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The Right Wing American Enterprise Institute concerned the UK's economic failure under Johnson will be so big it will have repercussions for America:

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The pound’s wakeup call for Boris

Economics, International Economics

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As a classics scholar, Boris Johnson, the United Kingdom’s new prime minister, must know that those whom the gods wish to destroy they first make mad.

As a biographer of Churchill, he also must know that markets can unravel the best- laid economic plans as they did following Churchill’s ill-advised decision to return the UK to the gold standard in 1926 at the wrong exchange rate.

This background offers at least a glimmer of hope that Johnson might heed the very clear warnings that he is now receiving from the currency market that risking a no-deal Brexit could be a very costly proposition for his country. However, it could also very well be the case that Johnson has already dug himself into a political hole from which it will be impossible to get out.

The source of Johnson’s likely future economic and political difficulties is that, in his very first speech in office, he has tempted the gods by throwing caution to the winds. He did so by announcing that the United Kingdom will leave Europe with or without a Brexit deal on October 31 with no ifs, ands or buts.

Never mind that the Bank of England, the IMF, and the OECD have all warned that the UK economy could slump by at least 5% in the event that there were to be a no-deal Brexit. It would do so as the UK’s supply chains would be disrupted and as the UK’s access to the Single European Market would be made more difficult.

To underline that he does not fear the risk of a hard-Brexit, Johnson has appointed a Cabinet made up of a disproportionate number of hardline Brexiters. He has also drawn a number of red lines for any future Brexit deal negotiation, especially on the vexing Irish backstop issue, that his European partners are bound to reject out of hand. Knowing this, Johnson has now instructed his Cabinet to make preparations for the eventuality that the United Kingdom might indeed leave Europe without a deal on October 31.

In focusing the market’s attention on the real possibility that the UK could crash out of Europe on October 31, Johnson seems to have overlooked the fact that his country is now running a very large underlying external current account deficit amounting to around 4% of GDP. This means that, at the very time that he is taking the UK into uncharted economic and political waters with his no-Brexit deal gambit, the country is highly dependent on the kindness of strangers to finance its external deficit.

Judging by the foreign exchange market’s performance in the few days since Johnson assumed office, it would appear that the markets do no not buy Johnson’s repeated assurances that a no-deal Brexit would be a non-event for the British economy. It also appears that the market’s patience with financing the UK’s large external deficit is running thin. Indeed, over the last two weeks, sterling has managed to lose around 3% in value and now trades at its lowest level in the last two years.

With Nigel Farage’s Brexit Party breathing down his neck, it will be politically very difficult for Johnson to make a Brexit U-turn. This heightens the chances that sterling will continue its free fall to the point that it provokes a political crisis that will end in an early UK general election well before October 31.

Sadly, it is far from clear that early UK general elections will spare the country from further economic damage and currency weakness.

In the event that Johnson were to win that election on a hard-Brexit platform, the UK would almost certainly crash out of Europe on October 31. If, on the other hand, Jeremy Corbyn’s Labor Party were to win that election, markets would almost certainly fret that Corbyn would lead the country back to the failed policies of the 1970s.

The net upshot is that, at a time that the European economy is already weak, it must expect to be soon hit by an economic shock coming out of the United Kingdom. That prospect is bound to have repercussions for the global economy and for world financial markets that will reach our shores. That in turn would strengthen the case for the Federal Reserve to be proactive in its interest rate policy as insurance against global economic weakness.

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Blue passports Philip. Nobody on here, including brexiteers can any other advantages.

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Just now, den said:

Blue passports Philip. Nobody on here, including brexiteers can any other advantages.

Only because they don't have to!

And then they flounce off, until next time.

I've never seen anything so childish. The pound is tanking, we're about to be plunged into a recession the ripples of which will be felt worldwide, we'll be left with barely any trade deals, we're at least 3 years away form having the necessary regulatory framework to go it alone. We're on the precipice of an economic meltdown, and the people who wanted it most are sticking their fingers in tehir ears and denying they'll be any problems. 

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Just now, broadsword said:

Only because they don't have to!

And then they flounce off, until next time.

I've never seen anything so childish. The pound is tanking, we're about to be plunged into a recession the ripples of which will be felt worldwide, we'll be left with barely any trade deals, we're at least 3 years away form having the necessary regulatory framework to go it alone. We're on the precipice of an economic meltdown, and the people who wanted it most are sticking their fingers in tehir ears and denying they'll be any problems. 

It'll all be worth it and the economic damage doesn't matter - heard it from a rabid Brexiter on a visit to then north east. 

