Malcolm Blair-Robinson's Blog, page 133

Brexit Thoughts 3: Tory Civil War

Cabinet Ministers opposing the policy of the government of which they are members are complaining that scaremongering is rife and that there will be a price to pay when the referendum is over in the form of disunity both in the government and the Tory party. The truth is that the Tory party may will break up in the aftermath of the vote, which is only happening because for years it has been split on the fundamental issue of Europe. With the current political and economic problems facing the world and therefore the UK, a vote to leave Europe or stay is a wholly irrational political project. It is not in the national interest; it is to save the Tory party from its schism and driven by the threat to it from UKIP.

When Britain entered into the EU, or the common market as it was then known, China was a closed Communist country without an economy that had any impact on the world at all. The emerging markets did not exist. Germany was split in two and the Cold War was in full swing. Half the members of the current EU were Communist countries behind the Iron Curtain. There was no such thing as the internet, a PC, a tablet or a smart phone. The world was divided into segments and spheres of influence. Globalisation was unheard of.

This referendum is of greater historic significance than any ordinary election and will impact Britain and its future and the future of Europe more than any can accurately predict. It cannot be fought like a village cricket match on a summer afternoon. It has to be fought with purpose, passion, principle, energy and anger, as well as hope and inspiration. The nature of these things is that friends will fall out and enemies will embrace. It is entirely right to point out in the strongest possible terms that leaving would be a complicated and troublesome process, the impacts of which cannot be accurately predicted either for employment, economic growth, prosperity, travel, the free movement of capital or indeed anything. The world is a very different place in all respects to the one we left to join and we cannot turn the clock back.

Of course Great Britain is strong enough to prosper but let us not forget that although WWII lasted six years, rationing went on for thirteen and of all the post war economies in Europe ours was on most measures the least successful. We have the lowest productivity among the industrial nations even now. So what is required from the Leave people is a plan, carefully costed and explained, if not in detail, certainly in general terms of how it is we are going to unravel the European web in which we now live, and create a new international habitat in which we will prosper better. So far there is nothing of substance whatsoever except a lot of vague generalities which fail to define the opportunities and smack of wishful thinking.

Leave must stop grumbling and start producing some concrete plans to answer very real anxieties about a leap into the dark. If they cannot, voting with them will be just that.

How To Print Money To Get Growth

QE in various forms is now very much part of the economic conversation, especially in connection with recent market turmoil. Dynamic Quantitative Easing (also called Peoples Quantitative Easing) remains under government, not bank, control and targets specific investment projects without borrowing, interest or repayments. It can reboot the economy, boost manufacturing and exports and enable sustained growth of real national wealth shared by all, rather than just asset inflation which is the downside of ordinary QE. If you want to find out more you can enjoy a lucid explanation of the original idea from the link below.

Download .99p  Paperback £2.99   

Trump v Clinton?

Calling US elections this far out is a mug’s game and this blog will not go that far. Nevertheless after sweeping victories in Super Tuesday contests both Donald Trump and Hilary Clinton are in commanding positions going forward. Mrs Clinton the more so because her field has narrowed to Bernie Sanders as the only contender whereas Trump is still winning in the high 30s and low 40s because there are still too many anti-Trump runners on the Republican side. If this is reduced to either Cruz or Rubio then it would be easier to judge Trump’s real strength in depth, but the smart money is on Trump to win. It is unlikely that Cruz or Rubio could beat Clinton in November, but Trump just might.

So while it is not yet necessary to burn midnight oil speculating on a Trump White House, some preparatory thoughts may be timely. The first thing to say is that those who know him and have done business with him see a very different trump to the barnstorming, headline grabbing sensationalist apparently sucking the life out of the Republican establishment. Walls, bombings, tax cuts on a heroic scale, increases in defense spending, carry a gun if you want to, are all good for getting out angry votes but they may fall short of an agenda for unifying government. For example you cannot cut taxes big time, get rid of the $18 trillion debt mountain and increase spending on armaments all at the same time, although Republicans have always believed you can. Which is why records show that Republican administrations under Reagan and the two Bushes ran much bigger deficits those of Clinton and Obama.

The word from the inside track is that if elected Trump will surprise. This blog believes he will for two reasons. The first is he is not a lawyer, he is a fixer and deal maker. Lawyers like Obama and the Clintons tend to see things through analysis, interpretation and possibilities. They also

Cabinet Split: A Row About Papers

We have a Government, a Tory one. There has been a re-negotiation of our membership deal with the EU and the Prime Minister has announced a previously promised referendum in which  government official policy is to back the deal and campaign for Britain to remain in the EU. Five Cabinet ministers have decided to oppose their government and campaign to leave. Through a peculiar indulgence they have been allowed to remain in the Cabinet, whilst opposing its policy. They are very lucky. They have been told that they will be allowed to continue to receive all government papers relating to the running of their departments, including business involving the EU. Lucky them.

Now they want to see all the papers relating to the government’s referendum campaign which they oppose and they have been told they cannot. So they are having tantrums. Enough of this. There is a simple solution. Sack them all, then they will not be allowed to see anything. They are nothing like as clever or indispensable as they think they are.

