Brexit reflections 10 weeks on

[jaywalker]

yes, these wealth effects could prove substantial (particularly through a big fall in house prices).

????, I do not think you can say credibly that those who warned about Brexit were wrong because there have been no income or wealth effects yet! These effects themselves take a couple of years to materialise AFTER we have been through the negotiations and agreed exit - to be clear, about 4 years after article 50 is invoked.

Of course I am already reading in the stupid sections of the press that when the recession comes (as it will) it will be for other reasons, and Brexit will have nothing to do with it.

Meanwhile, yesterday May really shot herself in the foot don't you think? Even the most ardent Brexiters were surprised if Fraser Nelson's reaction was anything to go by. We were promised by the OUT vote that EU nationals already here could stay after exit: that no longer holds. Both a misjudgement and a disgrace: I suspect her honeymoon period will be rather brief.

[miga]

jaywalker Wrote:

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> We were promised

> by the OUT vote that EU nationals already here

> could stay after exit: that no longer holds.

Could you expand on this?

[jaywalker]

During the campaign, the leaders on the brexit side, Farage included, said that EU nationals already in the UK would be allowed to stay after Brexit (if it took place). This was reiterated by Johnson and Gove on the morning after. But May has now said that this is not guaranteed - frightened of people coming here before we actually leave no doubt. Probably (thus leaving ALL EU nationals here now in a state of uncertainty) there will be a cut-off just before article 50 is invoked in the new year (God help us all, although there is a hope that the Supreme Court may then say the government is acting illegally without an act of Parliament). Problem is that many EU nationals are here, and may have been here some time, and there is no record of them being here. So there is now a massive rush by people to register their presence: hence the headline in the FT today and the rush to introduce a new IT system to try to record them: it seems there may be up to 800,000 EU people here (perfectly legitimately) of whom the government currently has no record.

[????]

Lordship 516 Wrote:

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>

> Quids, GDP is a relative measure and has to be

> valued on the basis of PPP - right now actual GDP

> per person PPP in the UK has fallen by more than

> 10% simply because of the fall in the value of the

> ? - so where is the gain in a growth rate of 2.2%

> ? Our assets have been devalued - is this

> optimistic ?

Our assets? Unless I was buying abroad the 'fact' that my house is now 10% cheaper in terms of the $ has absolutely no effect om me whatever. My pension value is actually now higher (nominally) thanks to the FTSE than it was earlier in the year and again, unless I want to cash it in and move abroad, it's value in $ terms is meaningless to me as it is to all of us. We may well experience some inflationary pressure as ? falls but we haven't yet. I'd be willing to bet with you it's not going to be in the high single figure areas. Many commentators thought the ? was overvalued prior to the referendum and the correction is a good thing, the long boom of the late 90s early 2000s was originally fuelled by the devaluation in the ? after Black Wednesday - Consumer Spending looks healthy; our position on the bond markets ditto; international investment is holding up and the fact that many EU immigrants are rushing to get citizenship here suggest that many of us have a reasonable faith in the future of UK PLC.

Don't disagree with you on the immigration thing Jaywalker - but in all honesty it's hardball realpoiltik to strengthen our negotiations I'm uncomfortable with it but it suggests they (May's govt) are going to get us the best deal possible. To reemphasize I voted remain but now moving on and we certainly aren't in the worst or even 2nd worse case post-brexit scenario predicted. Long term much uncertainty, agreed.

[JohnL]

???? Wrote:

-------------------------------------------------------

> Lordship 516 Wrote:

> --------------------------------------------------

> -----

>

> >

> > Quids, GDP is a relative measure and has to be

> > valued on the basis of PPP - right now actual

> GDP

> > per person PPP in the UK has fallen by more

> than

> > 10% simply because of the fall in the value of

> the

> > ? - so where is the gain in a growth rate of

> 2.2%

> > ? Our assets have been devalued - is this

> > optimistic ?

>

>

> Our assets? Unless I was buying abroad the 'fact'

> that my house is now 10% cheaper in terms of the $

> has absolutely no effect om me whatever. My

> pension value is actually now higher (nominally)

> thanks to the FTSE than it was earlier in the year

> and again, unless I want to cash it in and move

> abroad, it's value in $ terms is meaningless to me

> as it is to all of us. We may well experience some

> inflationary pressure as ? falls but we haven't

> yet. I'd be willing to bet with you it's not going

> to be in the high single figure areas. Many

> commentators thought the ? was overvalued prior to

> the referendum and the correction is a good thing,

> the long boom of the late 90s early 2000s was

> originally fuelled by the devaluation in the ?

