The economic consequences of the Brexit Vote

I think that there is only one opening today so let me hand you over to Kate Bush.

Wow! Wow! Wow! Wow! Wow! Wow! Unbelievable!
Wow! Wow! Wow! Wow! Wow! Wow! Unbelievable!

This is the song being sung by not only the UK establishment but quite a few establishments around the world. They were able to ignore the fact that it looked incredibly close from a few weeks in and there are a few who look rather foolish today. For example much of the polling industry especially if it is true that private polls for hedge funds are what led to the UK Pound £ to rise about US $1.50. It is hard to believe that the UK Pound £ was there only 7 or so hours ago. The impact has been seen on financial markets “all around the world” as ELO put it so let me remind you of the words on the cover of The Hitch Hikers Guide To The Galaxy.

Don’t Panic

UK Markets

These have been in turmoil and the currency markets have led this. For example the UK Pound £ has seen a range from just above US $1.50 to US $1.32 so far which is something of a record in terms of an intra-day move. However as I explained on Bloomberg Radio earlier and on social media we should not judge years ahead on knee-jerk market reactions. They were wrong at midnight so could quite easily be wrong again now. I remember vividly us leaving the ERM in 1992 and nearly all of the snap judgements were wrong or as the saying goes news one day, chip paper the next. The rebound in the UK Pound £ to above US $1.37 emphasises that point.

We have moved much less against the Euro and are around some 5% down at 1.24 as we see a clear consequence of this which is that we have pulled it down with us. Mario Draghi will like that although there are other consequences he will not like at all. I think that as time passes people will muse on what this means for the European project and can see weakness ahead for it on that basis. Losing the UK matters a lot – confirmed by all the official denials of it – and others may also chose to head for the exit. Oh and for those worried about the possible price for football transfers these are usually in Euros so those using the US Dollar change are wrong.

The FTSE 100 has also headed south after a brief rally to above 6200, anyway it looks like it will open more than 500 points down. If we move to the bond market then I expect quite a surge in it and a fall in yields. A clue to this has come from the 10 year yield in Germany which has fallen to a record low of -0.18% today and from the United States where the 10 year Treasury Bond yield is now 1.5% as opposed to 1.75%. So we can expect the UK 10 year Gilt yield to head towards 1% and set new record lows.

The Bank of England

It has been on the news wires maybe prompted a little by me.

Wake up Mark Carney and the Bank of England! Hint this might be what FX reserves are for

Firstly in an odd development considering how things have gone for the Bank of Japan it copied its language.

The Bank of England is monitoring developments closely. 1/3

Then we got this.

It has undertaken extensive contingency planning, working closely with , other domestic authorities & overseas central banks 2/3

After a short delay -which matters at times like this- we got this.

will take all necessary steps to meet its responsibilities for monetary and financial stability.3/3

We have also receive  a statement from Governor Mark Carney  which considering his proclamations of what a Leave result would mean must have been a challenge. We did learn a few things. Firstly some reassurance.

There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold.

Actually the reassurance theme continued in numerical fashion.

Moreover, as a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities. The Bank of England is also able to provide substantial liquidity in foreign currency, if required.
So a welcome calming salve although we did get yet another demonstration of how central bankers speak in their own language as he used the word “resilience” so beloved of Mario Draghi to describe the banks.
The Bank of England has stress tested them against scenarios more severe than the country currently faces. As a result of these actions, UK banks have raised over £130bn of capital, and now have more than £600bn of high quality liquid assets.



What about interest-rates?

We had a lot of proclamations about higher mortgage-rates should the UK vote to leave the European Union which were hinted at only a couple of hours ago by the new ITV economics correspondent Noreena Hertz.

Big decision looms for Bank of England. Raise interest rates to shore up pound? Or keep as is to avert household/mortgage debt crisis?

I pointed out she had missed the currently most likely option which is in fact a Bank Rate cut. This would presumably be presented by the Bank of England as a response to the recession it has forecast should we find ourselves leaving the EU. I have already pointed out earlier that bond or Gilt yields have headed that way and so in fact have interest-rate futures.

Short sterling opens 40-50ticks up.

For those who are unaware of such a market it is where I used to trade options but more importantly is signalling a Bank Rate cut or to be more specific the interest-rate path is circa 0.5% lower than it was only yesterday.

An international perspective

This started early this morning when I pointed this out on Twitter.

Governor Kuroda of the Bank of Japan will be staring at a UK map asking where Sunderland is?!

For those wondering why I pointed this out? It was because this was the first sign of a strong move towards Leave and of course there is a particular irony with the Nissan plant being there. But the Yen was already surging and the Nikkei 225 equity index was falling in response.

Let me give you a theme for today and the coming days that we got a clear signal here of how tightly wound together financial markets are these days. After all how much would this really affect Japan on the other side of the world? We also return to the thought of what sort of economic recovery have we had if events like this are such a shock?

Anyway Japan Inc had a bad night/day with the Yen strengthening through 99 at one point and the Nikkei 225  closing some 8% lower at 14,952. Mind you as I warned earlier market moves will be fragile and volatile as the Yen is now in the 102s.

Concerted Intervention

This was moved downwards in probability by this. From Bloomberg.

“Following the United Kingdom’s vote to leave the European Union, the Swiss franc came under upward pressure,” the central bank said via e-mail. “The Swiss National Bank has intervened in the foreign exchange market to stabilize the situation and will remain active in that market.”

My point is that the Swiss National Bank moved in isolation and not in concert with other central banks. So for now the likelihood of concerted central bank action has retreated. The day is of course young and the ECB plans to issue a statement later but for now that is the position.


So what do we know? The UK political establishment is in disarray as this is a bad result for most of it. It is hard to figure out who is worse off and I do realise that David Caneron has announced he will go by October when I write that. As to the economics we seem set to have a lower value for the UK Pound £ going forwards. This is simultaneously both an upwards push on prices and an economic stimulus. However that works out depends on whether we follow what happened in 1992 (good) or 2007/08 (not so good).

