WHY EU NATIONAL LEADERS SHOULD INTERVENE
It is perhaps appropriate that Samuel Beckett’s play Waiting for Godot was written in French, and premiered in Paris in January 1953, not appearing in English until its London debut in 1955.
As you’ll know, Godot himself never appears, which some might say is the real point of the narrative. Certainly, his non-arrival has no serious consequences.
This is where drama and reality part company. Like Vladimir and Estragon in Beckett’s play, both sides of the “Brexit” impasse have been waiting for more than two years now, and are waiting still, for the political equivalent of Godot to turn up. This time, it’s going to be very serious indeed if the major character (or characters) fail to put in an appearance.
If you’re a regular visitor to this site, you’ll know that I steer well clear of taking sides over the outcome of the “Brexit” referendum. This said, those of us who understand the surplus energy basis of the economy had solid reasons for expecting the vote to turn out as it did.
Though GDP per person was slightly (4%) higher in 2016 than it had been in 2006, personal prosperity in Britain deteriorated by almost 9% over that decade. When the public went to the polls, the average person was £2,150 worse off than he or she had been ten years previously, and was, moreover, significantly deeper in debt.
These are not conditions in which the governing can expect the enthusiastic backing of the governed. There were other factors in play, of course – including widening inequality, and the lack of a national debate over immigration – but the “leave” vote was founded on popular dissatisfaction with an “establishment” seemingly unconcerned about deteriorating prosperity.
The authorities’ fundamental inability to understand the prosperity issue was by no means unique to the United Kingdom, and neither were its consequences confined to the 2016 referendum. Had the deterioration in prosperity been understood in the corridors of power, it’s highly unlikely, for instance, that premier Theresa May would have called the 2017 general election which robbed her of her Parliamentary majority.
Calling an early election – intended to “guarantee security for the years ahead” – was just one of many mistakes made by the British authorities before, during and after the referendum on withdrawal from the European Union. The vote itself seems to have been called in the confident assumption that the “remain” side would win comfortably. The governing Conservatives then elected as their leader an opponent of the “Brexit” process. Perhaps worst of all, the British side negotiated as supplicants, accepting, seemingly without question, Brussels’ highly dubious assertion that the EU held all the high cards.
But it would be wrong to pin all (or even most) of the blame for the “Brexit” negotiations fiasco on the British side. Whatever mistakes Mrs May and her colleagues might have made, they at least have a democratic mandate for what they have been trying to do. Beset on one side by hard-line “Brexiteers”, and on the other by those opposed to carrying out what the public actually voted for, Mrs May had problems enough, even before her Brussels counterparts set out to play politics with the process.
Under these conditions, it’s hardly surprising that the British parliament seems to have reached an impasse, where the main alternatives to a flawed deal appear to involve either (a) leaving the EU without any agreement at all, or (b) disregarding the wishes of the voters, and perhaps inviting those voters to have another go, presumably in the hope that the electorate will ‘get it right this time’.
Needed – Godot
In considering what ought to happen next, we need to be absolutely clear that the stance adopted by the bureaucrats in Brussels has all along made it impossible for Mrs May to secure an agreement acceptable either to parliament or the voters.
Put bluntly, the point has long since been reached where the adults – meaning the elected governments of EU member nations, led by France and Ireland – should step in, forcing Brussels to offer terms which are both (a) mutually advantageous, and (b) acceptable to the United Kingdom. This really means that Paris and Dublin need to mount an eleventh-hour rescue, not just (or even mainly) of the British economy, but of the EU economy as well.
From the outset, Brussels has made three dangerously false assumptions.
The first is that, in terms of economics, a mishandled “Brexit” will hurt Britain far more than it would hurt other EU member states.
The second, flowing from this but extending well beyond economics, was that the EU side holds all the high cards – essentially, that Mrs May should expect nothing more than scraps from a bounteous continental table.
Third, Brussels assumed the role of punishing British voters in order to deter Italians (and others) from following a similar path out of the EU.
This third point is the easiest to counter. The role of Brussels, which in many other areas is carried out commendably, is to better the circumstances of EU citizens.
It is not to influence how those citizens cast their votes.
The economic point, though critical, is a bit more complicated, but needs to be outlined to explain why Ireland and France, in particular, ought now to be intervening to break the impasse.
Where Ireland is concerned, the assumption in Brussels that a mishandled “Brexit” would more dangerous for the British than for anyone else is gravely mistaken. Although Britain is a major trading partner for Ireland, the main problem for the Republic is a broader one. Essentially, Ireland is in no condition to withstand any major shock to the system – and a bungled “Brexit” would certainly be exactly that.
We’ve examined the Irish predicament before, so a brief summary should suffice here. Following statistical changes (dubbed “leprechaun economics”) introduced in 2015, reported GDP has become an even less meaningful measure of economic conditions. GDP grew by 49% between 2007 and 2017 (including a one-off 25% hike in 2015), adding €97bn (at constant 2018 values) to recorded output – but this occurred courtesy of a near-doubling in debt, such that each €1 of “growth” was bought with €4.85 of net new borrowing. Meanwhile, the all-important energy cost of energy (ECoE) now exceeds 11% in Ireland, at level at which growth is almost bound to go into reverse.
Fundamentally, reported GDP (of an estimated €309bn last year) grossly overstates real activity (adjusted for borrowed spending, €184bn), let alone prosperity (€164bn, or €33,550 per person).
Critically, over-stated GDP gives dangerously false comfort about financial exposure. Aggregate debt, for instance, might be “only” about 320% of GDP, but equates to well over 600% of prosperity.
Worse still, Ireland’s financial sector is grossly over-large in relation even to GDP, let alone prosperity. The most recent available numbers (for the end of 2016) put financial assets at 1750% of GDP, but this equates now to a frightening 3200% or so of prosperity.
Far from deleveraging after the disaster of 2007-08, both debt and financial assets are a lot bigger now than they were on the eve of the global financial crisis (GFC I) – in inflation-adjusted terms, debt has virtually doubled (+95%) since 2007, and financial assets have expanded by about 60%.
Moreover, the markets might know about the “leprechaun” factor in Irish GDP, but seem not – yet – to have applied the logic of that knowledge to the critical measures of national financial risk. On the assumption that the authorities in Dublin do know quite how dangerous Irish financial exposure really is, they have every incentive to strive for a form of “Brexit” which minimises economic and financial damage.
France has different, but equally compelling, reasons for intervening, and would have a lot more negotiating clout to bring to the table. As we’ve seen, there has been widespread unrest in France, unrest whose causes can be traced to deteriorating prosperity. Though personal prosperity as a whole is only about €1,650 (5.8%) lower now than it was ten years ago, the slump in discretionary (‘left-in-your-pocket’) prosperity has been leveraged to 32% by a near-€2,000 increase in the burden of taxation per person.
This has put Mr Macron’s government in an unenviable position. Neither the fiscal carrots offered by the president, nor the law enforcement sticks planned by his government, can address the fundamental issue, which is that a substantial majority of the population supports the grievances (if not necessarily the methods) of the ‘gilets jaunes’.
This seems to mean that Mr Macron can forget about his cherished labour market “reforms”, and further suggests that, unless something pretty dramatic happens, he can probably forget about re-election as well. The last thing his government needs right now is the economic harm likely to be inflicted on France by a bungled “Brexit”. It would be far, far better for the president to act in a conspicuously statesmanlike way to break the impasse.
In this situation, it’s unrealistic to expect Britain to resolve this issue unaided by Europe. If, as most observers believe, Mrs May’s deal is going to be shot down by parliament, neither of the remaining options looks palatable. Both those who support a “no deal” exit, and those who’d like to ignore (or re-run) the “Brexit” vote, are playing with fire. But neither can we expect the Brussels side of the talks to have a last minute conversion either to humility or to pragmatism.
In short, there are compelling reasons for European governments – led by France and Ireland – to enforce a rationality seemingly absent, on this issue, in Brussels.
Reblogged this on RogersLongHairBlog and commented:
Searching for the real Economy, Try the Surplus Energy Blog.
A must read for for Objective and Pragmatic Democrats on either side of the Brexit Question. Prosperity and SUrplus Energy, its the Money System Stupid!
Is either party capable of hearing the other at this point?
One can only hope so…..
I’m not one of those fascinated by “Brexit”, but I feel very strongly that EU governments have a compelling need to intervene.
A no deal Brexit under WTO rules will not be a disaster. All my family voted to leave the EU and we did so under the assumption that it would be on WTO terms, because we knew that the EU could not give a favourable deal to the UK because all the other members would also want it. This is why France and Ireland will not be allowed to pressure the EU into offering the UK acceptable terms.
