting hard to move towards consensus democracy, having shed oppresive dictatorships. TMM do wonder if they will succeed, as we are beginning to surmise a tendency for the success of a democracy to be inversely proportional to the diversity of the beliefs, behaviours, interests, cultures and religions of its populace (Egypt is in danger of bypassing its newly found democracy, remaining in military control). In other words, the more balanced and numerous the make up of subgroups, the less likely consensus politics will succeed. Which is, we suppose, why the oldest "democracies" sort of cheat by becoming two or three party systems where democracy is partially obscured by an oligopoly of power sharing. [IN EUROPE DECISIONS REALLY ONLY GO THROUGH IF GERMANY AND FRANCE AGREE WITH THEM]
The Euro project may have wonderful PR proclaiming a new golden dream of oneness but we can't escape the fact that everyone who joins does it for themselves and never for the benefit of other countries, though of course any resulting benefits to others are trumpeted as philanthropic wonderfulness. The PIGS are in it for having their debt guaranteed (something the UK has never benefited from, nor would being outside the Eurozone), France for agriculture policies and an ability to legislate against competitors, Germany for its imbalanced trade, the Eastern countries for wealth diffusion from richer states and the smallest states for economic and political risk buffering.
The UK has benefitted from trade agreements and seeing their competitive tax structures, whilst residing in the EU, suck in corporate HQs and global manufacturing plants, which has then sucked in European talent chasing the money (oh, and the UK has also benefited from those E111 European medical insurance cards and EU wide policy restricting the amount your phone company can rip you off whilst you are abroad). But it has lost its ability to counter EU legal impositions, with the European Court riding as a higher authority than the highest court in the UK. This is the issue that grates with me most.
I don’t want to lose trade with the EU, but if the UK remains competitive I don’t see why it should. Business follows the money and value. The rest of the world manages to trade with the EU and as a small example, despite EU regulations against solar panel imports, China still does pretty well exporting them. (The solar panel regulations were, as my friend Paul Barwell famously stated on Bloomerg TV, “Bonkers”. But that is an aside).
It basically comes down to this. The UK is very close to saying enough is enough. This is not a negotiating stance, we are passed that now. Unlike Greece where tactics of threatening to leave were employed to demand more, the UK is thinking of leaving because they can’t get more. Likening the UK to a club member saying they are willingly to stay in the club if they can change it, is fair to a point. But the point is more that the member has given notice to the club that it wishes to leave and is giving it a chance to keep it so that all possible is seen to be done before leaving and canceling its subscription direct debit.
If the EU were FIFA then the UK is one of their biggest sponsors. Though it damages both if the sponsor leaves, if things don’t change at the top then the costs outweigh the benefits. The difference is that FIFA is changing due to pressure from their sponsors.
The divorce between the UK and EU will/would be acrimonious as the EU would have to see the UK suffer as much as possible as a lesson to other member states. As with Greece and Cyprus, examples have to be made of those who fail the EU’s bidding. But if things did go well for the UK, they could take the path of an evolving company. Dynamic staff leave the unresponsive behemoth and set up a new disruptive alternative based on fresh ideas driven by client needs. This could then be realigned in new partnerships (NAFTA would be fun) or expand by sucking in talent from the old company leaving it as a decaying shell. For a light hearted example - UK leaves, Holland joins them, followed by Denmark. Sweden and Finland (they may even suck Norway in, though Switzerland would be a coup), leaving Germany supporting the southern states until even they can’t balance the political vs economic costs and cave in. France meanwhile would have closed the Eurotunnel and a new one would be under construction from the UK to Belgium, who would have seen the writing on the wall and sold their soul to the new high bidder.
Unfortunately this referendum, as with the Scottish Independence referendum will focus on the negatives and scare tactics. Show me the positives, and no Europe, that isn't asking for concessions, it's asking to be shown the member benefits rather than the punishments for digression.
Finally, I don't give a damn which UK politicians are for or against leaving. This is a decision that is cross party, across all classes and is personal. I am not going to have my vote swung by who supports what. Unless, of course, Bob Geldof, Bono, Charlotte Church or that Di Caprio fellow express a view then I am all ears...