There will be obvious uncertainty from a future which is unclear and that for the time being is likely to be a drag for some economic activity. As to the Bank of England well under old central banking theory it would be considering an interest-rate rise to shore up the UK Pound £. But as I have suggested earlier the modern version of central banking seems much more likely to head towards a Bank Rate cut. That would only change if the UK Pound £ really plunged.

The husband of the murdered MP Jo Cox has made quite a powerful statement this morning in my view.

Today Jo wld have remained optimistic & focussed on what she cld do to bring our country back together around our best values

I will add updates if further major events occur but for now let me leave you with Frankie Valli and the Four Seasons.

Oh, what a night (Do do do do do, do do do do)
Oh, what a night (Do do do do do, do do do do)
Oh, what a night (Do do do do do, do do do do)
Oh, what a night (Do do do do do, do do do do)


Update 9:15 pm

Some things remain the same as the UK Pound is closing the weekend near to where I looked at it earlier versus the US Dollar and the 10 year Gilt yield closed the week at 1.08% The FTSE had quite rally from the lows reaching 6200 before closing at 6138. We will see more on Monday after the weekend but there were some familiar issues at play.


We have been ahead of that particular curve on here.



109 thoughts on “The economic consequences of the Brexit Vote

  1. Excellent as ever Shaun. I think it’s time for a touch of the Corporal Jones’ “Don’t panic” since it’s a bit too late for Sgt. Wilson’s “Do you think that was awfully wise Sir?”. What Captain Mainwaring would say I haven’t yet figured…

  2. Hello Shaun,

    Well after the party at the weekend we ‘ll all wake up on Monday as if nothing of great import has happened …..


  3. I would not be surprised, especially given Lawson’s involvement in Leave (who after all spent a lot of time fighting amongst themselves), if we don’t follow a post-87 trajectory. The response to the late 87 stock market crash was to cut rates and print money. It prompted a rise in house prices over the next two years until inflation took hold (there being about an 18-month delay with most major economic moves) and rates rose, prompting a housing crash in 1992. Then we had the recession they had tried to avoid in 1988. This time it will be worse – since 2000, our economy has relied on immigration and funny money for growth. The 7% fall in the GBP against the USD is a real hit for many “property investors”, who were already moving out and I fear for immigrants, both EU and non-EU, as many Kippers seem to be intent on a path of expulsion.

    It is going to get rough and there will be no D:Ream this time.

  4. Hi Shaun, before I really go to town on this result I have a question with apologies in advance as it is political but has a direct impact on the UK economy and financial markets.

    There has been much talk today of the Establishment NOT invoking article 50 of The Lisbon Treaty.

    The only way I can see that happening is if the UK Government refuses to formally notify the EU of the result and of course refuses to negotiate a withdrawal. If this happens (or rather doesn’t happen) then the UK will REMAIN an EU member until such time as it chooses to formally notify the EU of the referendum decision to leave and as such will REMAIN subject to EU directives etc so why bother having the referendum when it seems that the LEAVE campaign now intend the UK to join the zombie banks in morphing into a zombie EU member? What am I missing?

    In answer to your question yesterday no I’m not a fan of New Order, they are OK but a faint shadow of their former incarnation as Joy Division.

    • The invocation of Art. 50 formally starts the clock on the two years of negotiations. The problem for the UK is that the political leadership will have to change as no-one has yet said what the new world is that we are “aiming for” . This will not only entail a new Tory leader/PM, but I expect a new General election.

      Thus, there is no point invoking Art 50 until the UK (ha, ha) gets its act together.

      i am just sorry for the youth of this country – as the Scorpions said “Where the children of tomorrow dream away”, but they are lumbered with Status Quo: Living on an Island and a currency song of theirs: Down, down.

      Unfortunately, there will not be time to form a centre-right pro-EU party to draw in the youth vote in particular, but maybe by 2021, when Boris and Nigel have become Taking Heads: Burning the house down.

      • david ,

        There are many of my kids friends who wanted the UK to leave and that is in direct contrast to MSM meme that all the young were wanting to remain .

        I’m not sorry for them , as the oldsters of ’75 were not sorry for me then when they voted to join a Common Market

        Democracy should be paramount , if the youth you know want to re-join the EU at a later date they can campaign and ballot for it


        • Hitler (to be topical!) was elected and it took 12 years and a lot of damage to correct that.

          Democracy is not what is really involved here – it was about hate and blame. It will take a while for the idiocy of the populists to become clear, but young people will be the most damaged in the intervening years.

          I expect the youth you know have expectations that the “competition” will now be removed for jobs etc. They are going to be disappointed, even when Nigel starts his deportations – of course, he will be deporting people, whom he and his acolytes excluded from your “democracy”.

        • seems I have to answer my own post in response to Dave’s reply to mine

          Nigel is not an MP and his party is not in power

          you can check wiki pages – Hitler was appointed , not elected ( yes theres a lot more to the story of his rise in power )

          However this is an economics blog and I shall direct my posts to that area from now on

          Appologies to Shaun


        • Replying to your 3:34 post Forbin, much as I wish you were right I am afraid you are wrong, there will be no second vote.

      • “i am just sorry for the youth of this country ”

        Why do you believe that, in the EU, they’ll have much better prospects than the youth of Portugal, Greece, Spain, Italy…and why do you think this will be materially affected for the worse by leaving EU?

        • Buzzin ,

          that was the problem , wasnt it ? despite all evidence that the current EU is not fit for purpose they carry on regardless !