> after Black Wednesday - Consumer Spending looks

> healthy; our position on the bond markets ditto;

> international investment is holding up and the

> fact that many EU immigrants are rushing to get

> citizenship here suggest that many of us have a

> reasonable faith in the future of UK PLC.

>

> Don't disagree with you on the immigration thing

> Jaywalker - but in all honesty it's hardball

> realpoiltik to strengthen our negotiations I'm

> uncomfortable with it but it suggests they (May's

> govt) are going to get us the best deal possible.

> To reemphasize I voted remain but now moving on

> and we certainly aren't in the worst or even 2nd

> worse case post-brexit scenario predicted. Long

> term much uncertainty, agreed.

But almost everything we buy comes from abroad

(of course that can change)

[jaywalker]

Yes I agree ???? about the "hardball realpolitik to strengthen our negotiations" but my own unease is not just that it is unethical (bad enough). The problem is that it is a time-inconsistent negotiation (or catch 22 as someone observed in the Times Higher Edu Supplement yesterday). That is, we cannot properly negotiate and thus know what we will end up with until we put in place an irreversible decision to leave i.e. a commitment to end up with what we are given. That it is a pretence or fantasy that we can have a concrete plan in place before invoking article 50 (one in which we know the outcome so that invoking article 50 is 'best for Britain') is pretty obvious.

My guess is this is why people pro-brexit are increasingly saying 'we'll just leave' and make deals elsewhere. Looking forward to how you will value your assets if that happens. Of course, the EU may blink. Perhaps more likely is that the EU itself will fall apart during the negotiations. My own fantasy is that as the months pass and the time-inconsistency gets more exposed May will realise that there is no credibility in invoking article 50 - Brexit will just be quietly forgotten.

[????]

JohnL Wrote:

-------------------------------------------------------

> ???? Wrote:

> --------------------------------------------------

> -----

> > Lordship 516 Wrote:

> >

> --------------------------------------------------

>

> > -----

> >

> > >

> > > Quids, GDP is a relative measure and has to

> be

> > > valued on the basis of PPP - right now

> actual

> > GDP

> > > per person PPP in the UK has fallen by more

> > than

> > > 10% simply because of the fall in the value

> of

> > the

> > > ? - so where is the gain in a growth rate of

> > 2.2%

> > > ? Our assets have been devalued - is this

> > > optimistic ?

> >

> >

> > Our assets? Unless I was buying abroad the

> 'fact'

> > that my house is now 10% cheaper in terms of the

> $

> > has absolutely no effect om me whatever. My

> > pension value is actually now higher

> (nominally)

> > thanks to the FTSE than it was earlier in the

> year

> > and again, unless I want to cash it in and move

> > abroad, it's value in $ terms is meaningless to

> me

> > as it is to all of us. We may well experience

> some

> > inflationary pressure as ? falls but we haven't

> > yet. I'd be willing to bet with you it's not

> going

> > to be in the high single figure areas. Many

> > commentators thought the ? was overvalued prior

> to

> > the referendum and the correction is a good

> thing,

> > the long boom of the late 90s early 2000s was

> > originally fuelled by the devaluation in the ?

> > after Black Wednesday - Consumer Spending looks

> > healthy; our position on the bond markets

> ditto;

> > international investment is holding up and the

> > fact that many EU immigrants are rushing to get

> > citizenship here suggest that many of us have a

> > reasonable faith in the future of UK PLC.

> >

> > Don't disagree with you on the immigration

> thing

> > Jaywalker - but in all honesty it's hardball

> > realpoiltik to strengthen our negotiations I'm

> > uncomfortable with it but it suggests they

> (May's

> > govt) are going to get us the best deal

> possible.

> > To reemphasize I voted remain but now moving on

> > and we certainly aren't in the worst or even

> 2nd

> > worse case post-brexit scenario predicted. Long

> > term much uncertainty, agreed.

>

>

> But almost everything we buy comes from abroad

> (of course that can change)

But that would mean a 10% devaluation will result in 10% inflation - happy to bet that won't happen.

