Brexit; an opportunity for Britain!

If they have the confidence and courage.

Written by Ron Manners 

 

As an Australian I could be excused for thinking of Brexit (a withdrawal of the U.K. from the EU) as being of little interest to Australia.

However, after recently spending three weeks in Europe, I hastily conclude that it presents the U.K. with a once in a lifetime opportunity to again assume an important international leadership role.

The U.K. has many things going for it, as they fortunately did not go ‘all the way’ with adopting the Euro currency — now ‘damaged’ , as is the U.S. dollar, by desperate and irresponsible ‘stimulus actions’ by respective (but perhaps not always respectable) governments.

The U.S. has managed this due to the ‘reserve currency’ status of the U.S. dollar, a luxury not available to the Euro or even the Chinese Yuan.

With international confidence declining in Wall Street and the Federal Reserve because of perceived collusion between these parties, the reputational image of London appears far higher. The U.K., if they position themselves correctly, could capture a larger share of international business, particularly on the back of mounting European resentment at the United States’ ‘bully boy’ imposition of their FATCA (Foreign Account Tax Compliance Act) bureaucratic paperwork and their insistence on access to European client banking records.

The U.S., having damaged its own economy through decades of reckless easy money, is exploiting extraterritorial bureaucracy as a means of attracting the world’s ‘portable money’ to the U.S., driven no doubt by their persistent deficits and need for perpetual external funding.  Peter Cotorceanu of Anaford, a Zurich law firm, predicts that hundreds of billions of dollars will move to the U.S. with most of the money moving this year.  He notes that individuals in Switzerland, Hong Kong and Singapore have until the end of the year to pull their money out. (Page 5; Financial Times; May 19, 2016).

There are some sheltered-workshop industries in the U.K. who will be alarmed at the thought of a strengthening Pound Sterling but the rest of the world could welcome a ‘sound currency’ in which they can have confidence as a ‘store of value’ which, after all, is one of the original reasons for the creation of ‘money’.

So the outcome of the ‘Brexit vote’ could indicate to what degree the U.K. has self-confidence to regain its sovereignty it has lost to Brussels over recent years.

Does it again desire to have control over immigration?

Has it confidence in its own ability to perform in a competitive world, without the ‘security blanket’ of the E.U.?

So, “Come on U.K., let’s put the Great in front of Britain again.”

 

Ron Manners,

June, 2016

http://www.mannwest.com

 

Note 1:     View Brexit movie – here

Note 2:     View How the EU destroys industries – here   

Note 3:     I’m guilty of confusing Britain with U.K. which is clarified below. 

Britain refers to England, Wales and Scotland only, whereas the UK includes Northern Ireland, and strictly speaking it is the UK that is party to the EU treaties.

“The United Kingdom is a country that includes England, Scotland, Wales, and Northern Ireland. Its official name is “United Kingdom of Great Britain and Northern Ireland.” England, Wales, Scotland, and Northern Ireland are often mistaken as names of countries, but they are only a part of the United Kingdom.” 

Note 4:     My criticism of QE may be unfair and I include this footnote from a friend whose opinion I respect:-

“In several major economies QE has been used to stimulate economic recovery. However, the crucial issue of the transmission mechanism of monetary policy has not received enough attention either from academics or from policy practitioners.  In particular, the puzzle is why, the words of Charles Goodhart, ‘in view of the massive expansion of central bank liabilities, there has been no equivalent increase in the broader money stock, and bank lending continues to stagnate’.

The answer lies, in my view, in the way in which the US Fed and the Bank of England, on the one hand, and the Bank of Japan and the ECB, on the other, have conducted very different styles of Quantitative Easing (QE) policies.

The QE operations conducted by the Fed and the Bank of England have largely been successful because they were targeted at the purchase of securities from non-banks; they therefore increased the stock of money or purchasing power held by firms and households directly; and were consistent with a reduction in private sector leverage. US broad money (M2) and bank lending are now growing at 7% and 8% year-on-year, respectively. The UK lags the US to some extent (in part because UK regulators have compelled UK banks to reduce leverage by much more than US banks have been required  to do) but UK broad money growth (M4x) is 4.5% year-on-year and lending growth has recently turned positive.

By contrast, the QE operations conducted by the Bank of Japan and the ECB have had much less success because they were targeted largely at the purchase of securities from banks, and as a result, they did not increase the stock of money or purchasing power held by firms and households, and were not consistent with any reduction in private sector leverage. Both these areas are still struggling with sub-par growth and deflation.

During a period of balance sheet repair the way in which QE is executed and the interaction with private sector deleveraging are the key issues determining the link between central banks’ actions and broad money growth and bank lending, not the level of interest rates, or the size of the monetary base.  “ ….. John Greenwood

23 thoughts on “

    1. A long time broking friend and I both think that Britain, despite its huge balance of payments deficit, will be better off economically out of the EU, and that sterling will eventually gain. However he thinks that if the leave vote wins it will fall in the shorter term. When asked whether there had been any talk of Britain’s greater affinity for classical liberalism, he said no. Most people have never heard of it and certainly don’t know that Britain’s great wealth was built on it.
      Peter

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  1. Ron – I am impressed! I did not know that your reach stretched that far! The key question is, should Britain leave (as we all hope it will), what language will they then speak in Brussels? It surely can’t continue to be English! Best wishes, Clive

    Like

    1. An immensely interesting post by my dear friend Ron Manners. I’ve never read something by him or spoken with him that I’ve not learned something – and what I admire most about his work is the way he’ll admit his own errors and graciously include opposing arguments (just scroll to the end of his piece, to see what I mean).

