What do I think of the deal announced on October 17 by EU and UK ?

I have been asked many times on Quora and Twitter what I think of this last minute deal that has been struck between UK and EU negotiators just before we reach another deadline set for October 31st and UK would crash out of the EU without a deal in a disorderly fashion.

First of all this is nothing like the hard fought breakthrough that the Johnson administration would like you to believe it is. This reheated deal was already offered to Theresa May more than two years ago.

The main difference is that the border between EU and UK has been moved to the middle of the Irish sea for convenience. Items removed from the Political Declaration also pave the way for erosion of workers rights, environmental standards and consumer protection.

Boris’ famous deal will fall at the first hurdle and here’s why:

It is my understanding that EU, UK and Republic of Ireland are all co-signatories to the Good Friday Agreement (GFA) and they want to avoid at all costs breaking international law by imperilling that Agreement. Creating a hard border on the island of Ireland would require ‘security installations’ which are prohibited in the GFA. Now they have agreed that to all intents and purposes Northern Ireland stays in the regularly sphere of the EU, there is no need for that border. What checking that still needs to be done would take place in commercial ports and those customs posts presumably would not be considered ‘security installations’ and be considered worthy of attacks by IRA terrorists.

Mind you the Unionists have already said they’ll vote against this deal anyway, so the deal will not pass parliamentary scrutiny and fall at the first hurdle. Boris Just does not have the votes. He may try to suggest that he had a deal and that therefore no-deal comes up trump again. Legal minds much stronger than mine assure me that this is an illusion.

That means that in two days, we’ll be back to asking for an extension.

This time for a GE and a People’s Vote.

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Commonwealth to the Brexit rescue

I always feel like banging my head against a brick wall, whenever Leave politicians utter the words ” we must have the ability to strike our own trade deals”.

Never in the last 3 years have I heard a single Leaver explain what’s actually wrong with the trade deals that the EU strikes on our behalf.

The only half valid point sometimes made, is that EU trade deals tend to focus on goodsf rather than services. But this is true for nearly all global trade deals. WTO trade talks in Doha on liberalising Services trade globally have been disappointing also. Countries just seem more protective when it comes to their services sector.

https://www.thebalance.com/what-is-the-doha-round-of-trade-talks-3306365

When I point out, the UK has the second largest trade deficit in the world, that doesn’t mean that I disrespect some of the world class industries the UK boasts. Rolls Royce Aerospace, Jaguar Landrover, JCB (I am sure I’ll think of others later) are world class and have no problem exporting globally while in the EU. The EU does not restrict them at all. That means leaving EU won’t liberate them.

The second thing that greatly annoys me of Leavers, is when they start reminiscing about their beloved Commonwealth.

Boris Johnson did it again during his conference speech. « We will trade more with the Commonwealth where billions of consumers await us. » he said to laud applause.

Doesn’t Mr. Johnson realise, that the average earnings of Commonwealth citizens are a tenth of the well heeled customers we serve throughout Europe?

If we take away the four richest Commonwealth members UK, Canada, Australia and New Zealand, Per Capita GDP drops below $900 per annum. These are hardly the same consumers our UK industry and service sector mainly caters for!

In Paris TGV terminals you can find smartly dressed commuters stocking up on Marks & Spencer’s ready meals retailing at €6.50 or two for a tenner.

Just in time supply lines powered by automated tellers can ensure their stocks are replenished from UK overnight, as most capitals in EU are only a eight hour truck drive away. When there’s no hold up at the border that is.

Just imagine how that would work for an equivalent M&S store in Delhi or Mumbay?

In other words, this let’s go global story is a Fata Morgana. Either we are already supplying these markets or the market is just not there for UK products. Too far and too dear for their purse.

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Trade wars, who’d have’m eh?

Answer posted on Quora today

https://www.quora.com/Why-are-there-so-many-trade-wars-between-countries-What-is-the-effect-on-the-world-economy/answer/Marcus-Lasance?ch=10&share=783d58c0&srid=BSU24

I am going to answer this trade war question in a very roundabout way. I feel passionate about this so please bear with me.

Trade wars happen because people have forgotten the role of money and why we use it.

Money is a temporary token for value. A country has oil to trade and needs wheat. The wheat takes another three months to grow and ripen so they take dollars and buy US wheat three month later. The IOU, which really is what money is, has been honoured and trade balance has been restored.

Nowadays people are so in awe of money, they think it has intrinsic value. So when they have paid for their shiny German car or latest Chinese smartphone, they think they’re fully settled up. But in fact they’ve made German and Chinese factory workers sweat and labour for worthless bits of paper with the Queen’s or Benjamin Franklin’s Head on them. This is worse than fobbing natives off with coloured beads of glass for gold and spices in the colonial days.