          I hope , and still hope a new EU will arise

          in the meantime our kids will learn of democracy and what it means to support yourself

          I hope that outside of the EU they will flourish – in their own hands is their future


        • “…my fear is multiculturalism.” –

 – “While race and ethnicity are considered to be separate in contemporary social science, the two terms have a long history of equivalence in popular usage and older social science literature. “Ethnicity” is often used in a sense close to one traditionally attributed to “race”: the division of human groups based on qualities assumed to be essential or innate to the group (e.g. shared ancestry or shared behavior).” AND

 – “Membership of an ethnic group tends to be defined by a shared cultural heritage,…”

          I rest my case……

      • Thanksd for th eexplanation on Article 50.

        Hitler wasn’t what they were about. Rather the human condition, but were, nevertheless a product of their time as am I. The only thing you saw on telly in those days was “The World at War” and second world war films whilst all my elders spoke mainly about “The War”, little surprise then, that a large section of youth of the 70’s were heavily influenced by second world war images…..

        By the by, I don’t think the Germans have moved on, their war has transmuted from a military to economic one.

        Despite my disagreement with your perception of Joy Division I am in general agreement with your comments to Forbin except that I don’t believe the idiocy of Boris and Nigel burning down the house will become clear.

        As this vote was based on hate and blame of foreigners for everything from not enough jobs and depressed wage levels due to “foreigners” “stealing British jobs” through “foreigners free loading on state benefits” (not sure how that can happen simultaneously with foreigners nicking British jobs but trust the British electorate not to let a minor detail like the facts get in the way of their thought processes) and on to the weather so, once again, as the house burns down it will be Johnny Foreigners fault for not allowing the UK to retain it’s trade agreements with the 27 “foreign” EU countries and the further 60 “foreign” countries the UK currently benefits from as an EU member.

        It will never be the electorates fault or Nigel and Boris’ fault for voting out, after all, who would’ve thought that foreigners would restrict terms of trade once the UK left the EU? And who would’ve thought that once the foreigners have been deported that the economy would shrink as aggregate demand falls whilst inflation simultaneously takes over as competition for jobs becomes scarce?

        • This claim by Leave (and Stuart Rose!) that wages will rise seems pretty idiotic to me, as it will push up costs and so, either the employee will be doing more work to keep unit costs down or output prices will rise.

          It is rather like the claim that most electors would pay more tax for the NHS – funny thing is, that when prescription charges or hospital car parking fees have to be paid, there is considerable resistance. Th truth is that electors think someone else should pay the cost and this is the inherent problem in a democracy.

          If anyone is to have a vote, they must be subject to the gains and losses of that vote. Of course, the “democrats” in leave,who deprived EU citizens of the franchise in favour of Commonwealth citizens living here plus 1.45m Brits in Oz and NZ, will say that is unfair, but in the next breath say the banks must face up to the consequences of their decisions.

          We are back with risk and reward really.

        • Not one of those countries, or groups of countries, which have a trade surplus with us will even squeak, and we no longer have to have crap, tasteless Spanish fruit and Veg.

        • ” due to “foreigners” “stealing British jobs” through “foreigners free loading on state benefits” (not sure how that can happen simultaneously with foreigners nicking British jobs.”

          They are not mutual exclusives.
          It is obvious that both are possible, or at least there is genuine concern that both can happen, with enough immigration.

          For myself, I don’t fear immigration, my fear is multiculturalism.
          It hasn’t worked anywhere in the World without the prior deconstruction of the indigenous culture.
          We would be considered racist bigots by the PC-pseudo-liberal-crypto-fascists to ask immigrants to assimilate.

      • Replying to your “2:39” post David as the answering system won’t let me respond directly to it.

        I’ve never accepted that there will be “jobs for all” and they’ll be higher paid in the event of Brexit. It’s more likely that in the immediate aftermath as expulsions take effect there will be less labour chasing the same number of jobs so upwards wage and cost pressure leading to higher inflation but, further down the road either employment rises and we get hyper inflation or wage rises can’t pace inflation and unemployment rises accompanied by inflation, so stagflation – the worst of all worlds! Of course it will still all be “the foreigners fault”.

        Your point about Expats in QZ etc calls into question the fate of Expats currently living and working in the EU – a tit for tat policy could evolve where the UK finds itself receiving expelled Expats who don’t want to be here but will nevertheless be competing for housing, jobs and receiving unemployment benefit whilst looking for work just as the current natives thought everything was going to get easier……

        • @David Hollins: Hitler was never elected Chancellor of Germany (as I think you are implying), he was appointed just as EU officials are appointed.

        • TW @ 3:48 Hitler was actually the leader of the party winning the largest number of votes in three elections (granted there was quite a lot of “persuasion” in 1933), so he was appointed Chancellor by President Hindenburg, just as HM Queen appoints the PM here on a similar vote share.

          My point is that democracy has some serious flaws and the problems it creates can take a long time to clear up.

          Blimey! Even Klitschko is talking about Hitler in the boxing – must be catching.

          To come back to funny money economics, it was Hitler’s financier Schacht, who financed rearmament with trade deals with South America payable in German currency or mefos (delayed promissory notes). I suppose printing money hadn’t worked under Weimar!

        • The Brit expat question is good. I’ll be fine, I can replace my EU nationals residency documentation with either family residency (having Bulgarian wife and children) or with a skilled workers visa. So forcably returned expats will be the least skilled, valuable workers. What annoys me about Brexit is reduced opportunities to work in Germany and across Europe. For me it just means inconvenience like getting a temporary Swiss work permit. But for most Brits the repealing of freedom of movement closes doors and reduces opportunity.

          As far as British jobs go, we could ask why employers prefer foreigners. There are language issues & cultural issues that create communication challenges. In theory a local is more likely to stay in the same job than a foreigner who has already demonstrated mobility for higher wages. But the problem is that many chavs are just unemployable. It is easier to sign on than turn up on time 5 days a week and work. Australia & NZ used to send the unemployed to manual labour jobs and those that failed had dole cut off. Fair to the unemployed, but firm with the workshy scroungers.

          Foreigners taking our jobs is nationalist nonsense. I haven’t put a Bulgarian out of work -> my US funded employer has open vacancies for C++ programmers and cannot find enough qualified people.

