Mega goes full INFOWARS (Britex vote)

[jk]

Re: Mega goes full INFOWARS (Britex vote)

However, I'll stand by my larger point, which is that analyzing the situation in Europe, with its many various challenges, as a continuing act of aggression by a single central nation on all others is not only simplistic, but has consistently failed to predict next outcomes. Holding Brexit to be unlikely is merely the latest of these. It really is time to let this model go.

are you thinking that people on this board blame germany for the eurozone mess because it is the nation running surpluses? or the nation demanding internal devaluation and austerity? i don't think that's been the case. the relationship between the center and the periphery within the eurozone has been reciprocal throughout its history and development. the periphery partied on the convergence trade, when bond managers around the world thought they could buy peripheral country sovereigns because they would eventually trade like bunds. their unstated assumption was that germany would eventually underwrite everything. and the periphery loved the cheap credit. and of course greece cooked its books, with the help of goldman, to meet criteria to enter the eurozone in the first place. so there's plenty of blame to go around.

the real problem is that there should not have been a common currency in what is not a natural common currency zone. there should not have been a common currency without a common fiscal authority, without a common banking system, without a common treasury and bond market. the common currency was founded on hope and fantasy instead of reality. perhaps the current crisis will force the creation of the necessary institutions, but without them the euro is like a disease for the countries infected by it.

but i also don't think brexit occurred because of differences in financial philosophy. i think the issues are globalization in all its manifestations.

immigration and refugee policy played a large part in motivating the "leave" voters. that's not financial philosophy.

also, global trade produces sufficient extra wealth that in theory all the losers can be compensated and the winners still come out ahead. of course, that didn't happen. the losers were thrown under the bus while the winners partied. we are now witnessing the populist reaction to those policies, both in the form of brexit and in the support here in the u.s. for both trump and sanders.

i've always found your discussions of financial cultures quite interesting and informative. but i don't think they are the relevant factors here.


p.s. - glad to see you back posting here. i've missed you.

[GRG55]

Re: Mega goes full INFOWARS (Britex vote)

I am travelling at the moment with very limited inet access.

I listened to hours of BBC World Service interviews during and after the vote on my truck XM Satellite radio while driving through the mountains of western Canada. I am surprised at the outcome, but in my mind it shows the depth of the animosity towards the proponents of the current EU policies. The consequences of those policies are indefensible imo. 25% unemployment rates? An even higher and catastrophic youth unemployment in large parts of the EU. Moribund economic growth rates. Growing poverty. For year after year. Layered on top of that the rising threat and reality of Terrorism in the name of Islam, and the very visible migration of Syrians and Africans, many of whom stand no chance of assimilating or adopting the customs and values of their new homeland.

You have a flawed memory of my comment about Germany. It was that Germany would be first to exit the currency union, not the EU trade bloc. I never expected ANY material participant in the trade bloc, including the UK, to ever desire to leave the trade bloc. And we should note that the first thing the UK is concerned about wrt to exit negotiations in the wake of this referendum is its trade status - no surprise. So we shall see if the UK really "leaves" the trade bloc in any real sense. I still seriously doubt it. And I am certain to sell goods and services into the EU the UK will still have to conform to EU standards, including the infamous curvature of cucumbers edict. That it was not suffering from the consequences of € currency participation, had reasonable comparative growth rates in the years following the financial crisis, had been the most open to immigration ( the UK was the only nation to immediately allow free migration of Eastern Europe EU member nation labour - something even Germany refused) and having recently used the argument of EU participation in the Scotish national vote I expected the UK, with its long history of trade, would not be sufficiently motivated to put that status at risk. Clearly I was wrong as far as the ballot count was concerned.

The EU has been pushed even closer to the brink by this. But it was already approaching that point as a result of the misguided and short sighted austerity policies, which simply compounded the he destruction from the earlier transgressions such as the undue haste to admit nations not at all positioned to be full participants. Maybe this will serve as a wake up call. Time will tell.

[Fiat Currency]

Re: Mega goes full INFOWARS (Britex vote)

... to sell goods and services into the EU the UK will still have to conform to EU standards, including the infamous curvature of cucumbers edict ...

FYI & not to diminish your comment - but I'm pretty sure that's another euromyth as of 2008 ...

http://www.nytimes.com/2008/11/12/wo...1299.html?_r=0

https://en.wikipedia.org/wiki/Euromyth

[jk]

Re: Mega goes full INFOWARS (Britex vote)

the real problem for the brits is that, unlike what i thought just a few days ago, they can't model a relationship with the eu on those of norway and switzerland- the latter had to agree to free movements of people in order to be part of the free trade zone.

otoh, the u.s. manages to trade with the eu quite nicely without being a member. also 16% of exports from the eu-uk go to the uk. 20% of german auto production is destined for the uk. etc. the eu has plenty of motivation to negotiate reasonably.