Of course all these IOUs pile up in the vaults of central banks abroad and eventually they will wing their way back to the countries who’s citizens had forgotten all about them.

Now they are used to buy their prime real estate and most efficient factories and utilities.

People feel like they are loosing a massive monopoly game and don’t like it.

When their President or a loudmouth like Farage says he’ll do something about it, they welcome him as a saviour.

But neither have an answer, because they also are in love with bits of paper. They don’t say, maybe I should have a better industrial strategy and create things of value we can trade so we can get back all our IOUs and maybe invest them better ourselves.

Before you reply, I am just a neo-mercantilist, I do know the value of a knowledge based economy and services.

The problem with the uneducated lazy masses that vote for Trump and follow Farage is that they don’t. They are not spoilt, they are ruined. They’ll never create anything of value. They think consuming creates value.

So all they want to do is blame foreigners more hardworking and better educated and they’ll cheer any kind of war. Thank god it’s still only a pseudo trade war.

Proudly Looking at the biggest container ship at Felixstowe not many Leave voting types realise that most of the containers being loaded are in fact empty returns.

Having the largest trade deficit bar America, does have this effect.

From List of countries by net exports – Wikipedia

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What is Boris’ big plan to get the UK economy going again after Brexit?

Lately I have become more active on the Social Media site Quora. Some of my answers are like mini blogs, so I’ll star sharing the best of them here on IdentitySpace.

After a no-deal Brexit Boris Johnson will try to pump up the UK economy with more hot air.

The British like to say they are special and have a ‘Services’ based economy, but what does that actually mean?

With a Masters in Business Administration, of course I have a good idea what goes on in those shiny skyscrapers in the City of London and how that brings in revenue from all over the world.

As an avid TV and movie watcher, I can also see how the BBC and other UK production companies produce brilliant content, music, film, drama, games and documentaries and how that copyrighted content is syndicated around the world and also brings in foreign revenues, not to be sneered at.

Where it all gets a bit hazy and incestuous is all these businesses where basically one UK citizen scratches another UK citizen’s back and they invoice each other. Again this total gets added to their GDP and makes the UK look big in nominal terms.

But how ‘real’ is this part of the UK’s GDP?

When I use a ‘Just Eat’ app on my iPhone to order a takeaway, that also adds to the ‘Services’ part of the UK economy and the Small and Medium sized Enterprises (SME) Sector is growing fast in numbers, but it doesn’t earn much foreign currency for UK plc. like the media industry, which is truly global. The ingredients of a typical UK pizza are probably mostly imported, so actually this activity worsens the UK trade deficit.

What we see with people like Boris Johnson and many Brexit voters is that they don’t distinguish between core economic activities that create wealth, like car manufacturing and farming, and secondary services sector activities that just multiply by recycling and distributing wealth other industries generate.

The Conservatives have no Industrial or trade policy. All they care about is their chums in the City of London.

With Brexit hitting the primary wealth generating industries of the UK first, there will be a huge knock-on effect for the secondary services industry in the UK. It will tumble like a house of cards, when British people tighten their belt in the Dunkirk spirit and stop spending.

All those Deliveroo and Uber drivers out of work! All the hair and nail salons. All the unaffordable childcare facilities closed.

To put it in simple terms, when the car plant shuts down, the hamburger van at the factory gate closes with it.

Because Johnson says “fuck industry” he will also deal a deadly blow to the Services sector, which now represents 80% of the UK’s GDP.

While in the EU, Britain was well placed to exploit their advantage in ‘Services’ with the advent of the Songle Market for digital services. Sadly with Brexit, that’s another sector where they’ll lose out.

There is no amount of hot air that can stop that. Brexit UK is heading for a catastrophic disaster. Most folk with half a brain can see this coming from miles away.

But some will make money out of this chaos.

Jacob Rees Mogg’s father even wrote a book about it!

How to Survive and Thrive during the Collapse of the Welfare State: Amazon.co.uk: James Dale Davidson, William Rees-Mogg: 9780684810072: Books

Some enterprising Brits will even find a new pitch for their hamburger vans!


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The asparagus tip of the Brexit iceberg

As Britain slowly stumbles towards a no-deal exit of the European Union and its successful Single Market and Customs Union, Leave voters are desperately reassuring themselves in their echo chambers that trading on just WTO terms after the 27th of March 2019 is not all bad news. “We’ll trade with the world”, they say. As if the gravity model of international trade in international economics no longer exists after Brexit.

World Map

An example is a little iPhone video posted by a British ‘Yellow vest’ of all the fresh exotic vegetables ‘not from the EU’, that he could find in his local Tesco fresh fruit and veg racks. The irony of a Yellow Vest revelling in the abundance of Peruvian asparagus tips and Kenyan broccoli spears would not go unnoticed, should any real French ‘Gilet Jaune’ stumble upon it.