When I researched the Conservative manifesto it clearly stated and promised that we would be leaving the single market and the customs union. At the time I wondered that if we had ruled those things out then what was there to effectively discuss with the EU? Of course it turns out that the Conservative manifesto was a complete lie from cover to cover and that Theresa May meant none of the things written in it. This is a democratic fraud.
The EU would politically like Brexit to be an utter disaster but they cannot do so without inflicting great damage on their own economies which are themselves heading into recession now. The EU has always been presented as a Fait Accompli to all its members and they are kept in check by withholding any ability to negotiate trade deals themselves which creates the apparent economic impossibility of leaving. But as Michael Burrage’s research indicates this economic strait-jacket is an illusion and countries trading with the EU under WTO rules have done as well if not better than the EU members as they bear none of the costs and overheads of EU membership for the states that are positive contributors.
The establishment in now saying that a no deal Brexit is unthinkable is presenting us with yet another Fait Accompli and it is only making people very angry indeed. Not least the fact that they cannot even be honest enough to admit that the supposed ‘deal’ currently on offer is not a deal at all but something more like permanent EU limbo.
As you’ll know, I prefer not to take sides over this, but to interpret things as objectively as possible.
Given that the British public have voted to leave, it should surely be possible for modern, sophisticated countries to organise this process calmly, sensibly and pragmatically.
To be sure, one problem all along has been the hostility of the British ‘establishment’ to enacting “Brexit”. But Mrs May does seem sincere over what she’s trying to do – and the bigger problem has been the EU side.
Yes the EU hasn’t been very helpful so I suggest a synchronised seizure of the ports of Calais – Antwerp and Rotterdam followed by an RAF strike on the EU headquarters.
The Royal Navy would the take full control of the English channel and be under instructions to sink any none UK vessels that encroach on our fishing grounds.
Our troops would simultaneously be parachuted into each of the EU member’s capitals and ‘peacefully’ take control on their parliaments. At the same time millions of leaflets would be dropped onto the EU’s general population ensuring them that we are their friends.
London would then become the capital of the EU from where we would instigate economically sound policies.
Now you must excuse me because the men in white coats have arrived.
Sorry Tim, but Mrs May is not the slightest bit sincere about what she is trying to do as she has always sided with the ‘establishment’ and never intended the UK to leave the EU.
In principle it should be possible for modern sophisticated countries to organise the process sensibly and pragmatically. In the absence of any sensible and rational debate we are therefore incumbent to enquire as to why no sensible and rational debate has taken place? Michael Burrage crunched the numbers from seven publicly available databases of world trade and found that there was precious little difference between exporters trading with the EU on WTO terms and member states. This public information was always available to peer review. In my view he gives a very honest and open appraisal of his findings. How is it that his findings were never seriously discussed? Why have we never been presented with actual hard evidence of the benefits of membership of the EU? Burrage stresses that the EU has never documented or proven the advantages of EU membership and neither had the UK government until the treasury provided some data just prior to the vote. He also shows how inadequate the data provided by the treasury was as it was based upon flawed models not actual hard empirical data.
The whole Brexit debate has been stage managed and its contexts specifically framed in terms of a supposed far right racist project when actually the whole thing has been about the future and possibility of democracy itself. Brexit is possibly the last chance for any sovereign nation in Europe to assert the principles of democracy against a Neoliberal project that is glacially moving toward an imperialist progressive totalitarianism. What is characteristic about this totalitarianism is that it refuses to acknowledge its own failings. It cannot admit to itself that its Neoliberalist economics have been a catastrophic failure and its cannot admit that the EU and euro itself have also been a catastrophic failure. It cannot acknowledge the yellow vests as a genuine economic protest because it refuses to accept that there are any economic problems in the first place so therefore it must try and frame the anger of the masses as being a far right phenomenon or the work of Putin stirring agitation. Anything but admit the monstrous truth to its totalitarian consciousness.
The UK having monetary sovereignty is reasonably safe – it is Ireland, France, Spain, Italy, Portugal, Greece and even German banks which are the real problem. Brexit has been a side show which has distracted markets from the very real problems in the EU. A no deal clean Brexit is the only possible solution to this non-existent problem as it was always completely pointless seeking a deal with the EU in the first place, especially if you don’t actually believe in Brexit as May does not.
I agree with you here. It’s been my assumption for some time that no deal would not be a disaster. Whilst the actions taken by government matter of course what is assumed is that businesses and individuals have been sitting on their hands for the last two years and this has to be nonsense; businesses should and would have prepared on a “worst case” basis already and the micro level counts here quite substantially.
BTW Martin Howe QC has issued a note on no deal that is useful:
Thanks for the link. All sounds perfectly reasonable to me.
I would suggest that you mention not only Ireland and France but included Denmark as well – we have no reasons at all to follow the brutal, punishing, and undemocratic path that Brussels follows.
I regret that I don’t know enough about Denmark (though I enjoyed my one visit there) to comment. If you can tell us a bit more about why Denmark should get involved, please do.
I think there are very specific reasons, as discussed in the article, why France and Ireland should get involved.
Thanks for another well reasoned post Tim. I have again tried to get more people interested in your site – and in particular your latest post – but this is one of the replies I got
“How many more times?
Brexit is about much more than economics and those who don’t understand that really should neither be commenting nor voting”
My view is that – form knowledge I’ve gained from your website and my own studies – is that the economic problems of the UK – and most of the World for that matter – transcend most other considerations.
Why try any more? They are on their patriotic soap-box: one reads the same sort of thing in Spain on the independence issue. The next word is usually ‘Traitor!’
Sovereignty is, of course, about more than economics: in 1940-1, for example, Britain faced the prospect of being incorporated -by violence or capitulation – into one of the foullest empires ever created, a moral abomination in every sense, and sovereignty was therefore very well dying for, whatever the purely economic consequences.
This case is not comparable, however, and one has to keep some perspective and be pragmatic.
Its all a wonderful distraction from the real state of things in the UK, which our host does so much to make clear.
If Brexit is such a disaster how do we explain the turn around of the UK Net International Investment Position of a positive $575 billion now from negative $250 billion in 2016? Clearly with a potential EU collapse markets are seeing the UK outside the EU and contagion as a good hedge investment.
It would interesting to know if there are any points of disagreement with the content of the video https://www.youtube.com/watch?v=fgJCorhsr64 Financial Collapse – Brexit And Ireland’s Impending Mega Crisis!
I see strong disagreement with the “numbers” in many of the comments.
Thanks, it’s interesting and I’m watching it now.
It’s noteworthy that he cites GNI as EUR 190bn, very near my “clean GDP” number adjusted for the spending of borrowed money (EUR 183bn)
Thanks. An excellent resource. Should be on the curricula. I’m working my way through the previous videos.
His view on Brexit chimes with mine that clean Brexit is the only way to go for good reasons and shows how much the EU need Brexit to fail.
Well well, ‘tribalism’, as i said…
“The British pound has been rallying all morning on Monday, driven by reports that Prime Minister Theresa May is quietly backing an amendment that would impose a time limit on the Irish Backstop, a measure that is likely to win over dozens of votes for a modified version of Theresa May’s deal – even as the EU continues to oppose the measure, as May has said.”
On the Hedge.
It would not surprise me unduly if she defies expectations and carries the vote – on the grounds of ‘every alternative is even worse’.
Thank you and indeed very interesting, I too am working my way through the other videos. This is also good by Charles Huge Smith and is the main reason I voted as I did. The immigration reasons were always a bit of a red herring as the majority of immigration has mostly been from outside the EU and as Dr Tim has pointed out falling prosperity was the catalyst.
Hope the link works, if not search ‘ Of Two Minds’
Happy New Year all and thank you Dr Tim for this stimulating and courteous resource.
The Brussels view is – and insultingly – very much ‘Vote again and get it right!’ as you say (although I’m not quite sure that Brussels can be so clearly be distinguished from the major EU states, least of all in terms of rationality and sense); but there is perhaps another aspect to this.
Let’s suppose I voted in principle for an independent Basque Country, and that side triumphed: I would very much like a subsequent vote on the actual agreement proposed between the Spanish state and the Basque representatives in the regional government which eventually emerged from the (no-doubt tortuous and violent) negotiations.
Otherwise, one is just buying a pig in a poke – and gosh, what a pig has come out of the Brexit bag!
At the time of the Referendum, a squirming bag with some kind of live content was waved in the faces of the assembled mob, with assurances from the pseudo-Churchillians that it contained a very fine animal indeed, once fattened up,and with excellent semen for decades of pigs to come; countered with dire prognostications of inherited genetic defects and a tendency to swine fever from the Brussels sell-outs -starvation looms outside the sacred fold. of the EU mega-farm ….