You also need to seperate Assets from that - most of 'our' assets don't come from abroad - I think Lordship's point is that a 10% devaluation means we are all poorer in $ terms, and in $ terms our economy has fallen in size - that's kind of academic is my counter argument, in the real world our economy is growing I wouldn't swap it for Frances growth (almost zero), although by a $ comparison France's economy is now 10% bigger than it was against ours in GDP terms since Brexit devaluation. Plus this (the devaluation point) works both ways eg anyone holding foreign assets or earning foreighn currency (so almost any UK pension funds/Investment fund and, of course, most of the FTSE 100, have just experienced a 10% increase in wealth and/or income on their foreign holdings/income). The asset thing is a bit meaningless. Economic growth with low inflation is what we want - and currently have.

[Alan Medic]

Could you guys (there, I said it) stop replying to long messages every time you want to write something, however little it is? Can you not just refer to @JohnL or @????. It really irrationally irritates me.

[????]

Alan Medic Wrote:

-------------------------------------------------------

> Could you guys (there, I said it) stop replying to

> long messages every time you want to write

> something, however little it is? Can you not just

> refer to @JohnL or @????. It really irrationally

> irritates me.

No :)

[Help-Ma-Boab]

60

[Alan Medic]

???? Wrote:

-------------------------------------------------------

> Alan Medic Wrote:

> --------------------------------------------------

> -----

> > Could you guys (there, I said it) stop replying

> to

> > long messages every time you want to write

> > something, however little it is? Can you not

> just

> > refer to @JohnL or @????. It really

> irrationally

> > irritates me.

>

>

> No :)

Why not 😒?

[Lordship 516]

Quids

"Economic growth with low inflation is what we want - and currently have."

There is no actual indication of either condition - all the data available is pre -Brexit & the short term excess demand is a classic response to revaluation that soon turns the other way without some policy or fiscal action to counteract the effects.

Inflation in the order of 4% to 7% is coming down the line with all the negatives that come with it on the side.

The employment scenario is uncertain as there is no data post Brexit to measure it by - let's see the next years performance. Devaluation of the pound did little to help the UK economy in 2008-2013. This time around will most likely be a repeat of 2008/2013 ? the devaluation of the Pound doing little to help the economy again.

GDP in $ terms affects a lot of issues such as the capacity to borrow - UK National Debt to GDP ratio has now increased without any extra facility being made available.

Also Quids, you are confusing your personal micro scenario with the Macro values - a common problem. The effects are quite disparate. In the real world [real GDP] the economy has most likely contracted . The presumption that devaluation is expansionary is not supported by empirical evidence. Relying on journalism or notional analysis to support the belief that devaluation has an expansionary effect is dangerous & self deluding. The immediate impact of devaluation is to create excess demand for home goods. However this is short lived [the effect has already been seen in the UK high street]. The eventual price increases caused by devaluation will create enough losers in real income terms to reduce effective home goods demand in the medium term; thus, falling output and employment after devaluation are to be expected after the initial period. Also, weak growth in major trading partners ? Europe and Asia - could lead to lower exports.

By ignoring income effects, especially those transferring real purchasing power toward economic actors with a strong tendency to save & by redirecting income to high savers, devaluation can create an excess of saving over planned investment [ex-ante] based on forecasts, and reductions in real output and imports[ex-post] based on actual returns .

Devaluation gives with one hand, by raising export prices, while taking away with the other, by raising import prices. If trade is balanced, and the terms of trade are not changed, these price changes are in equilibrium. But if imports exceed exports, the net result is a reduction in real income within the country.

Output of home goods [and thus total output including employment, and imports], will rise or fall depending on whether trade is initially in surplus or deficit. The UK has had a ?unremitting current account deficit in the past 15 years. This is caused mostly by the deficit in trade in goods, and more recently a deterioration in investment incomes. Since 2012 the UK had developed one of the largest current account deficits [& getting worse since] with the deficit for Q4 2015 was 7.2% of GDP, the greatest on record & Q1 2016 deficit of ?32.6 billion [6.9% of GDP], so lets see the Q2 figures at end Sept & Q3 at end of Dec] - these will indicate whether there is an expansion or contraction in the UK economy & not any notional analysis or journalistic opinions. It is my view that there is a contraction under way - the quants all point in this direction.

