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Wednesday, 20 March 2019

Brexit poll dancing

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My Brexit postal voting kit arrived yesterday. I declared some weeks ago that I would vote with whatever side looked to be the losing as the thing I wanted least was to see either side parading around with a triumphal countenance declaring a clear and decisive victory. 

There was “big” news in the Brexit world yesterday when the ICM Guardian poll was released revealing that the ‘leave’ camp had taken a lead over the ‘remain’ by 45% to 42%. Personally, I wouldn’t give too much credence to this poll or in fact any poll. I was invited to dinner at some friends’ house on Monday and although a straw poll of the table guests showed near unanimous support for an exit, one of the smart people there conceded that when push comes to shove, many if not most of the electorate will not finally decide which way to go until standing in the polling booth with the ballot paper in hand. 

With the developing change in momentum, I might have to delay returning my ballot paper for a day or two. 

I’m not sure how many out there still have clear memories of the 1992 French referendum on the Maastricht Treaty which saw the “Yes” camp slip through with a wafer-thin 50.8% versus 49.2% majority in Metropolitan France. Though often forgotten, the “petit oui” was accompanied by a Danish rejection of Maastricht and an end to what had been known as permissive consensus. European integration is not a “done deal” as much of the civil strife that is currently crippling France demonstrates. Although I am not a fan of French labour law that keeps those in work in work at the price of confining those on the scrap heap to remaining on the scrap heap, what the current demonstrations show is the wish of the populous in general to retain the right to choose its own path towards economic oblivion. 

Reverse gear

In this country the debate about the merits and demerits of Thatcherism still rage but the Iron Lady demonstrated that there is no such thing as a political process without a reverse gear. Sometimes one has to back up in order to re-survey the horizon and possibly to re-plot the route. Thatcher’s lasting legacy was to prove that the ratchet can, and is some cases must, be reversed. A vote for Brexit will be highly destructive for the union as a whole – I would not be surprised to see the Danes follow in due course – but it will be the result of the total integrationist camp not being able to acknowledge cavalry charges, as brave as they may be, are of little value if there is no infantry following up in order to secure the gains. Hence I repeat Donald Tusk’s words that some EU leaders promoting utopian “illusions” of a united Europe have lost touch with their populations. 

Sterling immediately lost 1.5 points to the euro and is trading this morning below €1.30 again. Of itself, that’s not much given that the low was around €1.23 in early April. The Gilt market was more sanguine and although I have tried to find some reflection of the market’s expectations for the referendum outcome reflected in Gilts I have so far not been able to. Brexit, schmexit – outside the forex market I can’t really see any discernible indication of either fear or greed. 

Back to France where the unrest continues. I have spoken to some folks out there who seem to think that the rent-a-mob, “la canaille”, is happy for any excuse to riot and that the unemployed youth should be fighting for the opportunity to get work rather than smashing up shops and cars in protest against a reform which is aimed at helping them out of unemployability. As they’d say in the north of England, there’s nowt so queer as folk. 

Back to the mainstream where the US PCE figures yesterday came in pretty much bang on expectations. Personal spending was ahead at +1.0% versus the forecast of +0.7%, which should please the Fed and which should, despite the deflator still being at 1.1%, support the arguments for an early tightening of the rate screw. The Fed releases its Beige Book at 2:00pm New York time, which should represent the last brick in the wall, leaving only the question as to timing; I still favour July over June. 

Finally, Abenomics is now dead and ready to be buried. The postponement of the promised increase in sales tax until 2019 – Prime Minister Shinzo Abe must be an optimist if he thinks he’ll be around in 2019 in order implement it – reeks of an abandonment far more than a delay. I’m wearing my laughing and crying face here as I thought the Three Arrows strategy looked doomed to failure as soon as it was announced but I suppose it was better than nothing. 

From Japan and France to Greece we are faced with economic models stuck in the equality idealism of the 20th century. Though morally desirable, they are in many respects economically impractical and many of the radical reforms required are electorally unpalatable. It was said of the late Yasser Arafat that he never missed an opportunity to miss an opportunity. Methinks there are many more who could be tarred with that brush. And on that subject, keep an eye on Vienna where Opec is meeting again. With oil back up to US$50 per barrel, the cattishness of the oil producers might be less evident.

 

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