Quite frankly, at the time of the vote no-one knew what was truly on offer: finally, the Brits know, and only now is there something for the people to decide upon.
My inclination is feel that it is entirely fair and rational to give them a second vote,and not merely plaything the Brussels game. While I can see that many sincere people would find this outrageous.
The on-going Macron screw-up is quite magnificent, his ‘Lots of you expect something for nothing!’ sally, is so well calculated to calm troubled waters: the statesman to save the day?!
I must admit to having had doubts about Mr Macron from the outset – though I hope I didn’t let that colour this article.
@Xabier – Indeed why bother – effectively because there’s such much anger and division out there I was hoping that some clear well reasoned articles might help – but alas no.
The video about Ireland is a real eye opener. If I was Ireland’s finance minister I would go into hiding now.
We’ve looked at Ireland’s economy here before, as linked in this article – it is a truly scary predicament.
I do find it rather strange that David Davis only feels he can speak his mind to the German media?
I’m cautious about putting too much faith in the WTO,
it’s a relatively recent arrangement, created by the Americans and designed to favor them,
when China joined the WTO it set about exploring and understanding it and they seem to have mastered working within it’s framework advantageously,
it may be that Trumps recent trade wars and impositions of tarriffs are an attempt to patch holes that China has found in the WTO.
instead of seeking more favourable trading arrangements surely we need to come up with something of value we can trade?
There’s an old business adage, probably most famously used by Sir John Rose, former Chief Executive of Rolls Royce, that there are only three ways of creating wealth – you can dig it up, grow it or convert something in order to add value. Anything else is merely moving it about.
If we say that wealth = useful energy then the UK needs to manufacture more products in which the embedded energy is even more useful (more often known as high added-value manufacturing).
When politics gets simply too much, one may perhaps try repeating George Herbert’s sensible lines (so English):
‘The worst speak something Good;
And when all want Sense,
God takes a Text,
And preacheth Patience’.
It’s wonderfully calming, and it works for me at least, especially whenever I read that nauseating, hypocritical: ‘The People’s Vote’, as if one hadn’t taken place already.
Macron just radiates contempt for the electorate: and perhaps after Hollande’s jokes about ‘the toothless poor’ it’s all too much for them?
Who wishes to be taxed into the ground (as has been shown here) and patronised so crudely?
Still, we can be fairly sure that he will come up with some more priceless gaffs to cheer us up.
Thanks for another incisive and topical analysis.
Your analysis links energy costs with declining prosperity and thus emphasises the economic factor in much of the discontent which is being felt. In my view there are other parallel, and perhaps connected, issues which would be labelled socio/economic.
These issues are downward mobility; the increasingly precarious nature of work and polarization. What the neoliberal system has done over the last thirty or forty years is to decimate the middle classes by commoditising much of work and reducing the particular standing of the middle classes and set them on a slow downward trajectory
The increasing precariousness of work is another factor which prevents an increasing number to better themselves; they are trapped and find it difficult to escape.
Polarization in terms of inequality, is, in some sense, an outcome of the previous factors and serves to highlight what many would regard as the injustice of the system.
Your analysis hits the pocket which is keenly felt over time but the above factors hit identity which is, arguably, just as potent if not more so; people can cover up a shortfall in cash by borrowing; there are fewer ways to cover a loss of face.
These issues are just as potent in Europe as they are here and speak to increasing strains throughout the continent; we may be convulsed by Brexit but the EU will be convulsed by these other factors which, subject to a fundamental political and economic realignment, will make the situation unsustainable.
Yes, economics isn’t everything, but it is very much the context for almost everything else.
Take downwards mobility, for example – this is largely the product of the economic model which has held sway since the 1980s, moving steadily away from the market ideal before breaking wholly with that ideal during 2008-09. It has become a system which sees nothing wrong in billions for a tiny minority, hardship for a growing middle group and abject poverty for many. This is combined with an insecurity which is used, I think, as an economic and political tool. Now, what is going to overthrow that model? – my answer is deteriorating prosperity.
Identity is indeed broader than economic status, but you might be surprised at quite how much our economic circumstances and ‘status’ influence how we identify ourselves.
All I can really aim to do here is to investigate an alternative economic interpretation – and one which is already proving both more interpretive and more effectively predictive than an established interpretation which, I would contend, is crumbling as we watch.
Actions speak louder than words and since politicians aren’t believed by anyone who can think for themselves, the true measure of what (if anything) they believe, is what they do, as opposed to what they claim. As such, the factual record shows Mrs May only seems to be motivated by two things, a hatred of foreigners and the wish to stay in power no matter the humiliation or pain that that entails. So it’s a tender mercy that Trump trumps her existence on today’s world stage, to lessen the UK’s embarrassment. Normal Europeans going about their daily lives have their own worries and have forgotten the UK’s drama a year ago; travelling outside this bubble opens up anyone’s eyes who wants to find out what others think. Nobody is exceptional, it’s not all about anyone. If nobody gave a damn when the Catalans were being beaten up in their own land for daring to vote on self-determination, who are the Brits to whinge that Europeans don’t help now.
May has lost by 230 votes
Behavioral Economics; Social; Material
The Behavioral Economists have explored the issue of how much of human behavior is actually explained by an ‘accounting’ approach to money. For example, they have determined that most people prefer the largest house in a modest neighborhood to a larger house…but located in a neighborhood where everyone else has more money and a bigger house than they do.
I believe it is also true that people are excellent judges of whether a co-worker is being treated better than they are…but relatively poor judges of whether they are being treated better or worse than they were 10 years ago. This is perhaps explained by the fact that all the deck chairs have been moved around over the last 10 years, and whether your current deck chair is located on prime real estate as compared to 10 years ago is a multi-variable question involving fallible human memory.
One of the things which has high explanatory value is the perception of Scarcity. Please see the book with that title, published by an economist at MIT. Now suppose that one takes out a 30 year mortgage. And suppose one has the perception that 10 years ago, the mortgage could be easily paid each month. But now it seems to be impossible to pay the mortgage and also meet other financial obligations. Then one is likely to feel Scarcity. Of course, the explanation could be that one had 3 or 4 children over that decade, and so expenses are naturally higher. But if we simply look at Dr. Morgan’s numbers for France, we can easily imagine that many people in France are perceiving scarcity.
I spent some time in a very modest rental house in Provence in a rural neighborhood. On Friday afternoon, expensive cars, many of them German, arrived in the neighborhood and pulled into gated houses. One could feel the modesty of the work-week change rather dramatically as ‘real money’ arrived in their country house for the weekend. So if one is working on a farm in that neighborhood, and perceives that their own income is going down, while the number of weekenders with expensive cars and fancy houses is increasing, then one will feel scarcity and likely anger.
Regarding the Brexit vote, I think we’re down to two immediate options:
Ask for an extension, or leave with no deal (the Default Option! 🙂
I’ve always thought we held all the cards and never understood why we negotiated as the supplicant.
No deal; no money. Let them beg for better terms.
That aside – the EU is, surely, toast within the next decade or two so best for us to get out sooner; even if it causes significant disruption, we are better placed to weather it now and ‘Collapse before the Rush’!
It can come as no great surprise to anyone that Parliament has rejected an unsatisfactory deal for which – adding insult to injury – the British taxpayer is expected to pay £39bn.
What Mrs May has done is to try to get the best possible deal from Brussels, then try to get MPs to accept it. It’s neither wholly, nor even mainly, her fault if the deal was far too unsatisfactory for Parliament to swallow.
There’s not a lot more that the UK side can do. One the one hand, cancelling “Brexit”, or calling a second referendum, would amount to defying the expressed will of the electorate. Going ahead with a no-deal departure would be damaging. Neither would changing the government through a general election change the fundamental equation.
It’s possible that the Article 50 departure date could be delayed, giving more time for European national leaders to assert their influence. But there seem to be few signs that this is likely to happen.
So the question seems to come down to this: is there any way of shocking Brussels, and/or EU leaders, into a less intransigent attitude?
If I were Mrs May, I would now offer Brussels a ‘minimalist’ protocol on withdrawal. This would entail security co-operation and the guaranteeing rights of residents, but very little else. In other words, ‘you leave us no choice but to carry out the will of our voters without a trade deal with you’.
If that didn’t act as an alarm call in Paris and Dublin, perhaps nothing will.
I’m past caring what type of Brexit happens or whether Brexit even happens because none of the myriad of options acknowledges that we’ve reached the limits of growth largely due the ending of the era of cheap and plentiful fossil energy,
can you point out any Brexit option that will address declining prosperity?