      This EU question is one I have to consider especially thoughtfully. I’ve a friend representing a nation there, and while it has the problems that arise, it’s done good, and, I think, has the potential to do far more good. So I’m going to re-read Ron’s piece tomorrow, when my mind is fresh, and urge all my friends interested in the EU to do so, too.

      Like

  2. Ron:

    Great blog, and echoes what we have been saying for a long time. I’m attaching a piece we put out in April. Alas, however, I fear that the outcome will be the short-termers voting for immediate gratification and security. And, as I noted in 2012 in UnCivilization, particularly referring to urban societies, “most individuals [as a response to increasing insecurity] choose and prefer the certainty of oppression over the uncertainty and opportunity of freedom”.

    Pamela and I will be back in Perth in August, partly to do an AICC talk (see attached) on August 10, and partly to escape the noxious gases of Washington’s electoral swamp in Summer. We just returned from a couple of visits to the UK, as well, and found almost universal support for Brexit among people whose experience one could respect.

    All the best,
    Greg

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  3. Thanks Ron. I’m with you on this one!

    Unaccountable, supranational, interventionist, protectionist, centrally planned bureaucracy versus democratic local sovereignty and respect for culture traditions – not a hard choice in my book!

    All the best

    Nick

    Liked by 1 person

  4. A long time broking friend and I both think that Britain, despite its huge balance of payments deficit, will be better off economically out of the EU, and that sterling will eventually gain. However he thinks that if the leave vote wins it will fall in the shorter term. When asked whether there had been any talk of Britain’s greater affinity for classical liberalism, he said no. Most people have never heard of it and certainly don’t know that Britain’s great wealth was built on it.
    Peter

    Like

    1. Good stuff, Ron!

      We’ll be over in Perth in mid-September/early-October (we leave end-August on a cruise from Brisbane to Perth and spend a few weeks with our son and his family).

      Maybe we may have a chance to catch up? I’ll try and contact you when we are there.

      All he best to you and Jenny.

      Like

  5. If Great Britain really votes for a “Brexit” she is most welcome. And good luck in turning into SMALL Britain. We Europeans will welcome Scotland and Wales wholeheartedly.

    Like

  6. Dear Ron,

    Rest assured that a number of us have the confidence and courage! Here’s hoping my fellow countrymen follow your advice on Thursday..

    Best wishes,

    Jonathan

    Like

  7. Scott Armstrong and I have been rushing to put up a site that we’ve been working on for some time now, IronLawofRegulation.com. Our objective, in brief, is “to summarize experimental evidence on the effect of regulations on general welfare” in order to help prevent and eliminate harmful regulations.

    The reason for our recent rush is the UK’s Brexit vote. We think the evidence our site provides will be of interest to British voters who are concerned over whether or not the UK will better off out of the EU, and followers around the world of the potentially game-changing event.

    The following, and attached, is our media release. Are you able to use it? If not, would you be willing to forward it to colleagues who might be able to give our news some coverage?

    MEDIA RELEASE

    New website, IronLawofRegulation.com, predicts Brexit good for Britons

    20 June 2016

    The Iron law of Regulation website provides a body of evidence on the effects of regulations. The Iron Law is most commonly stated as, “There is no form of market failure, however egregious, [that] is not eventually made worse by the political interventions intended to fix it”.
    Kesten C. Green (University of South Australia Business School) and J. Scott Armstrong (Wharton School) have established the site to help citizens, commentators, journalists, and political leaders assess the effects of changes in regulations in the hope that will then take steps to avoid and eliminate harmful regulations.

    Because of the impending Brexit vote in the UK, on 23 June, the directors of the site (Green and Armstrong) decided to press ahead and post an early version of the site. The Brexit decision is, in a large part, about whether the British people would be better off with fewer regulations and more control over their own regulation.

    Judging from the polls, British opinions are divided on whether Brexit would be beneficial. Forecasting research shows, however, that the predictive validity of unaided judgments, even experts’ judgments, is low.

    How, then, should Britons decide? The answer is that they should consider experimental evidence on the effects of regulations before they vote: the kind of evidence that the Iron Law of Regulation site provides. The site is located at IronLawofRegulation.com.

    Kesten G

    Like

  8. The outcome was correctly predicted by Austrian economist Dr Barbara Kolm in 2013….see her 5 min video here….

    Like

  9. Daniel Hanann –- a member of the European parliament who still favoured brexit which would result in his job being lost. Author, journalist, politician. Smart guy who opens the eyes of those who don’t know actually why they voted.

    Becky Vidler

    Like

  10. Finally, I’ve included a link to a great “Yes Minister” piece on “Brexit” that may well have been 30 years ahead of its time. I hope you enjoy.

    from Charlie Aitken

    Like

  11. Pat Condell from the UK (who we all know well) tells it as it is on BREXIT.

    He is 110% correct.

    It is well worth watching.

    All The Best,

    TerryCardwell

    The meaning of voting results. Very true listen to his speech

    Like

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