[Mega]

Re: Mega goes full INFOWARS (Britex vote)

Just wait till they find that "20%" of German cars are for buy to let scumbags..........
http://www.housepricecrash.co.uk/for...00-properties/

[llanlad2]

Re: Mega goes full INFOWARS (Britex vote)

the real problem for the brits is that, unlike what i thought just a few days ago, they can't model a relationship with the eu on those of norway and switzerland- the latter had to agree to free movements of people in order to be part of the free trade zone.

otoh, the u.s. manages to trade with the eu quite nicely without being a member. also 16% of exports from the eu-uk go to the uk. 20% of german auto production is destined for the uk. etc. the eu has plenty of motivation to negotiate reasonably.

Yes there was never any doubt that the Germans self-interest would come to the fore despite all the pre-vote threats. However that 16% is suddenly worth a lot less in real terms with the sterling devaluation.

In a way the UK has just committed the 1933 equivalent of ditching the gold standard and taken a massive lead in devaluation.

[jk]

Re: Mega goes full INFOWARS (Britex vote)

Yes there was never any doubt that the Germans self-interest would come to the fore despite all the pre-vote threats. However that 16% is suddenly worth a lot less in real terms with the sterling devaluation.

that 16% is in euros, but of course then there's the question of whether they raise the price in pounds and take a hit to sales, or repatriate fewer euros. either way they'll take a hit.

In a way the UK has just committed the 1933 equivalent of ditching the gold standard and taken a massive lead in devaluation.

good point.

[Southernguy]

Re: Mega goes full INFOWARS (Britex vote)

Shall the pound devaluation last? or is it just a trigger happy reaction due to reverse the next weeks...
I don't know.

[Woodsman]

Re: Mega goes full INFOWARS (Britex vote)

...good point.

Jk, of Brexit in general, can you share your thoughts on the domestic implications for the US. In terms of the macro and micro picture EJ laid out a quick short and long term view behind the paywall, but politically what do you think?

My 2 cents, Brexit is a prelude to the election. The Leave faction seems to have been driven by widespread anti-establishment and anti-immigration sentiment, which correlates generally to popular discontent over unemployment, stagnant wages and rising taxation. Equally important is turnout and Brexit saw the biggest turnout ever for a plebiscite of this nature, never mind the perennial elections.

Trump has already received more votes in the primaries than any Republican candidate in history and if you believe what you read on the papers, he's done it based on the same anti-establishment, anti-immigration sentiment, and he continues to capitalize on popular discontent over stagnant wages and rising taxation.

I think Brexit is an echo of what we can expect in November - a record turnout with Trump winning by margins surpassing Nixon and Reagan. Maybe?

[jk]

Re: Mega goes full INFOWARS (Britex vote)

Jk, of Brexit in general, can you share your thoughts on the domestic implications for the US. In terms of the macro and micro picture EJ laid out a quick short and long term view behind the paywall, but politically what do you think?

My 2 cents, Brexit is a prelude to the election. The Leave faction seems to have been driven by widespread anti-establishment and anti-immigration sentiment, which correlates generally to popular discontent over unemployment, stagnant wages and rising taxation. Equally important is turnout and Brexit saw the biggest turnout ever for a plebiscite of this nature, never mind the perennial elections.

Trump has already received more votes in the primaries than any Republican candidate in history and if you believe what you read on the papers, he's done it based on the same anti-establishment, anti-immigration sentiment, and he continues to capitalize on popular discontent over stagnant wages and rising taxation.

I think Brexit is an echo of what we can expect in November - a record turnout with Trump winning by margins surpassing Nixon and Reagan. Maybe?

i tend to agree with you. i see brexit as the latest in a series of political events signifying increased populism, nationalism, protectionism, isolationism among countries in the western world. we have seen increased political success for marine le pen's national front and other right wing populist parties in europe [netherlands, hungary, austria, poland...] and left wing populist parties [podemos, syriza, 5 star...].

brexit is just the most recent and most successful of such efforts.

i see trump as embodying the same values in the u.s. i don't think brexit predicts or guarantees a trump victory, but it points in that general direction.

as a side note- note that the polls showed brexit and bremain virtually tied, and right before the vote showed bremain ahead. so did the prediction markets. they were wrong.

mentally, i add 5 points to whatever the polls say about trump's numbers. black candidates always get about 5 points less than polls have predicted, presumably because of the unwillingness of some voters to honestly tell pollsters about their politically incorrect opinions. i think the same is true of trump.

[shiny!]