Isn’t the intransigence on the part of political leaders abroad and at home due to a faliure to recognise the underlying trends causing the mutinous mood spreading across western democracies?
and if contingency planning for a hard Brexit seems inadequate can you see any signs of contingency planning for GFC 2.0?
it all seems to me rather like fiddling whilst Rome burns.
please correct me if I’m wrong because I’m somewhat bewildered at this point.
My sentiments exactly. In fact, this article shouldn’t really be a part of my planned “fire and ice” series, about the forces now in play. “Brexit” is at most a symptom, not a cause. At its most basic, deteriorating prosperity is likely to provoke quarrels, not just within countries but between them.
One cannot really address deteriorating prosperity, in the sense of stopping it – that’s what my ‘glacier’ analogy aims to express. But we can certainly try to come to terms with it, and adapt to it, something I hope to get on to in the next part of ‘F & I’. Unfortunately, society – and certainly many of its leaders – have fixations rendered largely irrelevant by economic forces that, in general, are not understood.
P.S. You’ll see that I’ve changed the title, putting the article outside the ‘Fire and Ice’ theme.
IMV Brexit is a sideshow. In the long run I think a no deal exit would make very little difference economically and it’s the long run that matters.
What does matter are the trends that Tim writes about which will continue to undermine economies of whatever stripe, including of course those of the EU itself and not just the UK.
There are growing signs of substantial change in the EU and I think this will gather momentum over the next few years and the supranational, neoliberal model will come under increasing question.
Jacob Rees Mogg gave a very statesman like interview on ‘This Morning’ yesterday in which he very politely countered the objections of the typical remainer Susanna Reid.
There’s nothing in principle to stop the UK putting very low or even zero rate tariffs on imports making things a lot cheaper from around the world and the EU. Sterling is 15% lower than prior to Brexit so even a 3% tariff from the EU still makes UK goods cheaper in the EU than they were before. What is the issue with a no deal Brexit? Its the default option that ticks every box.
/The_Theory_and_Practice_of_Oligarchical_Collectivism https://hat4uk.wordpress.com/2019/01/16/last-brexit-from-brussels-two-falls-and-heading-for-a-submission/ A very funny take on the whole pantomime from The Slog.
Yes, clarity as usual from JRM.
What is little talked about are EU tariffs on food which tend to punish producers outside the EU in order to support those within the EU and which put up the cost of living markedly for the poorest families.
In fact there are nearly 13,000 tariffs that form part of the Common External Tariff. One of the problems for the EU is that if we did go down the no deal route we would reduce these tariffs over time and this could have a material impact on our economy and show up the EU for what it is: a protectionist trading bloc.
Amid all this nonsensical Brexit kerfuffle, there was an important article in The Guardian illustrating the erosion of British prosperity, as manifested in the decay of M&S.
It gave details of more of the 100 mixed-stores (clothes and food lines) which are closing leaving even major cities without a store.
Makes one think of the Roman fortresses and towns shrinking in the latter stages of Empire.
Loss of social cohesion (worrisome in a real crisis) due to massive immigration over the last two decades; widespread infiltration of international organised crime gangs; large-scale people trafficking -nothing less than the return of slavery to the British Isles; hugely increased street violence and robberies; the steady erosion of real prosperity and its true causes; and the further decay of the poorer regions (and now even of fairly prosperous-seeming medium-sized towns): this is what government should be concentrating on – the real business of government on behalf of the welfare of all, not Brexit.
I would add, though, that one sees just as much distraction by irrelevances in Spain and the Basque Country; Britain is certainly not unique in being misgoverned, although a peculiarly vulnerable economy.
Of course, there are some problems with using the fate of a particular company to chart the decay of an economy, as companies can loss touch with changing habits and tastes as they age – m&S has huge problems with the quality of its clothing for instance.
But I found the average comment under the article illuminating, with the repeated refrain of ‘It used to be nice here, but all we are left with now are pound and charity shops, junk-food dives, and whole rows boarded up’. Really, quite dismal!
You may find this interesting Tim – a view on what really is being fought for in the UK re. Brexit.
Good article with much clear thinking. My own views on Brexit are being affected daily by speeches – articles – debates on TV ect and I would assume many other peoples are being too.
Jacob Rees Mogg made (as per video) a convincing argument for no deal yet this is then countered by more articles saying how disruptive a no deal deal would be.
As reality – as we humans perceive it – changes from day to day – hour per hour – second by second so therefore influences our actions and thoughts – with all the conflicting information out there I’m not sure how a general consensus on Brexit can be achieved.
I voted remain but am still completely unsure what is actually the best route to take
Tim and all – I’m just repeating a post I made on the 11h January concerning an article in he Daily Telegraph – extracts of which are below.
Now is Saudi Arabia telling the truth because their reserves and production costs look too good to be true. Perhaps they are exaggerating to get the sell off through
I would be grateful for some feedback –
In today’s Telegraph – can it be believed? I’ve not copied all the article – just sections
Saudi Arabia has finally silenced its peak-oil critics and simultaneously revived interest in its stalled $2 trillion (£1.6 trillion) plan for a stock market float of state-owned producer Aramco.
The kingdom revealed this week it has enough crude to pump at current rates for at least another 70 years. At the end of 2017, Saudi oil reserves stood at an eye-watering 268bn barrels, up from previous estimates of 266bn.
By comparison, the UK’s remaining cache of retrievable oil under the seabed of the North Sea will be almost completely drained, probably after another couple of decades.
The updated figures were no surprise for many experts. BP’s highly respected statistical review of world energy lists Saudi oil reserves at just over 266bn barrels and Rystad Energy estimates that 276bn barrels remain under its Arabian deserts. However, not everyone has been convinced by either the longevity, or scale, of Saudi’s remaining oil riches.
In his critically acclaimed 2005 book Twilight in the Desert, the then-prominent oil economist Matthew R Simmons predicted that Saudi Arabia’s oil wells were about to run dry. His theory was based on the ageing status of several gigantic oilfields, which still provide the bulk of the kingdom’s near-11m-barrel-per-day output.
However …………………………………..Contradicting the above paragraph
Al-Falih said Aramco’s oil costs just $4 per barrel to produce. It’s a key figure for potential investors, which could make its $2 trillion valuation more believable. Suddenly, the IPO looks plausible again.
The fact is oil markets are more likely to dry up before Aramco’s reserves of crude run out. Demand for oil remains robust despite the growing popularity of electric vehicles and the pressure of climate change forcing consumers to search for cleaner transportation fuels.
Last year, the world consumed 100m barrels per day for the first time in history and consumption is expected to continue rising at least through to 2040. However, beyond this date the outlook is harder to predict.
Unless it wants to flood the market and send oil prices tumbling, Saudi Arabia’s best option if it wants to maximise its vast remaining hydrocarbon reserves could be to sell off increasingly larger shares of Aramco to international investors no later than 2021. Otherwise it runs the risk of having to leave much of its wealth stuck in the ground.
This article makes the same point, Donald,
“The fact is oil markets are more likely to dry up before Aramco’s reserves of crude run out. Demand for oil remains robust despite the growing popularity of electric vehicles and the pressure of climate change forcing consumers to search for cleaner transportation fuels”.
Quoting from the Science daily article,
“The scientists conclude that further economic damage from a potential bubble burst could be avoided by decarbonising early. “Divestment is a prudential thing to do. We should be carefully looking at where we are investing our money.(1) For instance, much like companies, pension funds and other institutions currently invest in fossil-fuel assets. Following recommendations from central banks, commercial banks are increasingly looking at the financial risks of stranded fossil-fuel assets, even though their possible impacts have not yet been fully determined. Until now, observers mostly paid attention to the likely effectiveness of climate policies, but not to the ongoing and effectively irreversible technological transition. This level of ‘creative destruction’ appears inevitable now and must be carefully managed,” Mercure concludes.
Regarding a Surplus energy approach .
(1)ED. This is the key misunderstanding , the whole basis of this analysis should look at Net Energy Surplus over cost of energy extraction, then in a real sense the Sentance , “We should be carfully looking at where we are investing our Energy ( qua, Energy )”, would have money taking the Debt based monetary unit as a referent renders the statement meaningless a per pro energy capital allocation decisions.
My own view is that The Establishment in Britain by the most part does not want Brexit to happen if one reads Project Syndicate and Anatoly
Jul 27, 2016 ANATOLE KALETSKY
Instead of rushing Brexit, Europe’s leaders should be trying to avert it, by persuading British voters to change their minds. The aim should not be to negotiate the terms of departure, but to negotiate the terms on which most British voters would want to remain.