    • The Leave wisdom is that the UK can delay invoking Article 50 as long as it likes to suit its own negotiating strategy.
      Article 50 TEU says:
      1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
      2. A Member State which decides to withdraw shall notify the European Council of its intention. (….)
      The referendum has been held. Leave has won and the European Council, like everyone else, was notified of the result by the official announcement this morning. I expect the European Council, when it next meets, to take note of the result and to declare that the Art. 50 clock started ticking this morning. … Of course, the UK could insist that the referendum result isn’t binding and that the UK might not leave after all. But somehow I don’t think that would be convincing …

      • “The Leave wisdom is that the UK can delay invoking Article 50 as long as it likes to suit its own negotiating strategy”

        That doesn’t seem very wise at all if I acept your second point:

        “.The referendum has been held. Leave has won and the European Council, like everyone else, was notified of the result by the official announcement this morning. I expect the European Council, when it next meets, to take note of the result and to declare that the Art. 50 clock started ticking this morning”

        As this would then provide Leave with a 2 year time constraint due to the third para of article 50:

        “The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”

        If, alternatively, Leave decide to be awkward saying the 2 year rule cannot be invoked until the European Council has been formally notified by the UK Government and go on to delay that notification indefinitely, the EU leadership will lose no time enacting legislation allowing member countries to be ejected and will then immediately implement it. They have to in order to make an example of the UK to Italy before it’s elections in 2018. If Italy leaves it will be the beginning of the end for the EZ and possibly the EU so the EU leadership will do whatever it takes to keep the EU going, otherwise they’re out of a job!

        • “…so the EU leadership will do whatever it takes to keep the EU going, otherwise they’re out of a job!”

          exactly !

          thats why I expect another vote just like the Ireland one .

          a bit of tinkering , some more fudge and hey presto !

          2nd Vote and we’ll be back !

          T1000 , oops sorry , Forbin

      • Ignore a referendum at peril to an mp career. Cameron has gone and it will be his successor who chooses. Credit to him for resigning in preference to doing something he doesn’t believe in.

        • More likely will be a change of Tory leader/PM, who will then face a tricky decision as going for a GE (rerun of Gordon Brown) has its hazards, especially as UKIP will still be playing the anti-Establishment card. Thus, there will be no mandate for the Brexit deal and so, along with the issues in Scotland and NI, there will be pressure for a second referendum to choose between the two deals (even though the EU can say the stay deal is gone) .

          The key will thus be what actually happens in the next two years. There will not be £350m a week for the NHS, but I fear there will be trouble for immigrants, both EU and non-EU (local fascists have been flyposting Asian Muslims near me) The UKP will slide and the economy will weaken, which is going to bring Carney his worst dilemma, although Shaun is right that the BoE will cut rates (and probably print more money), so the current housing issues will be exacerbated.

          There is already a petition, effectively demanding a revote and I suspect there will be some quiet boycotts going on – no, Dyson, I am not going to buy any of your products now.

          It will be a bumpy two years I think.

        • David – agree that next few years will be bumpy & unpredictable. UK is due a large recession and house price correction – add political unstability, what could go wrong ?

          But UK isn’t alone here – France is in an economic mess which EU membership cannot fix. Ditto Italy, Spain, Portugal etc.

          The lack of effective representation, corruption and disfunction in the EC are serious problems – Cameron and the remain campaign chose to whitewash them. Not only do member states need substantial economic reform – the EC needs substantive reform to the point it gains public trust and respect. Failing to effectively fix the EC is an existential threat to the EU. Le Pen and requested Frexit vote should worry Brussels.

      • You’re wrong.
        The EU isn’t entitled to start the clock until Article 50 is formally invoked by the UK Govt.

  5. Hi Shaun,

    Thanks for your balanced view on this emotive subject- always refreshing and objective.

    I feel the biggest challenge will be the economic implications of other european nations becoming emboldened to follow suit. We are in the midst of very uncertain times. Large sections of the electorate of most advanced economies have been ignored for too long and the desire to shake things up becomes overwhelming. I hope it is a force for good but it could so easily get nasty.

    Keep up the good work.

    • “I feel the biggest challenge will be the economic implications of other european nations becoming emboldened to follow suit.”

      Completely agree and this is why the remaining EU leaders will be determined to make an example of the UK to show any other potential deserters (Italy and the rising 5 star whose departure would be a big deal for the EZ) what they can expect…….

        • You got it. Now it really is time to stock up on the pop corn and strap yourself in for the scariest, roughest ride of a lifetime! Prediction:

          1. Uk economy does quite well this year as the indicators were good last year and are now baked in.

          2. Growth plateaus in 2017 and continues at a reducing rate in 2018.

          3. Stagnation in 2019 as new trade agreements take effect.

          4. Shrinkage as the reality of Brexit arrives in 2020.

          5. The full effect of Brexit is felt in 2021 and the UK and Greece are spoken about in the same sentence.

          I really do hope I’m wrong bu you can run a first check on my prediction at the end of this year. Meanwhile, I shall start looking for alternative countries to re locate to which should help with the UK housing shortage……..

        • Don’t be silly.
          A Trade war with the EU benefits no-one but Britain, and even the most petulant politician realises that tit-for-tat tariffs on their trade with Britain, when they have a £9bn/month trade surplus, would leave a lot of explaining to do domestically, whilst all tariffs payable by UK businesses could be tax-deductible with huge resources left over for public services (£900m/month @ 10%)

        • The Greeks wanted to stay in the euro, despite the damage alleged to have been done to them.

          The Antarctica claim was also a lie – South America has been in recession for two years.

          Why doesn’t anyone do much export trade with India and China? Could be their protectionist markets, so how will the UK get on? HMQ will not live much longer and when she goes, so Oz and NA will become republics. That sentiment alone will reduce the “sunlit uplands”.