Re: Mega goes full INFOWARS (Britex vote)

i tend to agree with you. i see brexit as the latest in a series of political events signifying increased populism, nationalism, protectionism, isolationism among countries in the western world. we have seen increased political success for marine le pen's national front and other right wing populist parties in europe [netherlands, hungary, austria, poland...] and left wing populist parties [podemos, syriza, 5 star...].

brexit is just the most recent and most successful of such efforts.

i see trump as embodying the same values in the u.s. i don't think brexit predicts or guarantees a trump victory, but it points in that general direction.

as a side note- note that the polls showed brexit and bremain virtually tied, and right before the vote showed bremain ahead. so did the prediction markets. they were wrong.

mentally, i add 5 points to whatever the polls say about trump's numbers. black candidates always get about 5 points less than polls have predicted, presumably because of the unwillingness of some voters to honestly tell pollsters about their politically incorrect opinions. i think the same is true of trump.

I agree with you except in Trump's case it's probably a lot more than 5%.

[Mega]

Re: Mega goes full INFOWARS (Britex vote)

[jk]

Re: Mega goes full INFOWARS (Britex vote)

a franco-german condominium over continental europe [save russia] would in reality be a german empire, with france as a fig leaf. germany is 30% larger in gap, but is also a much stronger state politically. it is in no way as riven as france. there will be no doubt as to which is the senior partner. and, again, this story is most beneficial to marine le pen.

[astonas]

Re: Mega goes full INFOWARS (Britex vote)

are you thinking that people on this board blame germany for the eurozone mess because it is the nation running surpluses? or the nation demanding internal devaluation and austerity? i don't think that's been the case. the relationship between the center and the periphery within the eurozone has been reciprocal throughout its history and development. the periphery partied on the convergence trade, when bond managers around the world thought they could buy peripheral country sovereigns because they would eventually trade like bunds. their unstated assumption was that germany would eventually underwrite everything. and the periphery loved the cheap credit. and of course greece cooked its books, with the help of goldman, to meet criteria to enter the eurozone in the first place. so there's plenty of blame to go around.

Fair enough. I haven't been able to follow the full conversation, and gratefully accept the correction.

the real problem is that there should not have been a common currency in what is not a natural common currency zone. there should not have been a common currency without a common fiscal authority, without a common banking system, without a common treasury and bond market. the common currency was founded on hope and fantasy instead of reality. perhaps the current crisis will force the creation of the necessary institutions, but without them the euro is like a disease for the countries infected by it.

I don't see this as being very different at all from my own perspective. I basically agree with everything you say above, but simply don't let the analysis stop there. Instead, I continue on to ask the question: "why is it that these clearly necessary institutions do not yet exist?"

It's certainly not that anyone thought they could do without them in the long term. The framers of the EU project are not blithering idiots (though it is certainly fun sometimes to pretend that they were).

Rather, these necessary institutions were not constructed from the beginning because each cultural faction had a radically different conception of what each institution should look like (eg. what rules it should operate by, how it should be overseen, what its specific mandate should be, and the like). And since all parties were convinced that the coming years would prove the wisdom of their own perspective and the folly of all others', each felt comfortable signing on to a path of continuing integration, believing that once everyone was stuck in the same boat, their own approach would HAVE to be accepted by the others' as the only right path in due course. The more time passed and the more trade mixed the ideologies geographically, it was thought, the more likely they were to get their way.

That's the kind of thought process that can only happen when one is incredibly certain that one is most correct.

The fact that each party couldn't simultaneously be more likely to get it's own way in time did not come up. But again, why not?

This is one significant indicator that it really IS culture we are discussing: One's own culture is seldom evaluated objectively, as though it were a separate entity from oneself. Instead, it is by default the backdrop against which all other cultures are measured. It is the reference frame that one cannot help but take for granted. If the continent's differences were NOT cultural, it might have been obvious to all concerned that the project was based on mutually incompatible assumptions, as we can now see clearly in hindsight. The fact that this was not obvious until more recently points out to us that it was the very assumed existence of a universal economic culture that was in fact a missing piece of the puzzle. Everyone was basically thinking "the other faction knows I'm fundamentally right (that's obvious) but they're finding an excuse to be stubborn to help their negotiating position."

But the reality was the opposite. Each group really believed - sincerely - that their way of seeing the world was the only one that could possibly be correct in the long run. And they still do believe this: The Anglo-Saxons are so convinced that the Ordoliberals would give way that Cameron used the threat of a referendum -- one that could conceivably sink the whole European project -- just to wrangle some concessions to help him with his domestic internecine political challenges. And the Ordoliberals were so convinced that Cameron had to know deep down that he was wrong that they readily called him on it -- and sent him back to his island empty-handed. They were just as sure he couldn't be sincere in his Anglo-Saxon beliefs as he was that they couldn't be sincere in their Ordoliberal ones!

But it turns out that both WERE in fact sincere. The Anglo-Saxons really DO believe that a strong worldwide banking system is so obviously important and beneficial, that no one would dare threaten it, and the Ordoliberals are so convinced that banks need tough regulations to serve their nations' people that no one could try to favor them further and still be taken seriously. That it must have just been a political game, and Cameron wouldn't really go through with a referendum, instead likely losing his own power before he could actually hold one.