This from the European Council on Foreign relations
This in the Independent about Gordon Browns plan to save the union, remember “The Vow” in the scots indy referendum?
1. Starter for 10 Federated Pound Stirling
2. Bonus 1. English Assembly
3. Bonus.2 Save Union Scotland.
Bonus 3, Introduce PR = permanent hung Parly. I.e needn’t worry about Jeremy Corbyn Govt @jeremycorbyn
When I was proposing the Grand cross-party Idea after the 2017 GE this was my prediction of how this would all get resolved, I still think it will play out this way. I am still agnostic on in or out as it makes no difference as long as the Neo-Cons have Trump by the short and curlies, which they seem to have.
To wit, I must say I agree with
on January 16, 2019 at 11:46 am said:
“IMV Brexit is a sideshow. In the long run I think a no deal exit would make very little difference economically and it’s the long run that matters.
What does matter are the trends that Tim writes about which will continue to undermine economies of whatever stripe, including of course those of the EU itself and not just the UK.
There are growing signs of substantial change in the EU and I think this will gather momentum over the next few years and the supranational, neoliberal model will come under increasing question.”
Last word to ANATOLE KALETSKY Is Canceling Brexit Now Inevitable?
Dec 27, 2018
As matters stand today, a new British referendum on leaving the European Union would produce a clear majority for remaining a member, regardless of how the votes were counted or the questions were asked. And with the only two Brexit options set to be rejected next month, the questions are increasingly likely to be asked.
or perhaps H G Wells,
VII. — FEDERATION
THE NEW WORLD ORDER
There is one direction in which Mr Streit’s proposals are open to improvement. Let us turn to another in which he does not seem to have realised all the implications of his proposal. This great Union is to have a union money and a union customs-free economy. What follows upon that? More I think than he realises.
There is one aspect of money to which the majority of those that discuss it seem to be incurably blind. You cannot have a theory of money or any plan about money by itself in the air. Money is not a thing in itself; it is a working part of an economic system. Money varies in its nature with the laws and ideas of property in a community. As a community moves towards collectivism and communism, for example, money simplifies out. Money is a necessary in a communism as it is in any other system, but its function therein is at its simplest. Payment in kind to the worker gives him no freedom of choice among the goods the community produces. Money does. Money becomes the incentive that “works the worker” and nothing more. Ed. NB
The New World Order is a book written by H. G. Wells, originally published in January 1940. Wells
And If I may a stanza from my poem,
GLOBALISATION UN-ENTANGLED. (A FOUND POEM, CIPHER OF GLOBALISM )
Eliza with Rogerian inscrutability
hears the confession of the mal-contents
A mirror held up before cosmetic application
Globalisation and Internationalism confused
despotism´s nature is to abhor any say
save that of its own momentary pleasure;
it annihilates all intermediate situations
between boundless strength on its own part,
and total debility on the part of the people.
Our education can be Our? our, government.
Our reason can be our Judge, of the rivals;
Globalism, Authority, coercion and competition.
or Nationalism, Internationalism, Cooperation.
Are we to have free will and democracy
Will we have determined authority
A struggle of ideals an ancient quarrel
Parmenides or Heraclitus navigators both
Actually Tim I think this article still qualifies under the heading fire and ice. Europe has been moving glacially from an economic community toward developing into a undemocratic totalitarian state fully in line with the aspirations of Nazi Germany.
Brexit, the yellow vests and the coming European spring are the fires that have sprung up in defence of democracy in principle and a deep dissatisfaction has formed as we come to the conclusion that our existing democratic institutions are unrepresentative and not democratic at all.
Progressive Neoliberalists are totalitarians who wish to shut down all debate and are turning the private sphere into a police state where the people are to be tried for hate crimes if one questions the identity politics of transgenderism for example. The progressives are the old violent revolutionaries of the Left turned into imperialist Neoliberals. They do no seek to resolve conflict they consistently seek to create and manufacture them. They feed off the violence they provoke and the bloodier the better.
Thanks to Tony Blair, they are also globalist imperialists who have directly supported wars in the Middle East and brought about the deaths and trauma of millions in that region. All of this came about because in 2006 in defence of that monster Blair, an innocent looking document called ‘The Euston Manifesto’ effectively rewrote and reduplicated the infamous far right Neoconservative ‘Project for the New American Century’ and gave it the false appearance of being a liberal or moderate politics. The EU has changed massively since 2003 when France, Germany and Russia were united in their anti-imperialist objections to the illegal invasion of Iraq. Once Blair’s Neoliberal conversion spread to the rest of the Left in the EU they all gravitated toward the PNAC geopolitics and we found supposed ‘liberals’ such as Cameron and Sarkozy openly supporting overthrowing Arab socialist regimes of Libya and Syria in order to liberate their public oil assets for their proper and supposedly more efficient exploitation by western Neoliberalism,
The EU is now fully on board with the progressive, globalist, neoliberal and neoconservative project despite the outcome that this imperialist interference in the Arab world has led to millions of refugees flooding into Europe for which the people are branded as racists if they voice any concerns. Left unchecked this will reach a stage of a globalist totalitarianism. There is far more at stake in all of this than simple Brexit – it is freedom of speech, the very principles of democracy itself and possibilities or more moral and ethical government
The attitude of the EU towards foreign adventures has perhaps changed because the energy crisis is perceived to be even more acute than at the time of the Iraq invasion?
At the moment, the question is often asked in comment forums in the Basque Country ‘Why do we have ‘natiionialist’ parties (Left and Right) who tell us we need hundreds of thousands of immigrants. and that is the only ‘moral’ policy? Why indeed? You will certainly be shouted down as ‘racist’, too.
But everything is so incoherent: I’ve met radical Left ‘nationalists’ so carried away as to be advocating the extinction of the white race – the obvious inconsistency of their position escapes them. Not the brightest buttons in the box..
I tend to see the EU as not so much’Nazi’ (although it does seem intent on following the ‘Europa’ project in the expansion eastwards and crushing of dissent) as an expression ,in its disdain for electors, of classic Continental authoritarianism – which I quite agree is not in the admirable, and very valuable, British parliamentary tradition. So much of which has been lost, and suffers at the hands of the rather low grade of MP we see today.
From the constitutional point of view, I am very much a Brexiter, however much I mistrust the competence, understanding and motives of those directing Brexit.
Setting aside for a moment the protectionist nature of the EU – quite right, and when the euro was introduced the basic cost of living rose some 25% – if I were in the food business, I’d take those cheaper food imports made possible by a low-tariff environment and maintain prices: much as clothing made for nothing in the East is sold at a huge mark-up.
Food producers and retailers have probably gone as far as they can in cutting wages, etc, so a discount on raw ingredients would be just their dream.
When I worked out how to cut my materials costs (still ultra top-quality) by 50%, I actually raised prices to new customers to compensate for declining volume – I certainly wasn’t going to give them a free gift!
That’s how business works, it isn’t a public charity.
This is also -i n general manufacturing – part of the ‘Crappification of Everything’ phenomenon: cutting costs and quality, but the same price or higher, observable everywhere. Itself part of the steady erosion of prosperity and the energy crisis addressed here.
And there is also the little issue of food standards and the protection of Britain’s own agricultural base: a race to the bottom to import provide the cheapest possible food -however produced – for the poor (and ignorant – many are happy to eat utter rubbish so long as it’s cheap, as may be observed) could be very destructive indeed.
I’m thinking here of a Russian friend whose family own a major food business: they buy from Brazil, Argentina, India, etc, and his mother told him NOT to eat their products as although they adhere scrupulously to Russian food standards, she has no faith at all in the producers and believes they use very unsafe chemicals in too large quantities. Being poor countries, with very corrupt elites, they maximise volume any way they can.
These are the places unworldly simpletons like Rees Moog wants to do deals with: India’s producers are champing at the bit to off-load crap on Britain.
It needn’t be like that, of course, but how do things usually turn out? Gove wanted to make future trade deals pass an ‘environmental test’, and he has been crushed by Treasury and Trade, as far as I last read about it.
A sign of what the future of ‘trading with the world’ promises.: keep the peasants quiet with poisoned crap.
I’m greatly in favour of protectionism, if -and only if – it supports good, national, farming and social cohesion in rural areas.
Hi even though there is a lot of fresh produce available in the UK many are still happy to spend £5 or more (and that would but a lot of fresh fruit and veg) on horrible takeaways – which are gradually taking over the High street – and ready meals from Supermarkets.
I made a massive diet change last year to far more fruit and veg and wholemeal bread and rice. My one luxury is fish and chips and an indian every now and again. My digestion and health have been a lot better.
