Nickolai, my son,
Europe is at an end.
Please stay in NZ and build yourself a future there.
Lots of love,
Mum
And so that’s how my honeymoon ended. In the Auckland Airport transit area. With a reminder of what I’m returning home to.
A long list of billionaires have established their boltholes in New Zealand. If the financial system collapses to the point where it impacts social stability and the supply of basics like food, you’ll find a bundle of private jets from all over the world at small airports across New Zealand.
At one point, the New Zealand government had to restrict the international elite hoovering up remote pieces of land.
Many years ago a colleague and mentor moved back to New Zealand too. At his going-away drinks I asked him about whether he ever considered the “safe haven” implications. How much safer his new family would be in NZ.
He had. But I decided to head the other way.
I moved from a comfy life in Australia and Japan to be here in Europe as so much falls apart. Political consensus, financial market stability and then the rules of the political and financial games.
It’s EU election week, for a start. My very first one too. I used to watch from the safe distance of Australia, where the EU election got precisely zero coverage.
Are you up to date on how the Poles and the Finns will vote to govern you?
Do you know the various Spitzenkandidats? Do you know what a Spitzenkandidat is?
Do you know which EU Parliament political party you’re voting for when you cast your vote for UK parties?
Do you know the policies of the different EU parties? Their ideologies? Their acronyms in various different languages?
Do you know which presidents will take office thanks to your votes?
I don’t think anyone has a clue about any of this. Even the people who vote. Especially the people who vote.
Is that how democracy is supposed to work? Where very few people vote without the slightest clue who or what for?
A few days ago, the Financial Times published a long article called, “European elections: is the party over for the centre-right?” I interpreted this to mean that centre-right populists’ popularity is finally waning.
But the article was about the centre-right’s dominance of EU politics since the 90s. So even after spending the majority of my time on Europe’s dramas I still misunderstand the media coverage.
I didn’t even know the EU is governed by what’s considered centre-right parties… I thought they were just a complete incoherent rabble.
The lack of understanding and coverage leads to all sorts of trouble. It’s no surprise EU bureaucrats have been caught doing some rather dodgy financial dealings lately. And no surprise the EU can’t find auditors to sign off on their accounts.
Apparently, if you watch the new Brexit process documentary Behind Closed Doors, it’s hard to tell when the politicians and bureaucrats are joking and when not. Because we just don’t know what’s within the EU’s capacity for mismanagement and what’s not.
The problem goes much deeper than a lack of understanding. Can you imagine pitching all this as an ideal to the typical European citizen a few decades ago?
“We’re going to create a European government. A democracy where people don’t recognise the parties, have never heard of the politicians and don’t know about the policies. The leaders won’t be elected and only they can introduce legislation.”
I don’t think anyone would consider it all plausible or possible. At least, not for long. Perhaps that’s why a majority of those surveyed by the European Council on Foreign Relations recently claimed they expect the EU to fail within 20 years.
My point is, uncertainty in Europe is very high. The range of possible outcomes is far wider than we’re good at conceptualising. And that makes radical outcomes possible.
Conveniently, it’s a great time to be a newsletter reader. And writer…
Since February 2018, I’ve been busily writing about all this. Again, it’s why I moved to Europe. Because I can be especially useful to you in times like this. Times of radical change.
Italy’s government budget wreaked havoc in May and October. And more trouble is in the making soon.
The German house price boom is accelerating, in the face of worsening GDP. That’s what you get for sharing a monetary policy with Italy.
And this week, it’s crunch time. The populists will run for power and influence in the EU. Can the electoral chaos of the last few years manifest itself at the European government level?
But this week, I’m back in Capital & Conflict. Because you all need to know what’s going on. What’s about to happen.
By the way, I haven’t just put my lifestyle on the line for my predictions. I’ve put my money where my mouth is too.
My quest to buy a house in the UK continues. The attempt to escape the banking system, the euro and the Aussie dollar is well underway. I want to be in pound-denominated assets.
But, for now, the pound is getting hammered. If you believe Bloomberg, anyway:
Longest Pound Slide Since 2000 Shows Brexit Respite All But Over
The pound headed for the longest losing streak against the euro since the turn of the century as rising U.K. political risks fanned concern about the nation’s ability to achieve an orderly Brexit.
Sterling fell for the ninth day against Europe’s single currency…
And “The pound is the worst performer versus the shared currency”.
I’ve pointed out before how the Brexit commentators conveniently swap back and forth between the euro and the dollar when pointing to the pound’s demise. But at least this time the pound dropped against the dollar too.
Now year to date, the pound is up impressively against the euro. By about three cents, and six and a half cents before the recent tumble. But nobody mentioned it back then. Only the falling pound gets news coverage.
I know the details because two thirds of my house deposit is still in euros. And I’ve been playing currency trading by keeping the funds there. Which wreaked havoc on my UK mortgage application. But the recent plunge in the pound made it worthwhile.
The real story hasn’t been mentioned by anyone though. The pound is range-bound against the euro. The exchange rate has been going sideways since the referendum. A few weeks ago we were at the same exchange rate as July 2016…
Until next time,
Nick Hubble
Editor, Southbank Investment Research
Category: Market updates