You cannot reason with these people - they hate the EU because the rich owners of the Mail/Express/Telegraph have conned them for the past 30 years.

And now we have our own Trump in Downing Street spouting false optimism and bribing the "Left Behind" with his Tory magic money tree (Aboretum Conservatii)

Ler's make Britain Great again.

Tally Ho!

 

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10 hours ago, den said:

Blue passports Philip. Nobody on here, including brexiteers can any other advantages.

That's if we can even get them, given they are now produced by a French company out of a factory in Poland...

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Central forecast is now £1= E1.08

And in the wonderful WTO world of No Deal

 

Product tariffs UK-EU (exports):

WTO: Dairy produce 40% Tobacco 39.5% Meat 32.3% Sugar 30.2% Vegetables 15.1% Vehicles 10%

EU: Dairy produce 0% Tobacco 0% Meat 0% Sugar 0% Vegetables 0% Vehicles 0%

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Might be time to put the thread in hibernation till the end of October.

The brexiteers on here won't admit anything's wrong on principle, while Philip is making me fear for the country my daughter will grow up in...

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No need to lock the thread unless it devolves into bickering and personal insults, so we're okay for now.

Obviously if you want to have a debate you need to produce evidence to back up your viewpoint, otherwise there isn't much point saying anything. No problem with people who are pro-Brexit, and everybody is welcome to their own opinion, but you'll need to provide some content to discuss or there isn't going to be much weight to that opinion.

For me there are obviously serious flaws with the EU and how it works, but if we as a country are worse off being out of it - and everything I've seen points to that being the case - then the sensible solution is to stick with it and try as best we can to influence it from a position of power rather than a position of weakness. 

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Yet again, right wing economists in America think this Brexit thing is not a good idea:

The US-UK free trade agreement: Not so fast

EconomicsInternational Economics

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When the UK trade secretary Liam Fox came to AEI two years ago, he predicted that a US-UK free trade deal could be negotiated very quickly as the two counties had very compatible trade rules. This past week, a successor in the UK trade post came to the US also pressing for a rapid move toward a US-UK free trade agreement (FTA) soon after Britain leaves the European Union on October 31. And Liz Truss, the new UK Secretary for International Trade, was adamant that her country would leave on October 31 “with or without” a divorce agreement with the EU.

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Britain’s Prime Minister Boris Johnson reacts during a speech on domestic priorities at the Science and Industry Museum in Manchester, Britain July 27, 2019. Rui Vieira/Pool via REUTERS

In many ways, she found a receptive audience. President Trump has favored a US-UK FTA since he entered office, and just before Secretary Truss’ arrival some 45 Republican senators sent a letter to British Prime Minister Boris Johnson pledging support for a new trade pact if no deal was achieved with the EU. Minister Truss was granted audiences with both US Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross. And Secretary of State Mike Pompeo expressed support for Brexit, promising “we’ll be at the door, pen in hand, to sign a new agreement.”

For all this, the prospects for ratification of a US-UK trade agreement in the near term under most scenarios are not great. If Boris Johnson makes good on his promise to “crash out” of the EU even without any terms of separation, the resulting disorder and chaos will render any serious negotiations impossible for the British government. It will have it hands full dealing with domestic fallout as well as cobbling together interim rules for dealing with EU. In the second quarter, partly in anticipation of a no-deal Brexit, the British economy contracted for the first time since 2008.

Many are predicting a general election at some point in next few months. Johnson has only a slim one-vote majority and his government could well lose a vote of confidence, at which point he would likely take his chances on a national election. Should a Labour/Liberal Democrats coalition win, the chances of a US-UK agreement would further dim — Jeremy Corbyn, Labour’s leader, is no fan of the US, and is deeply antagonistic toward President Trump.

Conversely, should PM Johnson decide to make one last charge at a compromise agreement with the EU (and persuade EU officials to go along), the UK would no longer be free to officially ratify FTAs with the US or other nations. Further, as I have noted in previous blogs, any move toward a “softer” Brexit would inevitably complicate and vitiate negotiations with the US as many EU social, environmental, and safety regulations are at odds with US standards and procedures. UK negotiators would be hard put to satisfy both partners.

Finally, there is the reality of a rapidly shifting trade policy environment in the US. The Democrats now control the House of Representatives and, as seen in the USMCA negotiations, are demanding substantial changes in trade agreements. It is by no means certain that future UK governments would or could accept such conditions.