Now hopefully poorer families can do this to get away from the cycle of McDonald’s and greasy Kebabs.
Ps I’m all in favour of protecting our own farming
Our system prior to joining the EEC in 1973 was to import food at World prices and to subsidise certain parts of agriculture (eg hill farms) for social or strategic reasons as a matter of policy. So we could have low prices together with the maintenance of important rural sectors to maintain social cohesion.
To me the “chlorinated chicken” argument assumes that we cannot have our own regulations relating to food which I think is nonsense. This argument is usually made in the context of neoliberalism where corporate and market power hold sway; but that in some ways is the essence of the argument in that Brexit is an implied rejection of these values.
Though a lot of journalists (who to be fair are paid to get to be interested about this) got excited by yesterday’s tragicomedy drama show in the UK parliament, the reality of total stalemate wasn’t changed. So the thing most likely to happen when nobody can agree to break a deadlock, is that which all stakeholders have no problem with and in this case, it’s delaying a decision in the hope that fate will intervene in their favour, while avoiding pain in the present. Hence the holding pattern that we have witnessed in fact for the last ~2.5 years.
Given ~500,000 people die in the UK annually, even if everyone refuses to compromise, literally to the death, reality favours a gradual shift of opinion on this issue towards the status quo, if the EU doesn’t implode first. Either way, I agree with the commenters who believe that this is an unhelpful distraction from the fact that we should be focusing on the existential threat of basic survival by switching to sustainable lifestyles while we still can.
The new meat substitute burgers (mark two versions) have been released and have got a very positive response. If we were to all to switch to these it would help with deforestation and all the usual energy costs associated with cattle.
(No news on milk yet though)
Not World saving – but a move the right direction. McDonalds would hate it.
Can anyone explain why, according to the BBC, the Irish government is only “now putting in place plans” to cope with a no-deal “Brexit”?
They ran out of five leaf clovers – or one of them kissed the Blarney stone and was suddenly able to get the gift of the gab.
Seriously though – panic?
I ask this, Donald, because the sheer scale of financial risk in Ireland makes it rather vital that the country is led by people good at thinking ahead and planning for contingencies……
Well how many of the current people in power are aware of the scale of their financial risk and would they cede power to a more competent team who would be better at reducing the risk (if possible) and putting in new plans for the future.
Those in power always want to hang on regardless of how badly they’re performing – but it’s now clear that a better team is needed.
Ps I’m just watching PM’s question time. I wish there could be viewer feedback to stop each Labour MP for standing up and reminding the PM that she suffered a heavy defeat yesterday.
I know she lost and I don’t want reminding every few minutes.
Ny the way May is performing pretty well at the moment because she has always been in a near impossible position.
PPs Another one got up and reminded her just as I was about to leave – I’m off now to escape from it all.
Misery loves company
A tempest in a teapot compared to Brexit. But if anyone has the inclination to look at a somewhat similar situation in the US, you might take a look at the small book Our Higher Calling: Rebuilding the Partnership between America and Its Colleges and Universities.
One of the authors is Holden Thorp, the president of the University of North Carolina who was fired several years ago during the athletic scandals at the University he nominally headed. Why was he fired? The public reason is that he ‘failed to perform his oversight duties of the athletic department’. The real reason, of course, is that somebody had to be sacrificed, and he had made enemies in high places by trying to close the university airport which served primarily the needs of the athletics department. Nobody ever asks the question, ‘Would Holden have ever been hired if he had promised that, if hired, he would diligently supervise the athletics program?’. The answer to that, of course, is that the coaches are paid 2 or 3 times as much as the president of the college, and would have handed him his head if he had messed in their business.
The book doesn’t wallow in the big money sports running the universities angle, but instead deals with the more mundane aspects of trying to put together a financially viable business plan in a changing environment. Everyone can see that change is necessary, but universities mostly have not been capable to generating the change internally. Occasionally, a real outsider comes along and is able to bring about change through leadership, but mostly the universities are just wallowing along in a well greased path.
I am reminded of the famous saying that ‘change occurs in science one death at a time’. We cling to what has worked, even when it stops working. Maybe that is the reason that the Irish leadership isn’t seriously pondering how they need to revise their business plan. Maybe that is the reason that the UK can’t put together a seriously different business plan, much less a seriously different business plan with sovereignty from the EU simultaneously.
Darwin discovered evolution, not revolution.
As Dr Morgan has said several times, Brexit is a side-show. The underlying problems and dissatisfaction has been caused by the loss of manufacturing and productive industries. This has been caused by our energy losses and resultant loss of manufacturing and engineering.
Bexit or no Bexit these underlying problems will get worse, and the Government has no answer.
The problem is not that they have no answer; the problem is that they don’t even know there is a problem!
And also truly disastrous antagonistic labour relations -with both sides at fault, I fear. Non-unionised services seemed so much more attractive an investment in consequence.
We’ll get back to these broader themes in the next article.
Tim regarding energy could you do me the courtesy of looking at the extract from the Telegraph regarding the Saudi oil sell off and their claims to be able to pump (seemingly profitably) oil for the next 70 years and tell me what you think. It’s in one of my posts above. Thank you
For starters, it’s full of inconsistencies, and reads as though whoever wrote it is a huge fan of Saudi Aramco. The idea that oil demand might ‘run out’ is stated alongside references to continuing growth in demand!
The reserves number is the familiar one, hardly changed – despite huge intervening production – from the number published in the 1980s, when member countries were incentivised to maximise their stated reserves, because these reserves were the basis for OPEC quota allocation. The production cost number is probably only opex, not capex, and seems low given the (acknowledged) scale of water injection.
Please remember, too, that hardly anyone wants to be a ‘party pooper’ on this one, and every significant financial centre will be looking to get involved – placing, underwriting, promotion, legal services and much more, with at least 5% of the sum raised to be shared out. Combine these huge incentives with the kingdom’s famed secrecy about its petroleum industry, and the investor could struggle to get factual information or objective advice. Just think how blindly investors have poured money into shales, even though it’ s a proven cash-incinerator…….
Thanks Tim – I’l file (as expected) under ‘Too good to be true’
Meanwhile back the real World………..
As you know Tim. If followed a number of oil companies on the LSE AIM Market and also in the US shale industry and I found the level of routine fraud going on to be unbelievable.
All companies when in search of cash from investors issue upgraded and improved figures of oil in place in principle but without any reference to the exorbitant cost of its extraction in practice. Most oil companies these days mislead investors by hiding well depletion rates and effectively excluding the CAPEX of drilling wells from their accounts. All of this is accompanied by talk of maximising shareholder value and general promises of jam tomorrow but profits are always deferred in practice.
They all lose massive amounts of money regularly and this is concealed in accounting impairments etc and their continually trying to raise new debt and issue new equity and incessantly diluting shareholders.
Brokers and investment bankers are well aware of the true state of these companies and they are equally complicit into misleading shareholders as to the true nature of the companies they are investing in.
This is essentially fraudulent and unethical but our Neoliberalised ‘regulators’ refuse to do anything about it. The scale of malinvestment and the miss-allocation of capital that has fraudulently taken place since the GFC is quite simply staggering and oil companies are just the tip of a very corrupt iceberg. Tesla is another incredible example of how much money can be extracted from investors when a company is losing staggering amounts of money. If you look at companies in general on AIM then the amount of fraud and corruption taking place is absolutely shocking. Sadly the behaviour of investors themselves is not far behind.
Simon there are – or were – Fracking companies accounts online which showed the amount of debt they’re having to issue with maturity dates well into the 2020’s.
For readers of the Telegraph ‘misleading’ articles on oil reserves simply provide them with reassurance that ‘everything is well’ so they feel happy about borrowing to buy a better car – for example – which makes them feel happy.
Like any Ponzi scheme they all rely on their victims inherent greed. What equally amazed me in researching the AIM market and its forums were the lengths that investors would go to to deceive themselves and each other and this makes the fraud all the easier to perpetrate. The amount of pump and dump operations is stunning.
Last year I researched the Bitcoin market and I found exactly all the same conditions operating there. Bitcoin also has led to a massive miss-allocation of resources as $billions have been ‘invested’ in ASIC mining machines which have no other use than trying to guess a very complex number. The total energy wastage of that unregulated and irresponsible ‘system’ is also staggering.
Neoliberal regulation is virtually non-existent. Look at Tesla and Elon Musk when he blatantly manipulated the Tesla SP by falsely claiming a deal was in place to take it private. The SEC barely slapped his wrists when he should have been fully prosecuted.
Regarding Bitcoin there was this article in CapX written by a Karian Kelly – Pitou
In my view a rather silly post in that Bitcoin produces nothing that is tangible.