Syria: Truce Holds (more or less)

The West and especially the UK never looses an opportunity to blame, pour scorn on or needle the Russians. Moreover there is never anything nuanced or thoughtful coming out of the political elements of either the foreign office or the defence ministry, who pedal the notion that they are not only right but righteous. Yet here we are after four years of the most appalling civil war with millions uprooted, hundreds of thousands killed and the fabric and infrastructure of the country destroyed beyond use, at last edging towards some kind of peace. There is a long way to go and much can go wrong, but now we know there can be an end and it might be in sight. What has changed? After four years of western involvement which achieved nothing? Russia intervened. Five months ago almost exactly.

Osborne Admits: Things Not Going Well

The nation will be surprised to learn, many will be aghast, that Osborne is planning more cuts. This Blog did warn after the Chancellor’s Autumn Statement that it was based upon forecasts likely to be wrong. As indeed they are. The admission that the ‘economy is smaller than we thought’ is a show stopper, because if that is the case, everything else will be wrong too.

This is the problem. If your economic strategy is to balance the budget, as it should be, then it cannot be done by cuts alone. Of course cuts are needed in many areas after time has allowed good housekeeping to become slapdash, but those cuts are to structure and organisation, not the front line. The front line has to be held for the very reason that it has to spearhead the advance of the recovery. Too much of the front line has been thinned for it to have enough punch, so here we are again with tax revenues that disappoint and do not add up to sufficient to pay the bills. There is no real plan to push growth up. There are catch phrases like ‘march of the makers’ and ‘Northern Powerhouse’ but they do not appear to describe real events. This Chancellor has been at this for six years now. If the plan worked it would now be working.

Instead there is still more austerity coming next month (wrapped in the forecast of jam tomorrow).  Cuts shrink the economy and whatever is growing has to compensate for that, making net growth too weak. Add in adverse economic trends globally and the uncertainty of Brexit and while we are not quite in a perfect storm, many will get wet.

Another Grandee Declares Out.

The news that Michael (Lord) Howard, the  fourth Tory leader post Thatcher and the one who groomed Cameron and Osborne to lead the Tory party after him, has decided to join the out campaign comes as no surprise. He has always been eurosceptic and was one of the cabinet ‘bastards’ in the notorious live mike mishap which befell John Major during his turbulent premiership which ended in the long Tory night.

There will be more and they will make news.  It is no surprise for members of the governing party to support their prime minister and the fact of doing so is not news. But when one of them crosses over it is a media event. However the campaign lasts four months, the markets are growing jittery and sooner or later Leave has to come up with more than a roll call of supporters. At some point it will have to explain how it is going to manage the consequences of its recommendations, what its economic policy is, how it is going to negotiate trade deals and with whom and a multitude of other details which seem unimportant now, but which will tumble out of the crisis sack if they win.

Today’s proposal that if they win they will simply get a better deal and have another referendum is little short of barmy.

Dame Janet’s Whitewash

One is becoming increasingly tired of these endless inquiries led by elderly but distinguished judges, which find that bad stuff happened but the bosses, those with responsibility, senior management, did not know about it and therefore cannot be blamed. This is rubbish. The bosses, by definition, are responsible whether they knew about the problem, heard about the rumours or whatever. Because that is what senior management is. They should both be blamed and take the blame. To dump it all on line floor management may convince the increasingly discredited establishment and their cosy blame averse culture, but it convinces nobody else.

The Falling Pound: Good or Bad?

It is very good news for manufacturing and exports and business generally needs to be fleet of foot to take advantage the the opportunities which this presents. It is an open window which may close, so no delay. It provides scope for home production as imports will become more expensive. Since we import almost everything we use, that may stoke inflation. That in turn may provoke a rise in interest rates. Borrowing costs for the government may rise because of the general uncertainty as to where Britain is headed, in or out. If it is out that will trigger a further fall in the value of sterling. Suddenly the economy will be hit by a major rebalancing shock at the start of the summer holidays.

It is obviously bad news for holders of assets valued in pounds and very bad news if those assets have been used to secure loans in another currency such as US dollars.

Brexit Thoughts 2. Cameron’s EU Deal: Is It Legal?

The short answer is yes, so Cameron is right and Gove wrong? Well no. The true answer is they are both right if you express it all correctly which neither of them has. They have both left out the tricky bits which dent their cause.

The deal is a legally binding international agreement with the force of international law. It can only be challenged if an injured party can show to the European Court of Justice that some aspect of it breaches the terms of an existing treaty. This is very unlikely but, because some of the issues are contentious and agreed to with reluctance to keep Britain in the EU, it is possible. The European Court sits above our Supreme Court and the UK parliament ceded sovereignty to it by the Treaty of Accession in 1972.

So in the normal course of business it is a done deal but as a matter of law whether it conforms with previous treaties in all respects is not for Britain, its politicians, or its courts to say. The EU Court has the last word. That is the whole idea of it.