A short video of non EU produce for sale in a typical UK Supermarket with following comment:

“PROOF: We won’t all starve when we finally leave the #EU, this is World Trade.

The scaremongering by the fake news mainstream media has to stop!”

Let me try and explain this Peru asparagus tip phenomenon for simple Leave voters:

I will use a simple example of supply and demand pricing that most will be familiar with: You can fly with RyanAir to France for €9.98 on some days when demand for flights is low. During school holidays however like on April 19th just before the Easter break the same flight is  €96.89 or ten times as high! The flight price point for RyanAir to break even on its flights to France is probably somewhere comfortably in the middle.

Same with asparagus tips from Peru and beans from Egypt. Sometimes passenger airlines have a few ton spare freight capacity and clever buyers at UK Supermarket chains exploit that price anomaly to cheaply transport speciality food to UK that usually you would not see out of season on our supermarket shelves. You cannot however ship crates of one pound cauliflowers, bags of potatoes and apples that way. There just isn’t the volume of airfreight available. There aren’t enough planes in the sky, to replace the thousands of lorries of fresh produce that arrive from France Italy and Spain every day of the year. Keeping UK PLC. supplied like that is not sustainable! The UK’s food supplies are another example of carefully crafted ‘Just in Time’supply lines built up over the last 40 years of EU membership.

Think also of the carbon footprint of food being flown in like that in bulk. Imagine the lorry queues at Heathrow and Manchester Airport! It all doesn’t bear thinking about it!

Leave voters of the Hard Brexit WTO variety are also too too stupid to realise much of this stuff on the videoclip is only available because of EU trade agreements with Africa and South America, Free trade Agreements for everything but arms, from which the UK as a current EU member benefits. If Brexshit happens there won’t be any agreements in place on day 1, so UK can’t import it unless it pays the relevant tariffs, which can go as high as 40%!

Trade Agreements can take years to agree. Any free trade agreements have to be carefully balanced with the threat to our own farmers and industry, many would be forced into bankruptcy in the face of cheap foreign imports. The EU usually gets this balance right. For instance oranges from Morocco only attract a small tariff during the few months the Spanish orange growers are harvesting. This assures these farmers don’t go bust, but yet we can enjoy cheap fresh oranges all year long.

We also had a discussion about cheaper wine from outside the EU. Non perishable foodstuffs like wine can indeed be shipped in by climate controlled containers, but let’s face it, the amount of duty U.K. government adds on top of any alcoholic beverage makes those tariffs pale into insignificance. See for example this €1.79 bottle of rose wine. Where could you find that on U.K. supermarket shelves. The myth that food and drink will be cheaper in UK after Brexit must be one of the most insidious lies ever to be perpetrated on a gullible UK public.

Finally an infographic of the free trade area that UK plc. will lose access to if it crashes out without a deal in six weeks time. I have added in Japan, a huge economy that EU yesterday signed a free trade agreement with.

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FDI: The Tories magic money tree and Brexit

Wrote another belter of a thread on Twitter.

Kindly the Twitter ThreadReader app made it into something that looks more like my usual blog posts.

Enjoy and best wishes for 2019!

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Lately I have become a bit obsessed with Britain’s trade deficit and Balance of Payments with the Rest of The World(ROW). Let me explain why, and what’s it got to do with #Brexit.
For me as a UK-expat in Euroland I have seen the value of my pension drop by 20% since the dreaded referendum.

Let’s home in on what happened around the time of the referendum. Although part of a longer term decline, the sharp drop did not go unnoticed by the commentariat.Sharp drop in Sterling rate highlighted June July 2016Cartoon of pound falling off cliff

Of course markets never like uncertainty, but I did notice that every time a Government Minister assured us it would be a ‘Soft #brexit’ there was a slight upturn. Mention ‘Hard Brexit’ or ‘no-deal’ and the short term gain was immediately wiped out.

n 1971, thirty three years after the post war Breton Woods conference agreement, the link between currencies and a the UK’ s Gold Reserves was effectively abandoned and Sterling became in effect free floating.Screen grab from Wikipedia Breton Woods article

The pound like many other currencies became a ‘Fiat Currency’Screenscrape from Wikipedia fiat currency article

In simple layman’s terms, the Pound, Dollar or Euro is worth as much as the people that use them and the markets that trade in them have confidence in the government that issues them. When the markets lose confidence you can end up with shock devaluation and hyper inflationImage of a trillion dollar Zimbabwean bank note

Watching iconic U.K. films like “Made in Dagenham”
and “the Crown” it always felt reassuring that in Cabinet Meeting scenes the U.K. balance of payments was always discussed as something of National importance. We must as a nation, never spend abroad, more than we can afford.Made in Dagenham film flyer

At some point in recent history, whatever passes for a competent Government in the U.K, must have given up the pretense of trying to match the level of imports into the country with the level of exports as a nation, the U.K. ships to the rest of the world.

