Looks like Britain may have the European Union bosses over bit of a barrel. They can't actually eject Britain from membership in their dysfunctional club. Britain has to invoke Article 50 of one of the EU treaties to begin the process of withdrawal. British Prime Minister David Cameron announced in the British Parliament that he would leave it to his successor to initiate that process. (Assuming his successor chooses to do so, which he is under no obligation to do. The just-completed referendum does not legally compel the British government to actually withdraw from the EU.)
Cameron announced he is stepping down in October. So that's already 3 months before anything can happen. He also referred to negotiating before Britain invoked Article 50. That gives Britain a good deal of leverage in extracting relatively favorable terms from the EU regarding trade, immigration, and social benefits for immigrants.
Meanwhile, there's been an odd disconnect between the political events and the behavior of stock markets. Every day, the political chatter from and about Britain is that it is "leaderless," since a clear successor of the Tories to replace Cameron hasn't been selected, and the Labour leader Jeremy Corbyn has a rebellion on his hands in his own party. Labor MPs are overwhelmingly calling for his resignation, and his shadow cabinet has resigned. We're being told that months, or even years, of uncertainty lies ahead.
Stock markets are supposed to hate uncertainty. And yet, after declining for the first two trading days after the Brexit referendum on Thursday June 23, stocks fell on Friday and Monday, in the U.S. about a total of 6% in the broad averages. Then they went up strongly the next 3 days in a row, recouping all the losses. This morning U.S. stocks are up again, for the fourth day in a row, although anything could happen by closing. As so often, the stock market confounds by defying its own putative "logic."
One excuse (aka "reason" or pseudo-explanation) for the rally is that traders expect central bank easing as a result of the Brexit vote. In other words, they assume that central banks (the Fed in the U.S.) exist to facilitate ever-rising stock markets by providing financial sugar for the professional speculator class. Perhaps some thought a measly 6% decline created a "bargain" situation. Given the extremely short-term perspective of "the market" in recent years, that probably is at least part of it.
How to square the continuing hand-wringing and bitter condemnations by financial and political commentators over the Brexit referendum outcome, along with their doom-and-gloom predictions for the economic future of not just Britain but even the entire world, with the giddy reversal of direction by stocks globally? Could it be that the elite chatterers and "economic experts" are dead wrong? Since they fetishize markets, surely they must defer to the "judgment" of those markets.
Following Moody's another "rating" agency, S & P, has downgraded the credit rating of the British government. As I stated in my previous essay, these credit "rating"agencies have shown themselves to be criminal enterprises by their complicity in the packaged mortgage securities fraud, rating junk mortgaged Triple-A. They deserve no credibility whatsoever.
Even the British pound rallied back to $1.35, from $1.32, although right now it's back to just under $1.33. But the gloomsters ignore the positive of that. It means British exports are cheaper, just boosting British exports. That in turn benefits at least some British workers, and certainly the export businesses. It also will boost tourism to Britain, since it means vacationing in Britain becomes cheaper for Americans and Europeans using the Euro. The downside is more expensive imports, and it makes foreign travel more expensive for Britons, who will get less foreign currency in exchange for their pounds when abroad. Net, Britain gains economically from a cheaper currency. And I doubt it will fall anywhere near the low of 1987, when it dropped to $1.04 U.S.
A looming political question is what Scotland will do. Scotland voted strongly for Brexit, and doesn't want to lose the alleged advantages of EU membership. There has been talk of another vote on Scotland independence, (Which requires the permission of the British Parliament, unless Scotland wants to fight a war of succession.) Well, the British empire has been shedding pieces of itself for a century, perhaps it's high time for another piece to molt off.
One worry going forward: now that the Tory former London Mayor Boris Johnson has dropped out of competition to succeed Cameron, the egregious Home Secretary Theresa May very much wants the PM job. She's a repressive authoritarian who has consistently pushed for more powers for the British secret police agencies, including the NSA's little brother, GCHQ (General Communications Headquarters, an electronic spy agency that works hand in glove with the NSA as one of the "Five Eyes," the electronic secret police organizations of the U.S., UK, Australia, Canada, and New Zealand). She also lobbies hard for more repressive laws. And if Britain leaves the EU, the privacy laws of the EU and the European Court of Justice will no longer exert a restraining influence on the British ruling class' thirst for more repression. At this time she has but a single rival to take Cameron's place, and that is Justice Secretary Michael Gove, an erstwhile ally of Boris Johnson in the pro-Brexit camp.