The dream (particularly among conservatives) of an American-British trade alliance goes back to the Reagan-Thatcher era. It looks as if it will remain a “dream” for some time to come.

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Seems the potions are continued free trade with the biggest single market in the world and the high standards it demands, or a move towards a smaller market with lower standards.

someone explain to me why we would choose America?

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People can make a killing from buying the NHS, lower environmental protection and health and safety standards and so on. We are not important in any of this and will have to put up with a country that is falling apart even quicker. 

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Major escalation from Philip Hammond here https://www.bbc.co.uk/news/uk-politics-49336144

Indicates how fraut things are getting. Extraordinary that the former chancellor calls out his own party leader and prime minister as having his strings pulled by unelected parties.

Things are going to come to a massive head in September. I think the Brexiteers have pursued an undeliverable strategy based on the assumption EU will seek a deal and drop the backdrop. They won't as they know we have far more to lose than them. That will become obvious shortly, then Boris will have a very tough decision on what to do next. Move the end date of 31st October to accommodate an election or referendum, or try to force through no deal against the will of parliament and people. I could see the queen stepping in if he goes for the latter (but I don't think he will as it would potentially fatally destroy the Conservative party and of course end his government.

 

 

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Significant opinion polling shift against No Deal published today:

Survation preferred Brexit outcome find support for no deal on the decline
Remain in EU 43%+2
Leave with deal 29%+2
Leave without a deal 19% -6
DK 9% +2

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I hadn't appreciated Germany would take such a pasting. This can't all be down to building Mercs? Do you know why @philipl

Not good for France or Italy either. One has to wonder why more hasn't been done to encourage the UK to stay or perhaps the public are unaware of what has been done?

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6 hours ago, philipl said:

Latest estimate of job losses by nation of the impact of a hard Brexit:

Surely Brexiteers see job losses across Europe as a win for them?

It would show that Britain has a strong economy as Europe will suffer, and it strengthens their argument that the EU will come back to the negotiating table.

The fact that there will be job losses and not gains will no doubt be overlooked.

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7 hours ago, Paul said:

I hadn't appreciated Germany would take such a pasting. This can't all be down to building Mercs? Do you know why @philipl

Not good for France or Italy either. One has to wonder why more hasn't been done to encourage the UK to stay or perhaps the public are unaware of what has been done?

One factor is the UK economy shrinks by 10%. So that means the UK doing 10% less buying from other countries which translates into a 1.2% decrease in GDP across the EU 27.

These studies have been worked through in great detail and estimated sector by sector where the impact falls.

BUT

What the studies don't estimate is what happens when the EU27 take political steps to reduce the damage to their economies Brexit is inflicting and export their pain back to the UK by something as simple as the very effective targeted Dutch Government social media campaign to attract away British high tech SMEs.

Taking Malta as an example, the estimate on the map is 1,750 jobs will be lost. However, just one project backed by Government is moving 2,100 jobs to Malta because of Brexit.

Another purely commercial initiative sees Bet365 moving 1,000 jobs to Malta- a move that wouldn't have happened without the Brexit threat.

Yes Malta was originally foreseen suffering disproportionately because of Brexit with forecasts of losing around 2% of GDP. Now, current projections are Malta will gain around 4.5% of GDP because of Brexit...

 

Of course all this means job losses and damage to the UK economy are dramatically worse than current forecasts are showing.

This video from 2012 is prophetic:

We are getting a hard Brexit and Patrick Minford is completely correct about their being no UK car industry

Tata (Jaguar Land Rover) gone to Czech Republic

Peugeot (Vauxhall) have said they are going if Brexit impacts the current logistics (it does)

Ditto BMW (mini and Rolls Royce)

Honda closing Swindon

Ford threatening closure of all plants

Nissan moved all new models out of the UK

Toyota not said anything... yet

Edited by philipl

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In other news I see that UKIP has elected yet another new leader, one Richard Braine. Apparently he is quite happy to be known as Dick. You couldn’t make it up.

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Just now, only2garners said:

In other news I see that UKIP has elected yet another new leader, one Richard Braine. Apparently he is quite happy to be known as Dick. You couldn’t make it up.

I had to check that it wasn't made up( Although he does now appear upset at people calling him Dick Braine)

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The Times today was reporting him as being very happy to be called Dick. Maybe the twitterati have got to him.

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This FT includes a lot of information I hadn't previously been aware of.

Well done Ireland!

And Johnson's "strategy" to hold Ireland hostage looks to have failed already.