      • I think the EU will do what the EU has done; play hardball with small members like Greece, whilst cravenly capitulating to large members like Spain.
        The EU is probably insolvent without exports to Britain.

        • “even the most petulant politician realises that tit-for-tat tariffs on their trade with Britain, when they have a £9bn/month trade surplus, ”

          And already we have the EU saying “no single market access without freedom of mobility of labour”……

          “The EU is probably insolvent without exports to Britain.”

          I think you got that arse about face –

          You should really read all of this as it demonstrates some of the variables to take into account showing that nothing is clear cut. In terms of your statement of insolvency above you should try reading all of page 12 with point 13 being the most important…….

  6. Going to need your wise words over coming months.

    Brexit qualifies, for me, as a trigger event. Someone somewhere will have it wrong and fall over. This time I doubt the central banks will have the capacity to contain it. I could loosely quote your old lecturer (Willem Buiter?) that it always takes longer than you think. The probability of a reset must be a lot higher today than yesterday. Again for me that is no bad thing.

    • Hi Chris

      Thanks and it was one of my old bosses sayings and he was right. You think something has to happen now but it can take years, just look at what has happened in Greece or Italy.

      If only we had reset at the beginning…..

  7. Shaun, as you know, I have been a regular reader almost since you first started and you words of wisdom have helped me greatly. IF we ever had an “Golden Days” they are now firmly behind us. As far as I can envision, there are no contingency plans (apart from BofE so we are told) either economic or political. I cannot cry for Europe as so much of what has happened has been, in my view, a direct result of their own blinkered stance. Whatever – You must continue with the good work.

    • Hi Ray and thanks

      There seems to be rather a lack of any plan at all on either side. It is all a bit like England in the Euros so far, some good players but no clear plan. After all the turnaround in English rugby has shown us what a plan can do.

  8. It’s a shame the EU didn’t put as much effort in keeping Greece(mistakenly) in the Euro, as it has keeping the UK in the EU.
    Sums it up, unfortunately.

      • Yes, Shaun, but the worst thing is they can’t see that they are mistakes and learn from then.
        UK is leaving, have you heard anyone from the EU asking what went wrong, what are the problems and what can we do to improve ourselves?
        No lets get rid of the U.K. a.s.a.p and make it as difficult for them as possible, so that no other country will do the same. What arrogance!
        With that attitude I can’t see much of a future for the EU.

        Keep up the good work, we are going to get a lot of bull over the next few months, so we need your unbiased views

  9. I believe that there will now be an internal battle within the EU between the ‘ever closer union’ mob and the realists who accept that this is not what the majority of Europeans want. Ironically if the realists win, a changed EU may end up being an organisation that the UK would want to belong to but will not have the option. Unfortunately it takes something of the magnitude of Brexit to make the politicians realise that what they think is the future is not what voters actually want. Our own politicians of various colours have been guilty of this on a grand scale. Will they now listen? Really listen?

    • I think I had my answer on Nick Robinsons programme tonight when Anna Soubry proved that she had learnt absolutely nothing from her campaigning or the Brexit result. In one breath she explained that immigration was the big issue in her constituency and that voters wanted it drastically reduced then in the next breath she went on to say that her job is to now change people’s minds and to explain the benefits of immigration! No – politicians don’t listen and will continue to peddle their own message.

      Just for the record, i do not have a problem with EU immigration but if the majority of people do, then our politicians need to do something about it !

      • The issue is actually that immigrants have been the scapegoats for the country’s economic issues, which are still very real for most people. They do not understand economics etc., so it is very easy for a populist to persuade them to act on something very visible.

        “The more economic difficulties increase, the more immigration will be seen as a burden” – Yes, you guessed, Adolf Hitler 1927.

        I think many Brexit voters think they can vote away the economic issues and that many immigrants (EU and non-EU) will be deported. They are going to be disappointed, so I am waiting for the first Polish shop to be bricked and will be hoping we are not in for a “crystal night”.

        • I am not sure it is the economics of immigration that bother people but rather the effect of communities being disrupted by a huge influx of newcomers. I also do not believe that it is the poles, Latvians etc that voters object to but the flood of immigrants coming from Africa and the Middle East by way of the EU. Even Trevor Phillips recognises that integration between communities of differing religious and cultural backgrounds leaves a lot to be desired or in many cases is almost non existent. Too much too quickly has a destabilising effect and gives rise to xenophobia.

  10. I believe that, as important as it is to us, Brexit is, nevertheless, a sideshow.

    Although Brexit will be blamed for any economic slowdown, in my view, this was going to happen anyway and much of the developed world is on an unsustainable course anyway from the economic point of view; Brexit is just one potential trigger of many and, in my view, will not be the one that really sets the hounds running; EZ troubles, the ramifications of Yuan devaluation, the increasingly bizarre behavior of the Fed or the contortions of Abenomics are likely to be more important.

    Ironically, it is just the potential fall in sterling and falls in house prices that could just provide a necessary corrective to the bubble mentality that is now so pervasive; far from being the catastrophe that is predicted it could be a very good thing.

    I voted Out but am under no illusions about what is involved in the short term but, long term, I hope we can make a success of this. I believed that Remain was in fact the larger risk.

    • “Although Brexit will be blamed for any economic slowdown, in my view, this was going to happen anyway”

      So, why vote for it if it makes no difference? I see the excuses for Brexit failure already beginning to appear just hours after the decision! I do hope Brexit advocates aren’t going to start talking about “counterfactual events” in the future otherwise I a won’t be able to discern them from the Establishment.

      • “So, why vote for it if it makes no difference?”

        There’s more to life and politics than economics. If it makes no difference economically then that’s all the more reason to decide on the basis other things, if you need a reason.

        • Those “other things” are what I’ve been talking about in replies to David Hollins. Just seeing if anyone was going to come out and say it openly.

        • Forgot to say that in this case the economics definitely makes an immense difference and Bob J is just flat wrong in his assessment of economic impact of Brexit being nil..