So yes, I am in complete agreement that there were structural flaws in the formation of the EU that brought us to where we are. But I do not see these flaws as either incidental or accidental. Instead I see them as a natural and expected outgrowth of a mechanistic understanding of economics, wherein each party believes that mechanism to operate with different causalities. Those assumed causal relationships are part of what I have been referring to here as "monetary and economic culture". And it was those differences that not only cause the immediate difficulties in fixing Europe's problems today, but also the inaction in building those obviously necessary structures you refer to, starting at the very beginning of the European project.

When a party's assumptions are cultural, they are also implicit. And as long as a difference of opinion can avoid being made explicit, it can linger and do damage, even far beyond its original scope.

but i also don't think brexit occurred because of differences in financial philosophy. i think the issues are globalization in all its manifestations.

But globalization without differences in approach simply wouldn't have caused such friction to begin with! Let's do the thought experiment:

If two or more numerically distinct but qualitatively identical cultures were forced to blend by the pressures of globalization, would there have any disagreement about how the unified financial institutions should be structured? Would there thus be any reason to postpone setting them up immediately? If everyone sees the world as functioning in the same mechanistic way, it's simply a matter of physically writing down the bill that makes manifest the obvious institution! So yes, globalization, granted. But only globalization over different cultures could cause this particular circumstance.

immigration and refugee policy played a large part in motivating the "leave" voters. that's not financial philosophy.

It certainly isn't financial philosophy directly, but without differences in financial philosophy, the required institutions would exist, and it is possible that the entirety of the crisis wouldn't be present either. It is also much harder to complain about an "other" when the views of that party are identical to one's own.

Essentially, I am here drawing a distinction between "cause" and "occasion". The rise of nationalism, anti-immigration, and other ugly forces throughout the world stem ultimately from economic differences (people noticing that they're getting the shaft) which then gets re-directed as affected people look around for whatever scapegoat is acceptable within their local social context. And every part of the political spectrum has its own favorite scapegoat.

It is the sense that people are getting screwed by the elites that allows the right to imagine that the mechanism for this is elites allowing immigrants to take away their jobs.

It is the same sense that people are getting screwed by elites that allows the left to imagine that the wealthy need to taxed out of existence for equal opportunity to be restored.

The occasion surrounding the Brexit vote may well be the various forms of ugliness that abound, but I see the cause as financial friction, which in Europe does still stem from these fundamental differences in perspective. (In the US, there is a different principle axis of disagreement, but it is no less an invalid oversimplification.)

That's why I basically agree with you regarding your next paragraph:

also, global trade produces sufficient extra wealth that in theory all the losers can be compensated and the winners still come out ahead. of course, that didn't happen. the losers were thrown under the bus while the winners partied. we are now witnessing the populist reaction to those policies, both in the form of brexit and in the support here in the u.s. for both trump and sanders.

Yes, that's pretty much dead on. I'd go further, and observe that in Europe, the context in which it is happening is leading toward more international animosity, if not quite as much animosity towards individuals. Which of these one considers to be more dangerous depends on the time horizon and scope one chooses to be concerned about. If America continues down this path, it could lead to some exceptionally uncomfortable times for certain minority groups. If Europe continues to degrade, I think it might eventually lead to an end of the continent's post-WW2 peace.

i've always found your discussions of financial cultures quite interesting and informative. but i don't think they are the relevant factors here.

I've likewise always valued your contributions. In this case, I think we are actually more aligned than you seem to suppose. I think we are looking at the same situation, from essentially the same vantage point, just perhaps with different zoom settings on our lenses.

p.s. - glad to see you back posting here. i've missed you.

Glad to be back, I've missed it, and your own commentary especially! I've been extremely busy lately, but hope I can check in approximately weekly going forward.

We do seem to be living in interesting times.

[jk]

Re: Mega goes full INFOWARS (Britex vote)

when i refer to globalization as the proximate cause of brexit and sanders/trump populism in the u.s., and the national front in france, and podemos and 5 star, i am NOT saying that the structure of the financial institutions were the cause, except in their effects. i'm pointing to lost manufacturing jobs, the flow of immigrants and refugees, the mixture of clashing cultures in tight geography and lack of assimilation [especially in europe].

The Anglo-Saxons really DO believe that a strong worldwide banking system is so obviously important and beneficial, that no one would dare threaten it, and the Ordoliberals are so convinced that banks need tough regulations to serve their nations' people that no one could try to favor them further and still be taken seriously.

is this a difference of economic culture or just a reflection of the different power structures in each of countries? or are those the same thing? i.e. is economic culture or philosophy just a rationalization or expression of the distribution of power in the society? e.g. where bankers pull the strings, "society" values banks.