Only the BoE or the Government can effect a change of this likelihood by policy or fiscal actions. The BoE has deployed almost all of their conventional tools already with very little left in the toolbox, so the most likely action is in the hands of the Government which has already indicated that they are minded to take action by firstly abandoning Osborne?s ridiculous policy of reducing the deficit whilst simultaneously granting himself & his wealthy money worshipping mates tax concessions [totally failed - another micro economist trying to run the economy like a child?s savings account]. QE is a waste of policy as it only results in less than 2.5% ending up in the real economy - it boosts the banks & stock market in number terms only but results in a less valuable pound. QE is hugely inefficient & ineffective - it relies on boosting the wealth of the already-wealthy in the hope that they increase their spending. In other words, it relies on a ?trickle down? theory of wealth. It doesn?t work - the rich are rich because they hang on to most of their money tightly, what they have they hold & wait for revaluation in the future [read Piketty et al]

The 2016 Autumn Statement & 2017 Budget will be the defining economic moment of the post-Brexit economy & the most important of Theresa May?s administration. Whatever they do they must stimulate Aggregate Demand & investment, borrow new money directly from the BoE and use it to build houses, renew transport systems, repair infrastructure, invest in energy-saving technologies etc. over all else - otherwise we will have a very significant [recession] depression. Ignore EU regulatory restrictions & those that advocate shrinking the role of the state - we need a life and need it now.

[Jenny1]

Has anyone seen any recent polling stats on how 'traditional Tory' voters view what's happened over the past few months? I'd be interested in that. In particular I'd like to see how the referendum result has exacerbated the party's pre-existing fault line dividing those whose first concern is global economic stability and those who prioritise immigration control above everything else.

[Henry_17]

Jenny,

You could have a search on UK Polling report which tracks all the polls. The Tory lead has recently expanded to the high end of the historical range. In terms of those specific points you are interested in there may have been a recent post addressing this.

[Jenny1]

Thanks Henry. I'll have a look.

[JohnL]

Alan Medic Wrote:

> ???? Wrote:

> > Alan Medic Wrote:

Well Okay ;)

[Alan Medic]

JohnL Wrote:

-------------------------------------------------------

> Alan Medic Wrote:

> > ???? Wrote:

> > > Alan Medic Wrote:

>

> Well Okay ;)

Excellent point.

[Earl Aelfheah]

Brexit means brexit means brexit. What else do you need to know? ;-)

[red devil]

Sounds like a name for one of those breakfast bars.

Brexit - taking our cereal bars back...

[Blah Blah]

If X = X, what is the value of X? This is the nonsense we are now being presented with. Eventually May has to tell us exactly what X is. She can only stall for so long.

[KidKruger]

She wouldn't stall for nothing, so expect the worst.

When I say worst I mean worst, as in worst, or 'worst means worst'.

[Lordship 516]

red devil Wrote:

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> Sounds like a name for one of those breakfast

> bars.

> Brexit - taking our cereal bars back...

Quite apt really - 'cos currently Brexit is causing the UK quite an indigestion and will be regurgitated in a form that rabid Brexiteers will have a serious colic over. May will do Brexit but it will be her way - but she has little or no control over anything except immigration; the other 27 will decide on what the market conditions will be & each of them have a vote so Brexit really will be a car crash that is heading for the breakers yard to be picked over & hoping to salvage some spare parts to insert in the second hand UK economy that will take decades to recover.

[Townleygreen]

It seems to me that at some point in the next year Theresa May is going to have to appear on TV (or in Parliament?) and explain in words of few syllables why Brexit is simply not going to happen because it is a totally bad idea, giving several good clear reasons why this is the case. The Japanese case for their companies investments here is just the latest example.

She will need to wait until the evidence is pretty overwhelming.

Farridge will no doubt have an apoplectic fit but that will be the truth.

[Earl Aelfheah]

How is Johnsson still in the cabinet?

[JoeLeg]

Townleygreen Wrote:

-------------------------------------------------------

> It seems to me that at some point in the next year

> Theresa May is going to have to appear on TV (or

> in Parliament?) and explain in words of few

> syllables why Brexit is simply not going to happen

> because it is a totally bad idea, giving several

> good clear reasons why this is the case. The

> Japanese case for their companies investments here

> is just the latest example.

> She will need to wait until the evidence is pretty

> overwhelming.

> Farridge will no doubt have an apoplectic fit but

> that will be the truth.

I wish I could agree with you, and would be happy to be wrong. But I think May will press ahead with Article 50 at some point next year.

We're going to get a fudge that pleases no one; she's already knocked back the points-based immigration system, and I think whatever we end up with will be decried by most Leave voters as "not what I voted for", one way or another.