        • I didn’t say the economic impact of Brexit would be nil. What I said was that any economic slowdown would all be blamed on Brexit whereas some slowdown would have happened anyway; the business cycle has not been repealed.

        • As in what the EU institutions have done to the people of Greece (its own citizens, ffs)?
          Did we punish Liverpool in any similar fashion after it elected a financially incompetent council?
          As in what the EU has done to European Parliamentary Democracy, within its own borders, namely Greece and Italy?

          Those were at the forefront of my mind, along with my revulsion at British and EU establishment, when I voted Leave.

        • Buzzin – I agree the corrupt EC is behaving disgustingly, but remember that the corrupt Greek Kleptocrats did steal billions. The Greek judicial system is incapable of holding the Greek Kleptocrats accountable, the EC has no federal power to arrest the guilty.

          This is an example of why corruption is harmful to the majority. It is an example of the importance of accountability and justice. And it should be a warning to all Europeans that we cannot afford a European commission which has immunity from prosecution and the ability to impose austerity on us whilst taking extravagant budget increases and pay rises for themselves.

    • I stand corrected and will re phrase – it’s flat wrong to imply, as you do, that any economic slow down will be unrelated to Brexit when in fact it will be the major cause and closely correlated to it, reference my reply to Forbin re the timetable for the Brexit related economic train crash that will start unfolding over the next 5 years.

      Of course the business cycle may well reinforce the downside making it harsher and quicker than my prediction as my prediction is based upon the assumption of a benign business environment where the cycle pauses at it’s current late stage of mature growth for 5 years (which in itself is unlikely hence my comment to Forbin to strap yourself in for the scariest roughest ride of a life time).

      • Just to correct that I meant ” it’s flat wrong to imply, as you do, that any economic slow down will be loosely related to Brexit when in fact it will be the major cause and closely correlated to it,”

        • Closely correlated -no; we are overdue a correction anyway and growth has already been tailing off for several months, at least according to the (probably bogus) GDP statistics.

          As to what the Brexit contribution to the slowdown will be and it being the major cause I have no idea and at the end of the day it won’t really matter – we are where we are.

          I have believed for some time that the UK is a Ponzi economy. Ponzi schemes collapse; they do not deflate. A collapse is a collapse and which part of the collapse is related to Brexit is the sort of argument monks used to have in the twelfth century when they had nothing better to do.

    • Toiday Bob I have “nothing else better to do” as I took the day off because Brexit is a big deal . You may note I usually comment at night as I’ve got better things to do in the day like working.

      Growth tailing off? Yes and again in disagreement with you I say it will improve in H2 this year Brexit or no Brexit – the end of year will tell. So no collapse this year due to last years monetary priming coming to fruition this year. Stats are definitely suspect but if you accept them then they are “correct” within their own error

      Trouble is way way back in the 70’s and 80’s I remember guys like most on this forum proclaiming “the end is nigh” and I’m still waiting almost 40 years later!

      UK a ponzi? yup ever since th elate 60’s that I know of and probably decades before that but it’s still going. Never underestimate the determination of the Establishment to maintain the Status Quo.

      The “collapse” of which you speak will not properly start until 2020/21 as the full impact of Brexit makes itself felt, Absent Brexit there would be no collapse simply a slow down, as for “A collapse is a collapse and which part of the collapse is related to Brexit is the sort of argument monks used to have in the twelfth century when they had nothing better to do.” well, you still fail to grasp that the “collapse” aint coming any time soon but with Brexit you betcha 202/21 is the year this is very very important because if Brexit was avoided so would be the “collapse” at least for another 20 years or maybe longer as I said the old guys I listened to in the 70’s were saying a collapse was imminent then and I’m still waiting, but not for much longer now that Brexit has come along. When the collapse comes in 2020/21 I will be saying all this could have been avoided by voting Bremain so never mind “which part of the collapse is related to Brexit” Brexit IS the collapse.

      I think it a complete cop out to imply only weeks ago that Brexit was the cure all of the UK economic woes and as soon as you and other Brexiteers get your way the excuses are already appearing for the impending Brexit related collapse, reminds of messrs King, Carney and Osborne, I’m done!!

      Only< I won't be around to see it least ways not in the UK butI will watch it from another country, that's how clear and certain I am on this….

      • No. Brexit may just add a little extra push to what is an unsustainable situation but it will not, in my view, be the cause of the collapse, or indeed anything near.

        As to who was implying that Brexit was a cure for all our economic ills I’m not sure who said this; it certainly wasn’t me. I have always thought that Brexit was high risk but so was staying in the EU which I believe will disintegrate anyway, and would have done even without Brexit. The Euro is a monument to hubristic, arrogant Utopian delusion and I would suspect would be the proximate cause of the debacle but it could be other things.

        You seem very sure of the timing of all this. If I was so sure I wouldn’t be typing this; I’d be on the terrace of my villa on the shores of Lake Como perusing the dinner menu over a dry martini.

        • Bob for your information I left the Public Sector in 2007 because of the poor pay and prospects copping a redundancy on the way out. I then started my own business and continued with my investments which had been steadily growing since 2001 just as the markets crashed when I started with the princely sum of £5000 and doing well all along the way by making correct calls.

          I correctly called the global crash of 2007 in 2007 and the bear market of 2008 in 2007 selling out all my long positions and shorting the whole market.

          I realised around October 2008 that the market was too cheap and narrow money was indicating a rebound in 2009 so I sold out my short positions realising my first smallish fortune.

          I waited for the market signal of the rebound which I saw in March 2009 and bought back into the sectors I thought would benefit the most. By November 2009 I had made my second not so small fortune. Good performances continued so that by 2012 I could afford to retire on investment profits alone notwithstanding my separate business profits. I’m not sure I could afford a villa on Lake Como but then I’m not interested in Lake Como and it must be borne in mind I hail from a poverty stricken back ground in child hood moving into low paid Public Sector work for 20 odd years with my first real break coming in 2007 in the shape of a redundancy pay off which I promptly put to work. I always understood Economics which I studied at college but ran out of money to take the study to degree level.