 


Punishing Ireland’s economy will backfire on Brexiters
 
 London’s strategy of inflicting as much commercial damage as possible is unjustified
 
David McWilliams
 
  Brexit has turned into a hostage situation. Boris Johnson is the kidnapper, Ireland is the captive and the backstop is the ransom. The British message to the EU is, “Drop the backstop or we’ll kill the hostage in a no-deal shootout”.
 
 Doubtless the UK could inflict much harm on Ireland, particularly in agriculture: near 70 per cent of UK beef imports come from Ireland, for example. And crashing out could badly interrupt Ireland’s global supply chain. Nearly half of the 475,000 Irish freight containers of cargo per year going through British ports go to the EU.
 
 That said, the Irish economy is much less dependent on the UK than many Brexiters imagine.
 
 Tactically, Dublin knows that “no deal” is only “no deal” for now. The UK must eventually do a trade deal with the EU because 46 per cent of UK exports go to the EU and 53 per cent of UK imports come from the EU. No matter how the hostage drama turns out, and no matter what the political and economic fallout, the UK will be back at the table soon.
 
 The more chaos at British ports, the shorter the self-imposed mercantile lockout.
 
 In the meantime, London’s new Brexit strategy is to inflict as much commercial damage on Ireland as possible.
 
 Given that Ireland didn’t ask for, or vote in, the Brexit referendum and, in recent decades, has been an impeccable neighbour and a calm, dependable partner in the British-created tinderbox that is Northern Ireland, this new aggression seems unjustified. However British sensitivity towards Irish concerns has never figured highly in Anglo-Irish affairs.
 
 Part of the new British approach has been a relentless campaign to paint itself as the victim of Irish inflexibility, simultaneously emboldened by a Rule Britannia assurance that Ireland can, and will, be brought to heel.
 
 This unstable combination of whingeing victimhood twinned with pompous self-regard has characterised much of Britain’s negotiations thus far. What has been absent are economic facts.
 
 Here they are.
 
image.png
 In 1953, when Winston Churchill was prime minister for the last time, 91 per cent of Irish exports went to the UK. Today, that figure is 11 per cent and falling. Far from being the poor, dependent outpost relying on British largesse — as depicted by Brexiters — the Republic of Ireland is an outward-looking, dynamic, trading entrepot.
 
 Today, Irish firms in the UK employ more people than UK firms in Ireland. Small countries must overcome the tyranny of geography. They live and die by the quality of their strategic thinking. Part of the Irish strategy in joining the European Economic Community was to break its dependency on the UK, seeking new markets in richer, continental Europe. And Ireland has been far more successful in diversifying from the UK than the UK has been in diversifying from Ireland.
 
 Today, little Ireland remains the UK’s fifth largest export market. Britain exports more to Ireland than it does to China with its population of 1.4bn. Furthermore, the UK runs a large trade surplus with Ireland — in fact, its second-largest trade surplus after the US. Strangling Ireland would hurt UK business much more than the other way around.
 
 Ireland buys more from Britain because Ireland is much richer. Rich people buy stuff. On a conservative estimate, the Irish are now over 25 per cent richer than their UK counterparts. Irish income per capita rose from €13,934 in 1995 to €40,655 in 2018 — growth of 192 per cent. In contrast, UK income per capita rose from £21,716 in 1995 to £30,594 in 2018 — growth of roughly 41 per cent.
 
 Ireland is growing nearly five times faster than the UK every year.
 
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 Ireland is also a far more globalised economy. When Britain pulled out of Ireland, it took its capital too. It’s taken us a while to catch up, but eventually we deployed fresh American capital by using our tax system, transforming the economy. This export-orientation ensured that Ireland is today a formidable trading machine.
 
 Based on the most recent data, the value of all goods and services exports per employed person in Ireland was €126,630 per year, compared to just €17,627 in the UK. Total trade in Ireland was 178 per cent of Ireland’s gross domestic product, which was significantly higher than the EU overall (77 per cent) and the UK (54 per cent). If there is a Singapore of Europe, it wears green not red, white and blue.
 
 As Ireland and the UK are in competition with each other for mobile capital and talent, arguably Brexit will be positive for Ireland.
 
 Which looks more attractive, the country that is open to everyone, with fully free access to the EU and no barriers to work, or the country that needlessly erects tariffs and borders against the trading bloc with which it does half of its trade?
 
 Ireland can’t stop the UK if it intends to go down this route, but the EU single market and customs union are far more important for us. We understand the yearning for sovereignty, identity and independence, believe me. But just one piece of advice: the first 70 years are the hardest, after that it gets easier.
 

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