Read all those arguments many times.
Bitcoin itself is just the tip of the crypto iceberg. There have been over 2000 new currencies issued most of them through a process known as ICOs (Initital Coin Offering) which is the exact equivalent of an IPO in equities, though in the case of crypto they are entirely unregulated. The wild west of crypto has been completely unregulated free market capitalism and in practice its a complete nightmare. I think that over 90% of these ICOs have lost all the investors money over the last 2 years and almost all have been revealed to be fraudulent. Doesn’t stop the unscrupulous from making a lot of money from their financially desperate millennial marks.
Just over a year ago when a Bitcoin was worth around 18k I told a friend that the person he used to work with whose book value of his Bitcoin holdings was worth nearly a couple of million should crystallize his massive profit(he’d bought in very early – about 5k worth and seen it rise in value by about a factor of around 400) But he wouldn’t sell saying the price could still go up.
I know what I would have done.
For these currencies there is no benefit to the economy – just cost.
Not that easy to exit a position in crypto I’m afraid. You need to look at exchanges such as BitFinex and their sister stable coin tether to see how it artificially manipulated the price of BTC for the majority of its rise last year. The crypto exchanges are essentially casinos and stable coins such as Tether are the chips that punters buy. Unfortunately the casinos don’t hold the dollars they claim to hold so will not let the punters cash out and are forced to reduce exits to the bare minimum hence the religious HODL mantra. Its all pretty well documented on the web.
As I have said corruption and manipulation is endemic in markets in general and it will not end well. One guy at the SEC even went as far to hint that they might turn a blind eye to corruption in crypto markets on account of the fact that they were getting their kids interested in markets! It really has got that bad. We need some pretty serious regulatory authorities to try and make business and markets a lot more morally and ethically responsible again.
Well certainly something that I’d never want to get involved in.
To me one of the biggest scams is front running. It amounts to little more than top skimming as the Mafia are alleged to have done in the casinos. Operators like Citadel may argue that they give liquidity and depth to the market but these arguments are specious; my understanding is that they clear their books every day so contribute nothing to market liquidity.
Simon Hedges has it dead on concerning fracking. In fact many professional geologists are leaving the industry as the pump and dump artists have taken over once respectable companies. They are in fact moving moving costs around to hide the lack of profit from the operations, according to my colleagues that are still employed. In the future it may be hard to know or when to trust these companies in identifying and bringing to market oil at a reasonable and responsible price.
Dr Tim. This link gives some very interesting views on the gilets jaunes movement in accordance with your views regarding prosperity of the ordinary worker in France. It predicts that the movement is likely to strengthen rather than go away….
I’m not sure if this link will work
But it’s about the South African utility company Eskom and it’s growing debt. Part of the problem has been overstaffing and only charging 10% of the real price of electricity to subsidize the poorest homes.
So in order to help alleviate its debt it could charge the full price of its electricity to the poor households but then of course then they could be in a situation of no energy or no food ec
Already in the UK many households have had to cut back drastically on energy usage or go hungry and I assume it will get worse as our own companies are unlikely to subsidize poor households.
I quite agree that there is no logical reason why we should not have high food standards in Britain after Brexit, or BINO, or whatever -even higher than today.
Moreover everyone agrees that agricultural policy needs reform, and the subsidies of today (which are being axed) all too often go into the deepest pockets.
But the fact remains that the Treasury and Trade have jumped on Gove most severely when he talks about these things. The deal will come first, and quality second. There is real fear that agricultural will be cut loose by those who believe everything the country lacks can be bought from abroad with ease if the economy is doing well enough -well, such is my reading of agricultural magazines.
The hard truth is, surely, that in a steeply declining economy (which seems to be the only realistic prospect facing the UK) people will shop on price,not quality, and the mass food processors will be protecting their threatened profits.
Britain has a rather poor record on nurturing agriculture, after the glories of the 18th century: the awful conditions of the prolonged 19th century rural Depression, (helpfully driving people into factories, domestic service and to the Colonies) and the nightmare of the 1930’s – when much land was lost to production and hedgegrows grew over lanes and blocked them, and land values fell so that only the Scots could buy farms in East Anglia and make them work, were of no great concern to government so long as the cities could be fed on cheap imports – to which situation Britain is likely returning.
In food production, the bad must drive out the good unless great care is taken.
And as prosperity falls, might we not see the return of food riots, so common in countries today where the very basics of life take up most of one’s income? A long way down the road, perhaps, but is it?
This is what counts, and its not good:
Please post the link to the article – I have searched zerohedge 2019-01-16 to no avail. Many thanks.
OK, found it: https://www.zerohedge.com/news/2019-01-17/three-things-spoil-goldilocks-market-scenario-strong-january-doesnt-make-it-2017
“In this light we should know that our real things in life will not change all that much. Your tools, chairs, clothes and cars will remain yours. Houses and land, TVs and boats, all will retain the exact same “value” they always had. What will change is our ability to use our currency and paper assets as a medium to measure the “real value” that’s always so inherent in these items, yet so well hidden in our perception of today. Yes, the currency price of things will greatly change, even as their “use value” moves little. Such is the nature of dying paper money systems. Such is the ending of a currency timeline!”
“So you see, learning how the world works is all about each man coming to the understanding about the real wealth we all require to best ensure our survival. Knowing that Gold is the master proxy for our life’s day-to-day and year-to-year shifting requirements for food, clothing, shelter, and energy, it simply makes more sense to gather in Gold for later use than to gather in clothes (that we may outgrow,) food (that may spoil,) houses which are more than our needs, or energy (that we can’t store.) You see, time bears witness to this undeniable fact: Gold can be called wealth because it is an enduring wealth proxy in exchange for our life’s needs. Currency, on the other hand, serves a specific modern economic purpose–to be borrowed and inflated in placation of man’s immediate desires. It is not wealth, it fails as a proxy for the Gold it tries to imitate. Do not confuse the two.”
Does physical gold get you to the other side? Hmmm… Will there be another side?
FOA: In this light we should know that our real things in life will not change all that much. Your tools, chairs, clothes and cars will remain yours. Houses and land, TVs and boats, all will retain the exact same “value” they always had. What will change is our ability to use our currency and paper assets as a medium to measure the “real value” that’s always so inherent in these items, yet so well hidden in our perception of today. Yes, the currency price of things will greatly change, even as their “use value” moves little. Such is the nature of dying paper money systems. Such is the ending of a currency timeline!
ARI: So you see, learning how the world works is all about each man coming to the understanding about the real wealth we all require to best ensure our survival. Knowing that Gold is the master proxy for our life’s day-to-day and year-to-year shifting requirements for food, clothing, shelter, and energy, it simply makes more sense to gather in Gold for later use than to gather in clothes (that we may outgrow,) food (that may spoil,) houses which are more than our needs, or energy (that we can’t store.) You see, time bears witness to this undeniable fact: Gold can be called wealth because it is an enduring wealth proxy in exchange for our life’s needs. Currency, on the other hand, serves a specific modern economic purpose–to be borrowed and inflated in placation of man’s immediate desires. It is not wealth, it fails as a proxy for the Gold it tries to imitate. Do not confuse the two.
I previosily posted some comments from Anonymous, but get the feeling most here do not buy in.
It recently occurred to me that in an era of declining ERoEI, gold will eventually be too costly to produce as the mines are getting deeper and ore grades are so low – I recall over 1 ton is required to refine 1 Oz.
My mistake, the writer’s name is Another
As I have indicated here before, I fall into the cohort that sees Brexit not as a destination, but as a path. Brexit or No-Brexit is the same to me as the choice between taking the M25 clockwise or anti-clockwise, you eventually end up at the same point just by a different route.
What I could never have imagined is the absolute shambolic charade being played out by the political classes. Is it really possible that these people are so detached from reality ?
I am finding this increasingly difficult to believe because if these people are for real, then they must be on some kind of medication, prescribed or otherwise. ( indications would suggest either LSD or Magic Mushroom )
That leads me to the conclusion that this is indeed a Charade. It is being play-acted for effect, and towards a specific goal.
But what is that goal ?
Is it to run the clock out to a No-Deal situation ? ( leaving the door open to blame Brussels if things were to get worse), or
Is it to manoeuvre the population into demanding a second referendum, which will then give the “correct” result ( ie “Remain” ) ?
As we all know, in such situations, the Law of unintended consequences will no doubt be invoked.
With nothing being done to address the issue of falling prosperity, all that we can be sure of is that we will be poorer. However, there may well be a sting in the tail for the puppeteers behind the screen, as this very interesting article on RT suggests.