          Had I been in a well paid job in the 80’s then as an Investor I could have literally made a fortune by the end of that decade and certainly by the early 90’s would have afforded multiple villas world wide but it’s all about the start you get in life.

          Aside from investments I started a specialist chemical business cleaning chemical spills, dealing with chemical fires and escapes of poisonous gases in confined areas in late 2007 as a one man band (in fact I was a self employed sole trader at that stage) just as the crash started yet it now employs 5 people with zero staff turnover.

          So, in light of my achievements above, yes, I am very sure of the timing and as I said to Forbin you can check the first part of my prediction at year end when you say the UK will be deteriorating but I say it will growing reasonably well.

          The fact is I like working and analysing, I would be bored stiff sipping martini’s at Lake Como and would not re locate there as Italy is yet another basket case ( I know you speak of Lake Como figuratively but I am pointing out that Italy is another tinder box waiting to go off)

          I could, of course just go off making money with nary a thought to the carnage being caused as the Establishment seeks to protect investors whilst making the working man pay, but because of my roots my concern for the damage to the working man remains, so I contribute to blogs like this in the hopes of spreading the word about prudent actions , taking brave steps requiring sacrifice for long term structural gain instead of quick fixes (which most Brexiteers think Brexit is) and rewarding people for providing quality services and goods as opposed to financial services investing on markets creating nothing but more money which of itself is inflationary. I am currently front running the ECB as it kindly informed us all of it’s intention to buy Sovereign bonds and Euro denominated Corporate bonds beginning in June and doing very nicely out of it, especially after the Brexit result re the FX. Do I agree with what is to me “money for nothing”? No but my dislike of an incompetent Establishment encourages me to take advantage of them.

          Your earlier comment about “nothing else better to do” amuses me as due to swift work earlier today typing on my computer I cleared an overall profit of 2.5% of my portfolio in a few minutes all due to Brexit which I knew was on the cards if Brexit happened so I took the day off whilst following markets and posting on blogs so yes, today I had “nothing else better to do” than make 2.5% profit.

          The actions of the EZ authorities are “wrong” as are those of the UK if you care about people but if your only God is mammon then their actions are correct.

          I guess you will be pleased to hear that due to today’s “result” I will only comment on here about other countries that Shaun covers, as, in reference to the UK I now actually agree with you when you say, if I may misquote you – “A collapse is a collapse (due to Brexit) and which part of the collapse is related to (external factors to Brexit) is the sort of argument monks used to have in the twelfth century when they had nothing better to do.”

          There is nothing more to be gained from discussions about UK “problems” due to monetary or fiscal settings as these are mere minor details compared to the slow train crash that is Brexit which will crush monetary and fiscal policy settings to powder.

          Meantime I’m already on the case of my own personal Brexit and have identified Australia, New Zealand and the US as potential new homes whilst I have the domestic headache of trying to sell a business, my home and my old home (no I am not a landlord, I traded up and never got around to selling my old house)

        • Good Luck!

          And by the way a deterioration in growth and a slowdown are not mutually exclusive; a slowdown from 2.5% to 1.5% is a deterioration but it is still growth.

        • As to who was implying that Brexit was a cure for all our economic ills I’m not sure who said this; it certainly wasn’t me”

          And on 09/03/16 we have:

          “I believe the EU has become clogged with bureaucracy and stasis, like most organisations of its type. See: Mancur Olson:The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities: Economic Growth, Stagflation.

          This situation has an inimical effect on productivity and “dynamism” so I think we would stand a better chance outside such a grouping: if we follow the right policies(?).”

          The implication is clear.

          Thanks for the congratulations on my record of achievement in investment and your good wishes for my future Bob. I return the sentiment.

          You have said that growth has been tailing off for several months, going on to speak about a possible Brexit contribution to the slowdown which you were unsure what level of contribution Brexit would make.

          In response I agreed the tailing off growth statement but disagreed your implication that the slowdown would continue, (which it must post Brexit if Brexit is to make any contribution to the current slowdown) stating there would be a growth improvement in the second half of 2016 (in contrast to your belief that growth will still be deteriorating – i.e. growing more slowly) regardless of Brexit. I really don’t understand why you are telling me there is no difference between a slow down and deterioration as I am talking about a GROWTH IMPROVEMENT in the second half of 2016 but yes I did already understand that slowdown and deterioration may be the same thing depending upon the context within which they are used.

          Amazing how much fending and proving you require and still you can’t see when you’ve made mistakes preferring the pedants approach of concentrating on insignificant detail, attacking sentence structure and word choice!! Establishment? Messrs King, Carney & Osborne?

          Any way thank you also for the attempted lesson in semantics!

  11. Hello Shaun,

    Do you think this event will encourage Greece to exit and default ?

    I think tourism there would be benefit of that 😉

    After all since joining the Euro their economy has shrunk below pre-join levels ….


    • It’s hard to see any way back for Greece this half-century. They’ve been cleaned out of any assets and left holding all the debts (or a lot of them). As long as the Banks can hold on to this relatively new idea that a debt is forever (at least, a debt to a bank) there’s nowhere to go for them.

  12. Just catching up on the last couple of days I see I missed the song suggestions yesterday; sorry its late but can I add another one from the ’60s:
    “Nothing he’s got he really needs
    Twenty first century schizoid man.”

  13. Hello Shaun,

    Sorry me again , I see on the economic front

    1, house price lull because of exit – well it was going that way anyway

    2, Rates to drop – well you predicted the signs it was anyway

    3, higher petrol prices – well we had a rise anyway

    and following Noo2 comments on time scale of UK performance , well that similiar to mine about about the next oil “shock” as LTO in the States falters and oil’s average yearly price approaches $100 +/- $10.

