Homepage / Currency / When the revolution eats itself
European equities seen lower with political instability in Germany Alibaba goes offline with $2.9 billion stake in China's top grocer Most citizens support military rule in the world's largest democracy Germany's withering stability is just a local issue German coalition talks collapse Asia set to open flat as investors focus on US tax reform How to find out what Facebook knows about you Three shady — and all too common — things that digital health startups do to make money The 2018 Buick Enclave nails everything customers want from a luxury SUV Steve Jurvetson was pushed out of his firm as the lines between personal and professional crossed This 32-year-old leveraged 3.7 million Pinterest followers to remodel and furnish her tiny house European cities battle fiercely for top agencies leaving UK China pledges another three years of 'toilet revolution' to boost tourism Argentina says it may have received signals from missing sub Gerry Adams to step down in end of an era for Irish nationalism Tax reform could come before 2018, so a strategist says buy these 2 stocks Google's new headphones promise amazing translation features, but they're really bad Lebanon's Hariri arrives in Paris as Macron plays mediator China says will work with North Korea to boost ties as envoy visits Cramer Remix: Amazon is the Death Star Cramer says homegamers should stay away from the red-hot Chinese IPO market Top VC deals: Stitch Fix, flying cars and retail robots used at Wal-Mart Applied Materials CEO: 'The future of competition' is changing, and it's fueling our business Cramer's game plan: Stay focused on the individual companies Nelson Peltz will bring 'fresh perspective' to P&G: CalSTRS Tesla's biggest bull sees $60 billion in revenue by early next decade Tesla is 'going out of business,' says former GM exec Bob Lutz Start-up factory Y Combinator is no longer working with Peter Thiel Tesla Semi claims a number of 'firsts' for trucking industry Two bills currently in Congress could impact Google and Facebook ad sales Profits don't matter for investors anymore, only whether a company can beat Amazon or Netflix Scientists claim to diagnose football-related brain injury in living patients for first time VC Bill Gurley says investing in healthcare is 'extremely dangerous,' but he's doing it anyway One of tech's most successful investors says Silicon Valley's unicorns need to 'grow up' Stitch Fix CEO says there are not enough female 'decision-makers at the top' Bill Gurley: Bitcoin is an 'incredible store of value' in much of the world Uber investor Bill Gurley: My firm was 'on the right side of history' for ousting Travis Kalanick Traders betting on Deere, these other stocks ahead of earnings next week Laser weapons developers 'riding the wave' created by Tesla, other battery innovators Apple just delayed its HomePod smart speaker until next year JPMorgan broke money-laundering rules, Swiss regulator says Wal-Mart says it’s preordered five of Tesla’s new electric trucks Venezuela's falling crude oil imports are a 'huge red flag' that could shock the market Investors are fleeing junk bonds in near record numbers, a troubling signal for the stock market Stitch Fix spikes more than 20% in debut after opening at $16.90 This Amazon seller lost $400k in attack from self-proclaimed 'virus of Amazon' Tesla event did not blow all of Wall Street's minds into an alternate dimension Foot Locker shares surge the most in 40 years after earnings beat Best gifts for the Android fanatic in your life Wall Street is freaking out as EA caves again to social media outrage over its ‘Star Wars’ game Cisco CEO Robbins: We are optimistic about tax reform Why Russia might actually be better off quitting the OPEC deal North Korea rules out negotiations on nuclear weapons Square shares rise after Evercore ISI says bitcoin test is innovative, upgrades stock Buyer beware, the Cisco rally could be nothing more than a short squeeze, strategist says CEO Les Moonves: CBS may not be able to stay out of the media deal frenzy much longer US housing starts surge to one-year high; permits up Only millionaires will pay higher taxes under GOP reform plan, Mnuchin says Why the CEO behind one of the largest cryptocurrencies left AOL and Yahoo for blockchain EA scraps controversial money-making feature in new 'Star Wars' game after fan backlash … for now Putin signs decree to increase Russia's armed forces to 1.9 million GE stock is a ‘screaming buy,’ a ‘spectacular opportunity,’ strategist says Italy’s populist parties ‘have put water into their anti-EU wine,’ says former leader Trader Talk: Big changes are coming to key indices you watch every day Competition with tech and other sectors is a prime concern for banks, Deutsche Bank CEO says ECB chief Mario Draghi defends e-commerce players like Amazon US department stores are killing themselves by not innovating, Harrods chief says Saudi officials reportedly offer freedom to arrested royals — in exchange for 70% of their wealth Carillion shares collapse after UK firm issues third profit warning Draghi says ECB has not hurt banks' profits Bitcoin adds $41 billion to market cap in 6 days as it hits all-time high of $7,998 Many ICOs are fraudulent, say men behind two top bitcoin rivals Artificial intelligence will have huge impact for oil and gas, Microsoft executive says Notorious Mafia ‘boss of bosses’ Toto Riina dead at 87 Beijing opened the door to international investors, and one domestic sector may be the big winner European markets set for a mixed open ahead of Draghi speech Tesla CEO Elon Musk unveils a surprise new car: A ridiculously fast Roadster Tesla's new semi truck has a 500 mile range Tesla unveils electric semi truck, vowing to redefine trucking China minister warns against seduction of values by Western nations Defector reveals North Korea's serious parasite problem German coalition talks delayed until Friday — sources North Korea is 'on an aggressive schedule' to develop a ballistic missile submarine Asian shares expected to extend gains after US stocks rally Amazon quietly launched an app called Relay to go after truck drivers LinkedIn co-founder Reid Hoffman: Trump is 'worse than useless as a president' Cramer: Thank Wal-Mart and Cisco's CEOs for their upside earnings surprises Indian finance minister says his country is on track to grow above 7% in 2018 A company Google sold to SoftBank just released a video of a robot doing a backflip Comcast is in talks with 21st Century Fox about buying major assets, sources say BuzzFeed IPO in 2018 unlikely as sales fall way short of forecast, report says A start-up fighting pirates with satellites just raised $70 million Square Cash users can now withdraw money from any ATM with their Cash Cards Facebook is making it easier for people to create video on mobile devices MongoDB had 'tremendous uncertainty' about going public, letter reveals Stitch Fix IPO sees orders coming in under range US FCC votes to loosen media ownership rules These stocks are trading at extremes, and they could go even higher Buy red-hot robot maker Intuitive Surgical, Goldman says The best gifts for the Apple fanatic in your life