Because if there is cause to hold a “Peoples Vote” ( ie a Second Referendum ) on Brexit, then there is certainly the same argument to have a second referendum on Scottish independence.
.. and maybe one on Irish unity too ?
Thanks, and you’ve touched on exactly the theme that I’m likely to look at in the next article. There are reasons why the ruling elites don’t understand what’s really happening.
I don’t see that as an excuse for everything, though. Examples must include the violence being used against demonstrators in France, or the the demand for a second referendum in Britain, where a ComRes poll shows that 2 in 3 people agree that ‘Theresa May is right to warn that if Brexit is stopped it will cause a catastrophic and unforgivable breach of trust in our democracy’
If we in the UK succumb to the evidence free economic ‘arguments’ of Project Fear, by choosing to reverse Brexit all we will effectively do is prove once and for all that we and every sovereign member of the EU can never leave it in terms of economic practicality.
Once we have foolishly made this economic submission, then we have also ceded any possibility of having an effective voice in the EU as all parties will have now accepted the universal impossibility of leaving it. Even Marine Le Pen in France has now reversed her ‘socialist’ objections to Euro membership.
Once this principle is assumed and established beyond anyone’s reasonable doubting of it, then there is no realistic sovereign or democratic control over the EU and the political directions it may travel in. There is no possibility of moderating or influencing it and all member states are utterly subjected to it by virtue of their submission to it under the terms of their complete economic dependence on it. This means that it is highly likely that without any restraint the EU which has a political structure that has strong potential to develop into a fully totalitarian entity will continue down that path and the people will be unable to object to it.
This is a grace political error it we are genuinely interested in democracy. Leaving without a deal will not lead to financial catastrophe indeed, isolated from the EU, the UK will fare much better when the next global financial crisis hits as it will most likely start within the Euro dependent countries as they are far more vulnerable to financial crisis in the absence of monetary sovereignty.
Therefore it is rather important to evaluate in advance as to how the EU is to deal with GFC2. Looking at the ESM in rather looks like it will involve more public bail outs of irresponsible financial institutions and even greater austerity and further Neoliberal cuts in public services, benefits and the continued dismantlement of the true progressive welfare state which was hard won by the working classes, trade unions and our struggles of two world wars fought for the very democratic principles we are now on the verge of foolishly surrendering.
With democracy and sovereignty consigned to the waste bin of history we will have no possibility of influencing or determining the EU’s technocratic response to the next crisis.
Make no mistake, once we submit to Project Fear there will be no turning back. As Varoufakis pointed out in 2013, absent democracy, there is a very real danger the EU will develop into a Supra-national concentration camp. The writing is on the wall for all to read.
“I am writing today’s post as a Europeanist who wants to imagine Europe as our common home but who also fears that Europe is sliding into an unbearable authoritarianism threatening to turn our common home into a shared concentration camp.”
So to all of those who regard themselves as Neoliberal progressives and Pro-EU then I would ask doesn’t the fact that you think and agree with all the views of the Nazi vision of its project for a Supranational Europe along the exact same lines as that of the EU, then doesn’t that logically make you at least a Nazi sympathiser even if you notionally and rhetorically declare or falsely identify yourself to somehow ‘belong’ to the historical label of the Left as it used to be before Blair?
Who knew that the death of John Smith would bring such a terrible cost to Europe and the world in general as it resulted in Blair and the consequent Neoliberalization of the European Left and the Democrats in the US? Obama could have delivered ‘Change’ and we would not have had the Neoliberal EU we have today, we would not have had the invasion of Iraq and wars in the Middle East. RIP John Smith, your passing has cost millions unnecessary and untold economic and geopolitical suffering on an utterly overwhelming scale because you had a moral and ethical social conscience.
Wow, Simon !
you really blew my hair back with that shock wave !
Thank you for your excellently formulated reply. It does indeed show that we are standing at the very precipice of interesting times. I hope that I my post did not signal that I was taking a stance on the Brexit issue, because as far as Brexit goes I am perfectly ambivalent. It is the reaction of politicians that is unfathomable to me, and I am searching for meaning in it.
Among the very many good points that you raise, the prospect of the impending GFC-II stands out as being of special significance. Government with its shambolic handling of Brexit has demonstrated its complete incompetence. However, as you point out, the same medicine as last time will probably be administered, Failed Bank bail-out, Depositor bail-in, and more austerity for the masses. – Good luck with that one !
As far as the UK is concerned, I do not think that it will be able to save itself from curtailed civil liberties and the destruction of democracy, any more that Europe itself can. The UK has a very pronounced militaristic tendency, and I can see martial law being enacted at the first signs of civil unrest. Being out of the EU will not change that in any way, in fact it may make things easier.
The UK with its high debt burden will be hit especially hard by the coming GFC-II and my feeling is that living standards will not just fall, they will plummet !
The public reaction to this will undoubtedly be civil unrest. Demonstrations, burning cars on the streets, looting, etc. prompting a very heavy handed government response.
Why am I humming that Bob Dylan’s song – “The Times they are a Changing ” ?
Johan, just take a close look at the terms ‘interconnected’ and ‘exponential’.
The world is interconnected through finance, ict, economics etcetera.
As soon as one piece (Brexit) is being removed, other pilers shake in their foundations; (mis)trust in currencies is just one example.
In Brexit, yellow vests, Italian populists etc. the core of trust crumbles. Immigration, politics, fiat currencies…..
ALL are under fire, and for good reasons as we’ve read over here the past few years.
The current political class cannot deal with degrowth. The whole system is based on growth. Period. Expect madness.
For the Brits complaining about agriculture:
The first article summary points to a talk that shows that Italy, France, and Spain, all within the EU, are doing far more to protect their agriculture than is Britain.
Later on, there is a summary of Michael Gove’s comments. Then a remark that agriculture needs legislative action…not fine words.
I don’t follow Brexit closely, but I did notice one comment by an MP: ‘don’t delude people that gardens are going to help’. Well, I recommend for your reading pleasure this article, published in Cell, in September, 2018. Please note this Q and A:
What interested you about your current area of study?
The microbiome fascinates me, as it represents a complete change in paradigm from anything that I’ve learned about in medicine and in science. In a period of only around a decade, we’ve learned to realize that our body is composed not only of eukaryotic human cells, but also of roughly equal numbers of microorganismal cells, which carry millions of genes and feature functions that are essential for the healthy functioning of the “human machine.” We’ve also learned to appreciate how little we know about the molecular “alphabet” dictating the cross-talk between our human and microbial parts, but realized that by understanding these complex communication channels, we will slowly be able to better understand the pathogenesis of complex and common “multi-factorial” disease and identify new therapeutic targets for them. This adventure, involving two of my biggest loves, medicine and science, focuses on search and discovery for unknown parts of biology. This is fascinating to me, and hopefully to my students and postdocs, as it incorporates a deep dive into the very basic principles of life while potentially having very actionable implications on the health of millions of humans.
Anybody who looks at this revolutionary information has to conclude that fresh fruits and vegetables play a key role in the signaling which is at the heart of human health. Now, there is no particular reason why Britain cannot import its fresh fruits and vegetables from France or the Netherlands, provided Britain has the ability to earn the money to pay others to grow those for them, but to cut off supplies and rely on foreign countries who routinely spray their crops with chemicals which kill the microbes is utterly insane. Grains can be imported from Russia, but as you will see if you look at the descriptions in the article, there is a farm in Sweden growing vegetables with a 3 month growing season. The report says that the British farmers were paying very close attention.
The interview was not published in Cell, but was prompted by an article Erin Elinav published in Cell in September which upset a lot of applecarts.
Pingback: “Brexit” and the wait for Godot, Discussion on Dr Tim Morgans Blog.(Brexit from a Surplus Energy and Peak oil Perspective. Prosperity analysis, you never had it so good.) – RogersLongHairBlog
Pingback: “Brexit” and the wait for Godot, Discussion on Dr Tim Morgans Blog.(Brexit from a Surplus Energy and Peak oil Perspective. Prosperity analysis, you never had it so good.) – RogersLongHairBlog
Pingback: “Brexit” and the wait for Godot, Discussion on Dr Tim Morgans Blog.(Brexit from a Surplus Energy and Peak oil Perspective. Prosperity analysis, you never had it so good.) – RogersLongHairBlog
If dirt were dollars?
Has a lot to do with what replaces the Petro Dollar. The Carbon DOllar is the answer.
Ukraine, Syria etc Gas Pipelines wider geo politics.
The Main Prize is through the religious elevation of Carbon to the debt based measure of a carbon enslave economy.
Pingback: #145: Fire and ice, part two | Surplus Energy Economics