    And that will cause a new round of QE and bailouts

    I am mindful that predictions are difficult , esp about the future !


    PS: EFTA – keep an eye on that agreement

    • Hi Forbin

      Well corn futures continue to edge lower and I think you are still up on the week as they fell more than the UK £. As to your earlier question about Greece well they were being given some good news with the reinstatement of the ECB waiver only a day or so ago just in time for bank shares to fall 30% today. Although 30% of what is a valid question? If only they had defaulted…..

      Will the fall in the UK Pound £ spook foreign buyers ot bring them back to Central London? The story today was that they are back but that could have just been estate agent hype.

  14. Hi Shaun, I’ve ranted on long enough today so I’m just going to say the most apposite song for today is indeed Anarchy for the UK – Sex Pistols. Oh and I just banked 4.5% profits in 24 hours on my American investments which were swelled by my reallocation from UK to US investments a couple of weeks ago by way of contingency in the unhappy event of a Brexit vote but have taken a 1.5% loss on what’s left of my UK investments so far today.

    Point being, as an anarchist, I can easily cope with Anarchy for the UK at least in the short and medium term but can the rest of the populace of the UK??

    • Hi Noo2

      Well done as people were complaining earlier they were unable to trade (but the FTSE 100) . I note you had thought ahead which is often necessary.

      If this does turn out to be a Black Swan event and for example for the banks it could – although of course it is only one day they have been in trouble – it is odd as for a while it seems so many ignored the fact that what has just happened was fairly likely. So many professionals were so wrong….Oh and I can’t resist this bit.

      “I thought it was the UK
      Or just
      Another council tenancy”

  15. I’m surprised the FTSE is only down around 3% and pound to euro 6%, thought it would be a lot worse. Impressed that the Carney intervention seemed to have a soothing effect. It doesn’t feel that out of kilter with the new-normal rockiness to me – remember the start of the year? Who will now deliver those brexit promises to the millions of malcontents: the better jobs, cheap homes, bustling high streets, gleaming hospitals, efficient and cheap transport system, new schools and fresh opportunities? Sadly, I fear a jaded set of Thatcherite-style reforms presented as a new dawn and the same old fat cats eyeing up chances with the abolition of EU regs and standards! There’s still plenty of QE/rate cut potential, so I don’t see the zombie apocalypse coming just yet, might be time to brush up on the wilderness skills though…

    • “Who will now deliver those brexit promises to the millions of malcontents: the better jobs, cheap homes, bustling high streets, gleaming hospitals, efficient and cheap transport system, new schools and fresh opportunities? ”

      If the remainers had run on that ticket everyone would have cracked up

      Frankly the Eunited States of Europe whould have offered a better deal

      they still can , if they have any statesmen left

      aye , theres the rub


  16. Hi Shaun
    On a momentous day will the main
    story be the Deutsche bank fall?
    I thought that Andy Coulson made a
    very valid point on ITV, “If article 50 requires new
    westminster laws to be passed, how will that
    happen with a majority of pro euro MP’s?”

    Will you politely, say goodbye.


  17. I thought that the leave campaign case was against the EC not anti EU plus a few populist bash immigration yobs. It has triggered a wave of dissatisfaction in Western Europe, unsurprisingly given the downward wage pressure caused by the 2004 & 2007 expansion. An optimist might hope for EC reform as a result of a crisis. Real Swiss style binding referendums to dictate to the European parliament is needed. I won’t hold my breath…

    • Hi ExpatInBG

      You would get rather blue I think. As to what happens next well one group seem to be briefing that the UK will be punished and another that we will be cut a deal. So best to enjoy the weekend and await the next chess move.

      • indeed. Actions speak loudly. Leave campaign NHS promises were quickly broken. Brussels would be better being patient and civilised – it puts the lie to the EUSSR brigade, but they have a LePen Frexit vote call to worry about.

  18. Either it was a very deep well or she was falling very slowly for Alice had plenty of time to look about her and wonder what was going to happen next.

      • Pretty muted reaction Shaun. Kiwis are looking forward to cheaper overseas trips to the UK, but that’s about it. Brexit knocked the exchange rate down about 7%.

        From the NZ Herald –
        Last night, Prime Minister John Key sought to reassure New Zealanders that the immediate effects of the vote were likely to be limited.

        “We will continue to have a strong relationship with both the EU and the UK, and to further develop our ties with both. In this respect nothing has changed,” he said.

        “The UK remains a member of the EU for the moment and it will take some time to work through the implications of their decision to leave.”

        Mr Key said New Zealand remained committed to negotiating a free-trade agreement with the EU, and would work with the UK to “put in place new trading arrangements”.

        In New Zealand the NZX50 fell by 2.3 per cent ……

  19. Shaun, 60 plus comments tonight! i have been reading your blogs for longer than i can remember and this must be a record!

    • Hi Pavlaki

      Thanks and it is one of the best. There was a Christmas post which went past 100 but covered several days otherwise I am not certain. On your earlier point about politicians not changing a Liberal Democrat Baroness on LBC did the same as you described earlier. “We must accept the will of the voters” and then went on to describe her position which was to ignore them.

  20. Hello Shaun,

    The uncertain future is more uncertain by the media frenzy about the brexit poll

    now we will have a petition to vote again !

    looks as if my prediction of another vote will get some traction over the next few days

    frankly I am appalled as if the vote had gone the other way with such a narrow margin there would have been no coma back !

    still gotta laff , havent you ?


  21. a message to Noo 2 Economics

    Dont leave us this way – communards

    Really , lost the battle ? the war is still on you know .
    Going to jump ship when you’re needed most ?


    Frankly a small island nation on the edge of a large continetal power can be great .

    after all I hear of no one advocating Japan joins China
    ( apart from the Japanese regading the average chinese as , well , you know )

    Still you could help with the next referendum

    The UK to seek union with the US of A

    the Queen a US citizen ! yay!

    a common language and a common culture – what better fit ?


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