Currency

When the revolution eats itself

WHEN a revolution happens, the consequences are not obvious straight away. The British referendum on EU membership in June 2016 was seen as a revolt of ordinary people against a globalised elite. The politicians who led the Leave campaign did not seem to expect to win; as wags remarked, they were like “the dog that caught the car”.

This helps to explain the general chaos that has enveloped British policy since the result. The Leave campaign had contained two contradictions. The first was that Britain could have all the advantages of EU membership without the bother of actually belonging; the country could “have its cake and eat it” as Boris Johnson, Leave campaigner and now foreign secretary put it. The second was the split between the free market, Liberal brexiters, who envisaged Britain as open to the world, and the nativist camp led by Nigel Farage.

  • When the revolution eats itself

  • How two local referendums might affect Italy’s future

  • An unwelcome rise in obesity

  • Bosnia’s stand-ups jest about genocide

  • Transcript: Interview with Hillary Clinton

  • A bomb blast in Somalia’s capital exposes the government’s failures

Theresa May, who took office as prime minister in the wake of the referendum, has struggled to reconcile these two camps. It took Britain a long time to trigger the Article 50 process for leaving the EU and the talks have since got bogged down (as Leavers insisted they wouldn’t be) on issues such as the size of the financial commitments the UK should continue to meet. 

Impatience is rising and the leadership is turning on itself. One camp wants Mrs May to sack Mr Johnson, who has been writing articles clearly dissenting from the government line; another camp wants to see the back of Philip Hammond, the chancellor, who is taking a cautious view of post-Brexit economic prospects. It seems likely that Mr Hammond is paying attention to the concerns of those in business and finance who expected Britain to take a pragmatic approach. Instead the ideologues are outflanking the pragmatists.

But it is not clear whether the government can afford, politically, to do what business leaders want: settle the bill with the EU and stay in the single markets and customs union. Brexiters will see this as a betrayal. And the Conservatives will get no help from the Labour party, which has a clear political interest in seeing the negotiations fail. The party can simply demand that the government deliver on the Leave campaign promises, knowing that this will be impossible.

We are at the stage of the battle between the Girondins and the Jacobins in the French revolution. The Girondins may have helped to bring down Louis XVI but they found themselves outflanked by the Jacobins who in turn were consumed by the violence they unleashed. There is now lots of talk of “no deal”, creating the risk of a chaotic breakdown in trade, with backlogs of lorries from Dover to the M25. This is crazy stuff. While the Conservatives are battling with each other, the only cause they are serving is that of Jeremy Corbyn’s Labour party.

Let me sketch out a plausible outcome. In a last minute-deal in early 2019, Mrs May gives in on the main issues to the EU—on money, the European Court of Justice and migration. This is seen as a betrayal by her backbenchers, who force her out. A new prime minister takes over. That person calls an election—possibly on the grounds of repudiating the deal or merely to give themselves a mandate. With the Conservatives in a mess, Labour sweeps to power with a manifesto promising higher taxes on individuals and companies, nationalisation and changes to the labour market to enhance workers’ rights.

This is where the economic and political risk comes in. In the aftermath of the referendum, the pound plunged but the UK stockmarket did fairly well (in local currency terms) because of the overseas earnings of many listed companies. Since then, it has been pretty clear that the markets have been happiest when a deal with the EU looks more plausible. But a post-Brexit, Corbyn-led Britain would prompt international investors to fundamentally reassess their view of the economy. For 30 years or more, Britain has been seen as a welcome home for international capital, an English-speaking, business-friendly place for companies to base themselves inside the EU. Those advantages would have gone. There would not be an overnight exodus, but the supply of new investment would stop and existing businesses would reconsider their position. The economy would take a hit and that would in turn limit the ability of the Bank of England to support the pound with higher rates; so both sterling and the stockmarket might suffer. Investors are aware of some of this—a net 31% of those polled by Bank of America are underweight UK equities—but the nearer we got to March 2019 without a deal the more nervous they will become. 

NextEconomic optimism drives stockmarket highs

Source: economist
When the revolution eats itself

Comments are closed.