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untie the knot

Dear Reader,

After the Brexit referendum Glynsky and I debated a lot. We were equally surprised to learn, Glynsky was pro Brexit, and I was against. Not that I had a vote.

After a few arguments, which got quite heated, we agreed to disagree. The always wise Glynsky ended our debate with: “Nobody can predict the future.” I agreed, of course.

Ever since I have been following the news about Brexit. And with news I mean the facts, not the cacophony of opinions, wishes, dreaming, infighting, and inflated egos.

I watched the rising prices in the UK, the continuing losses of jobs, the 32% drop in M&A deals, the decline of real estate value, the downgrading of the UK credit rating by Moody’s. And Brexit hit close to home. Family members, working in the UK for international organizations, were told to look for other positions within their organizations, but outside the UK.

During our debates Glynsky said, the EU needs the UK as much as the UK needs the EU. When challenged, he referred to the EURO clearing and the bond market at London Stock Exchange, and the transatlantic cables to the US. He considered those “must haves” for the EU. That was roughly 15 months ago.

In the meantime the Deutsche Boerse in Frankfurt started offering lower commission on EURO clearing. And the EU started the process for a new law, requiring EURO clearing to happen within the EURO zone.

Plus, an insider told me, the German state of Hesse wants its own direct cable from NYC, across the Atlantic, through the rivers Rhine and Main, directly into Frankfurt.

I interpret these actions, more than anything else, that the EU is preparing for what is called a hard Brexit.

Stay tuned,

Engine Room

One thought on “untie the knot

  1. I too voted Brexit and I’m still happy that this is the right route for the UK, for any number of reasons I’m not about to get into here. Agreeing to disagree is a good starting point.

    You are right about the facts you give, but they don’t all apply to everyone and there are just as many people unaffected. House prices are not falling particularly yet, as demand remains high with too few for the growing number of people now resident here. Interest rates will rise soon and this may effect things, but as always these things recover in time. Although there have been price increases on some things, perhaps food being obvious, it isn’t that bad and there are still many low cost commodities available. The average house hold in the UK isn’t being hit that badly presently. Living in the UK gives the advantage of first hand experience of how it is on the ground.

    Brussels will do anything to retain the status quo of their ever nearer federal EU and of course Germany will do whatever it takes to bolster this, as they have too much to lose if it all goes tits up. Not quite the same for so many southern countries who have suffered being a part of the Euro and not in control of their balance of payments.

    There was a problem several years ago and there still is. (FT Article: Nov 8th 2011 – Sid Verma) https://ftalphaville.ft.com/2011/11/08/734241/the-eurozone-crisis-as-balance-of-payment-problem/
    Hold your horses: a consensus is emerging that the eurozone crisis is also at its root a pure balance-of-payment crisis. Hidden behind an opaque monetary wall that requires inflation in Germany and deflation elsewhere to stem the rot. In short, without the freedom to adjust nominal exchange rates, relative price changes within the EMU — i.e inflation in Germany — is needed.

    Inevitably Brussels (Germany) wants to make Brexit “hard”, as they want to frighten all the other “states” into not thinking about doing the same. At least the government is pushing to sort the best Brexit it can, as instructed by the majority of the UK population. Even if it was marginal! As Glynsky said “only time will tell” in regard to how it all pans out. It’s far too early to know who will be the winners and losers and they will be across the board, but the Euro zone will miss out huge monetary contribution to the club once it stops. We are the 2nd largest contributor. Whereas we could actually benefit from inward investment for a change.

    We live in extraordinary times.

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