Published on The Doomstead Diner on June 26, 2016
Discuss this article at the Geopolitics Table inside the Diner
Brexit Discussion with Jason Heppenstall, Monsta & RE
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The carnage across the markets and the political hornet's nest unleashed on Friday after the Brexit Vote came in with a LEAVE result has been truly amazing to behold, and this is only on Day 1.
We can be sure the Central Banks have been working furiously over the weekend to get a strategy for calming the markets on Monday, which undoubtedly will amount to huge injections of liquidity to keep any of the large systemic banks from locking up. However, there is so much PANIC right now through all sectors in all markets it's hard to imagine how they can plug all the leaks here.
HERE THEY COME TO SELL 'EM AGAIN!
For the crowd supporting Brexit, there is some initial Blowback which nobody predicted, which is that on the heels of this it Split the UK itself, with Scotland and Ireland in favor of Bremain, while Britain and Wales voted Brexit. So now Scotland and Ireland are talking about holding their own Referendums on leaving the UK so they can stay part of the EU. Scotland already held one of these referendums last year where the Leave camp lost, but with this latest change probably would sswing a new referendum the other way. Ireland is a really peculiar example here of how confused things are, because way back when they actually voted AGAINST joining the EU initially, but then the thunbscrews were put on them and in a revote were persuaded to join. “If at first you don't succeed, try, try again to get the voting result you want”.
Speaking from this POV, Paul Craig Roberts doesn't think the Leave Vote will stand up, with Brussels and the IMF, World Bank etc again putting the thumbscrews down to either force a new vote or to force Parliament to go against the vote of the people and Bremain anyhow. The Referendum is supposedly “non-binding”, and in order to be enacted into Law, Parliament has to send a Letter or at least make an Official Statement invoking Article 50 of the Lisbon Treaty.
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. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
3. 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.
4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.
A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.
5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.
Even after such an “official” declaration by Da Goobermint, the negotiations to unwind this marriage have a timeline of 2 years. That is a LOT of time for still more SHTF in both the UK and in the EU as a whole.
Far as the Brit Pols and the Eurocrat Clowns & Jokers are concerned, you have 2 opposing camps on this part of the debate also. Current Prime Minister David Cameron is stepping down, but not for another 3 months. As a Bremain supporter, he doesn't think he is the Man for the Job of negotiating a Brexit, which is about the first true thing I have heard out of the mouth of a politician in a long time. Kudos to DC for that. However, DC was also the person who actually suggested a Referendum, confident at the time I suppose that Brexit was a laughable idea and would be soundly defeated.
Unfortunately in the interim, the Refugee Crisis escalated out of control and the EU Clowns & Jokers have proved ever increasingly ineffective, anti-democratic and just plain stupid. Any credibility they may have once had has long since been lost. Really NOBODY in the entire EU except the Political Class beholden to Brussels can STAND these people, or being under their thumb economically, and as a result politically as well. You don't bow to the will of Brussels, they make your life miserable. See the Greeks for this, who after a brief and fairly impotent attempt at getting some kind of reasonable deal on their small mountain of debt totally capitulated to their Masters in Brussels.
The Brits (and Welsh, Scots & Irish) are in a slightly better position than the Greeks were. First off, when they joined the EU they never gave up their own currency of Sterling. So they can still print their own money. Second, the UK is home to the City of London, one of the largest financial centers in the world, exceeded only perhaps by Wall Street. This bollixes up all their operations, and while maybe they can move to Frankfurt or Brussels itself over some period of time, that would be an extremely expensive and difficult move to make. Thus you get still further turmoil in the financial markets during this period.
In any event, the EU Clowns are pushing the Brits to Invoke Article 50 IMMEDIATELY, to get on with this divorce! "Let's get it OVAH with here already! We HATE each other and we don't want to sleep together anymore! The Marriage is OVAH!"
The Brits on the other hand are shuffling their feet here on this, as mentioned Cameron won't send this letter and is stepping down to let some other Pol do the dirty work. From the Brexit side, they are in no rush either to carry through with the Referendum Results, especially given the already nasty fallout from the first day! They want to now use this to try to negotiate a better deal with the Euroclowns, but like the Greeks before them they don't REALLY want to leave the EU.
Problem on this of course is that at least by EU standards, the Brits ALREADY had the best deal, they got to keep their currency but ALSO had access to the Eurozone trading market with low or no tariffs, etc. The Euroclowns don't want to negotiate a STILL BETTER deal with them, since of course directly after that everybody will be clamoring for the same deal.
Which now brings us to another perhaps even larger problem than Brexit (which certainly is a big enough problem on its own!), which is the fact that in just about all the countries in the Eurozone, there are simmering Populist Movements that want OUT, extant even before the Brexit Vote.
Podemos in Spain under Pablo Iglesias wants Out. 5 Star in Italy under Beppe Grillo wants Out. The National Front under Marine LePen in France wants Out. The Party for Freedom in the Netherlands under Geert Wilders wants Out. Just about every country on the Balkan Migration Route of the MENA Refugees does NOT want Brussels dictating to them precisely how many Refugees they should or should not give Asylum to. This includes places like Austria, Hungary, Croatia etc. So Brussels is under a LOT of political pressure here, and in the medium to long run simply will not hold together as a union. That does not mean though that in the near term they will not use all tools at their disposal to keep this Ponzi afloat, they most certainly will do that. Everything depends on this, the solvency of the banking system leading the way on this.
Next week certainly will have a lot of Market Turmoil as all the Big Players try to reposition themselves in the aftermath of the initial carnage. How well the Central Banks can contain this and prevent Financial Contagion from spreading throughout the entire system is an Open Question. Interest Rate tools are pretty much shot since they are at ZIRP or NIRP all through the bond market. Ouright monetization of debt would destroy whatever is left of credibility here, and beyond that there still is no mechanism to deliver freshly printed money to the consumers who spend that money. Without that, you have no flow of funds, velocity of money drops to zero and it does not matter how much you print.
To sum it up, this would be a good time to load up on preps.