So they invented FDI1

Definition of FDI

FDI is the magical money tree the Tories invented, when they no longer managed to keep the UK’s trade books balanced.

It happened around the same time Britain decided it did not want to join the Euro.

We no longer export as much as we import?

Let’s have a giant car boot sale!!

For sale the UK offered it’s Utilities, empty factories and warehouses, all with prime access to the emerging giant EU market that was developing on its doorstep. Hey presto. Our abysmal trade record solved. National Financial Accounts balanced and the Pound propped up by FDI🤗

All this happened without being honest to the UK electorate. Not joining the Euro was sold as a clever move. The country kept partying as if it was still 1999 while across the pond the EU economy, powered by Germany, went from strength to strength.

Of course with failing investment and falling productivity wages of ordinary working people in Britain fell behind.

Et on charlatans, who wreaked havoc on our economy, while lording it over, had to find a scape goat.

In true fascist style, an easy target was found: Immigrants!

This is the economic background story to #Brexit. It’s a story of mismanagement of the U.K. economy, at the same time as our EU neighbours did everything right.

@jeremycorbyn has understood some of the problems, but unless he first fixes #Brexit, he’s on a hiding to nothing.

Let’s look one more time at that league table of trading nations.

Look at who’s in the top ten and the bottom 10.

Where would we rather be?

Back in the EU fold or adrift alone in a globalised world?

Does anyone seriously think @LiamFox can fix this? That @jeremycorbyn can?Lust of countries by net exports: Six EU nations in top 10. EU although not a country in third position for referenceLust of countries by net exports: Bottom USA. Second from bottom on position 193 UK

Stop #Brexit with a #peoplesvote before it’s too late!

 

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What makes a great Trading Nation?

I keep reading posts about what a great trading nation Great Britain is, or was, or could be after Brexit so I tried to look for ‘United Kingdom’ in the global list of countries by net exports.

I was not surprised to find Germany near the top and consequently also the EU, although strictly not a country and therefore listed in third position for reference only. I quickly found Ireland and Netherlands on the list and France and Italy. But where was UK I wondered? I had to use the ctrl-f function to find you and astonished to find UK second from the bottom next to USA.

America of course long ago stopped worrying about running a huge trade deficit. They had some clever professors at the Chicago School of Economics figure out that, as the whole world traded billions of barrels of Oil in dollars, the greenback would keep its value, even if they stopped making actual stuff like cars and airplanes. Just Google ‘Chicago Boys’ and find out what damage they did to economies worldwide, e.g. in Chile.

Practically the whole world has figured out that America has been scamming the rest of us with a currency that is practically worthless. Poor people work long hours in sweatshops all over the world to satisfy the insatiable demand of American consumers. No wonder the British establishment like John Redwood and Rees-Mogg thought they too could play that game.

Only…. Great Britain is really little England with proud Scotland, Wales and Northern Ireland attached. The Pound of the Bank of England is no more this great reserve currency every central bank in the world wants to stuff in its vaults in the 21st century, than they admired the Dutch Guilder in the seventeenth century. That idea and practice died along with the British Empire sixty years ago.

Meanwhile the Euro goes from strength to strength. Not only does the EU represent the single biggest consumer market in the world, they actually also make stuff that people worldwide want to trade for in return. Quality and style!!

Oil producing nations increasingly specify they want payment in Euros for their black gold. Why would they want to be exposed to Micky Mouse money like the dollar or Sterling?

So I got to laugh when I listen to Brexit shouters who predict the always imminent demise of the Euro and the EU as a whole. This idea flies in the face of the markets. Not even Greece or Italy want to go back to their own Micky Mouse money Drachma and Lira.

As long as Brexit shouters think Free Trade is just about buying stuff abroad for bits of fancy paper with the Queens head, without producing enough stuff to trade in exchange, they are in for a bitter disappointment. These bits of paper are really IOU’s and the bearers of these debt bonds will one day come and collect what’s due to them. They will buy more than just marmalade. They’ll own the country.

By staying in the EU a different chart can be plotted for the UK economy. By adopting the Euro the U.K. can build further on its strength in the ‘Services Industry’. The services sector represents already 80% of the UK economy. Think software rather than hardware. Export your cool culture rather than your nationalists backwardness. Brexiteers just can’t get their head wrapped around this idea. They still think they’re the workshop of their old empire. They still think fisheries are important for their fish and chips. Come on guys, it’s 0.1% of your economy you get hot under the colour over and most of what you catch in British water is sold to EU, not eaten by you!

So come back in the EU fold. Play on your strengths rather than nostalgia. Be cool again and re-educate those stupid Leavers.

Références: https://en.wikipedia.org/wiki/List_of_countries_by_net_exports

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