Cameron announced he is stepping down in October. So that's already 3 months before anything can happen. He also referred to negotiating before Britain invoked Article 50. That gives Britain a good deal of leverage in extracting relatively favorable terms from the EU regarding trade, immigration, and social benefits for immigrants.
Meanwhile, there's been an odd disconnect between the political events and the behavior of stock markets. Every day, the political chatter from and about Britain is that it is "leaderless," since a clear successor of the Tories to replace Cameron hasn't been selected, and the Labour leader Jeremy Corbyn has a rebellion on his hands in his own party. Labor MPs are overwhelmingly calling for his resignation, and his shadow cabinet has resigned. We're being told that months, or even years, of uncertainty lies ahead.
Stock markets are supposed to hate uncertainty. And yet, after declining for the first two trading days after the Brexit referendum on Thursday June 23, stocks fell on Friday and Monday, in the U.S. about a total of 6% in the broad averages. Then they went up strongly the next 3 days in a row, recouping all the losses. This morning U.S. stocks are up again, for the fourth day in a row, although anything could happen by closing. As so often, the stock market confounds by defying its own putative "logic."
One excuse (aka "reason" or pseudo-explanation) for the rally is that traders expect central bank easing as a result of the Brexit vote. In other words, they assume that central banks (the Fed in the U.S.) exist to facilitate ever-rising stock markets by providing financial sugar for the professional speculator class. Perhaps some thought a measly 6% decline created a "bargain" situation. Given the extremely short-term perspective of "the market" in recent years, that probably is at least part of it.
How to square the continuing hand-wringing and bitter condemnations by financial and political commentators over the Brexit referendum outcome, along with their doom-and-gloom predictions for the economic future of not just Britain but even the entire world, with the giddy reversal of direction by stocks globally? Could it be that the elite chatterers and "economic experts" are dead wrong? Since they fetishize markets, surely they must defer to the "judgment" of those markets.
Following Moody's another "rating" agency, S & P, has downgraded the credit rating of the British government. As I stated in my previous essay, these credit "rating"agencies have shown themselves to be criminal enterprises by their complicity in the packaged mortgage securities fraud, rating junk mortgaged Triple-A. They deserve no credibility whatsoever.
Even the British pound rallied back to $1.35, from $1.32, although right now it's back to just under $1.33. But the gloomsters ignore the positive of that. It means British exports are cheaper, just boosting British exports. That in turn benefits at least some British workers, and certainly the export businesses. It also will boost tourism to Britain, since it means vacationing in Britain becomes cheaper for Americans and Europeans using the Euro. The downside is more expensive imports, and it makes foreign travel more expensive for Britons, who will get less foreign currency in exchange for their pounds when abroad. Net, Britain gains economically from a cheaper currency. And I doubt it will fall anywhere near the low of 1987, when it dropped to $1.04 U.S.
A looming political question is what Scotland will do. Scotland voted strongly for Brexit, and doesn't want to lose the alleged advantages of EU membership. There has been talk of another vote on Scotland independence, (Which requires the permission of the British Parliament, unless Scotland wants to fight a war of succession.) Well, the British empire has been shedding pieces of itself for a century, perhaps it's high time for another piece to molt off.
One worry going forward: now that the Tory former London Mayor Boris Johnson has dropped out of competition to succeed Cameron, the egregious Home Secretary Theresa May very much wants the PM job. She's a repressive authoritarian who has consistently pushed for more powers for the British secret police agencies, including the NSA's little brother, GCHQ (General Communications Headquarters, an electronic spy agency that works hand in glove with the NSA as one of the "Five Eyes," the electronic secret police organizations of the U.S., UK, Australia, Canada, and New Zealand). She also lobbies hard for more repressive laws. And if Britain leaves the EU, the privacy laws of the EU and the European Court of Justice will no longer exert a restraining influence on the British ruling class' thirst for more repression. At this time she has but a single rival to take Cameron's place, and that is Justice Secretary Michael Gove, an erstwhile ally of Boris Johnson in the pro-Brexit camp.
The Nightmare Scenario: The Remorseless Theresa May as Prime Minister of Britain.
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