So that’s how it’s going to be. The British prime minister, David Cameron, made it clear yesterday that his preference is for Britain to remain in the European Union (EU). By linking national security to the issue, he’s prepared to make the case that Britain’s survival as a sovereign state is best served by staying in the Franco-Prussian dominated EU. Hmm.
The prime minister did leave himself some wiggle room. If he gets the deal he wants from Brussels, he’ll campaign to ‘stay’ in the 2016 referendum. Presumably, if he doesn’t get the deal he wants, he could, theoretically, campaign to ‘leave’. Right.
The list of ‘demands’ sent to European Council president Donald Tusk was hardly a declaration of traditional British (and liberal) principles. It was a modest grocery list. Cameron is the sort of man you’d want to play poker with. Judging by the volume of sceptical and disappointed mail in today’s mailbag, most of you agree that it was a bad day for British democracy. Here’s an example:
“Sir,
“For me, the key issue is sovereignty. The government never had the explicit permission of the electorate to transfer ‘competences’ to Brussels such that about half our laws now come from there. We no longer live in a democracy ruled by a Constitutional Monarchy and an elected House of Commons. Logically, if we remain, we should halve the Commons, which would at least help with the refurbishment of the Palace of Westminster.
“I am willing to back the entrepreneurial capability of the British to make a great success of life outside the EU. I will be voting to leave regardless of the so called ‘negotiation’ which anyhow is not considering anything close to the primacy of national governments, despite John Major’s attempt with subsidiarity in the Maastricht Treaty.
“Regards,
“Derek S.”
If you were reading the letters I read this morning, you’d see how much passion there is on the issue. And today, of all days, how much patriotism. That is both a benefit and a risk.
The benefit is that British people are thinking about whether it’s in Britain’s national interest to stay in the European Union. Take the idea of national security. That includes physical protection from armed foes. But doesn’t it also include secure borders? And doesn’t it include the idea that the ideas that make up a liberal political order need defending too? Is Britain’s national security best-served by ever closer union with lawmakers in Brussels? Hardly.
The risk, like any political issue, is that your heart takes over from your head. You end up making an emotional decision. That kind of decision can lead to disaster.
To take some of the emotion out of it, I’ve got Charlie Morris on the case. His bitcoin series will resume tomorrow. But he’s spending most of today and tomorrow talking to his contacts in the City and Westminster about the non-emotional side of ‘Brexit’. Charlie has two decades’ worth of contacts in his Rolodex.
He’ll issue his own report next week as the cover story for MoneyWeek. I’ll give you a preview of it later this week. But the aim is to be analytical about the issue. What does Britain have to lose by leaving? What does it have to gain by leaving? What does it have to lose by staying? Is there anything to gain, beyond the rather tepid list of ‘demands’ submitted yesterday by the Prime Minister?
And since MoneyWeek is an investment magazine, and Capital and Conflict is a publication for investors, savers, and pensioners, Charlie will also look at possible stockmarket, property market, and currency implications for staying or leaving. You can’t predict the future, of course. But you can put some thought into the logical consequences on capital flows, bond prices, British services, and especially the City. Stay tuned.
Negative rates the new normal
A quick note about negative interest rates: they could be here to stay. Bloomberg reports that: “Now that Sweden and Switzerland have shown that negative benchmark interest rates don’t necessarily result in flights to cash, asset bubbles or banking strains, the global giants of central banking may be more willing to embrace sub-zero borrowing costs the next time their economies slide.”
This little snippet is both deceptive and illuminating. It’s deceptive because it suggests that negative rates in the major economies may only surface in the next ‘slide’. That’s assuming the current slide is over. If you accept the contention that we’re in the middle of slow-motion second Great Depression, then negative interest rates in the developed world are not something that could happen in the distant future. They’re something that could happen next year.
The illuminating part of the snippet is that negative rates are being endorsed on the grounds that they’re good for banks, not savers. Ordinary savers and pensioners don’t have many options when it comes to savings account and cash. Thus, even as they earn little or no interest – and are living on a fixed income – negative rates haven’t led to bank run. At least not yet.
At what level would rates have to go negative for you to give up on your bank? There’s probably someone on a central bank payroll researching that story right now. They don’t know. As I’ve said before, they’re making it up as they go along.
By the way, this is why Charlie’s article yesterday on blockchain technology is so important. If blockchain technology removes the banking sector as the middleman in the creation of cash and the allocation of credit, we won’t have monetary policy created by and for bankers. Savers won’t suffer financial repression in the name of ‘good policy’.
Here we are then, on the frontier of sweeping changes in financial technology that could change the way we think of money and revolutionise the financial sector.
Category: Brexit