“Our overall conclusion is that it is not possible for the UK parliament to frustrate Brexit by October.”
Eurointelligence public briefing – 27 June 2019
“So we are getting ready to come out on October the 31st. Come what may… Do or die. Come what may.”
Boris Johnson – Tory leadership contender
“The next austerity episode will spark revolution and bring the Jacobins to power on the Left, and the new Caesars on the Right.”
Ambrose Evans Pritchard – “If the next Tory leader does not tear up the rule book on spending, Corbyn will do it for him”
Those of you who placed a political bet on Boris Johnson winning the Tory leadership contest after my last blog post, on 26th May 2019, will already be sitting on a nice profit on betfair. The cautious among you may wish to use the option of “cashing out”, guaranteeing your stake and a decent profit, or stick it out for a bigger profit assuming Boris wins the contest.
Despite the brief wobble over Boris late-night domestic with his lovely blond girlfriend last week, Boris remains the favourite to win the Tory leadership contest. Boris is the hard Brexit candidate and that is all the majority of the Tory membership want to hear. The alternative, as I explained in my last post, is electoral oblivion.
I have also placed a bet on a Hard Brexit by the end of 2019, which is currently at 3 to 1 odds (£100 stake yields a £200 profit) which is rather steep given the growing probability that we are heading for that outcome. Eurointelligence, a pro-EU intelligence newsletter, noted today that the UK parliament has already lost the opportunity to stop a no-deal Brexit if that is the determined wish of the next British prime minister (PM).
Of course, Boris Johnson remains a political enigma and there is doubt whether he really intends to take Britain out of the EU without a deal on 31st October. His “do or die” comment this week certainly gives the impression that he is serious but the financial markets and political commentariat remain convinced that a Hard Brexit is a low probability event. Either way, a high stakes poker game is going to start soon between the UK and the EU.
Let’s assume for the moment, that Boris wins the contest, fails to get meaningful concessions from the EU on the Irish backstop and succeeds in driving the UK out of the EU without a deal by November 2019. Berenberg Bank, a pro-EU German investment bank, recently noted that the worst-case scenarios predicted by the UK media will prove wrong. The trucks will carry on moving, the planes will land and we won’t see Armageddon on the supermarkets. Yes, there will be disruption but it will likely be short term and relatively manageable.
Should a Johnson government go through with a Hard Brexit it is likely that relations with the EU will go into a strategic Ice Age. The UK will prioritise relations with a pro-Brexit Trump America. A fast track free trade deal will be negotiated and the UK will pivot towards America on key foreign policy issues like Iran, Israel and China.
A Johnson government, with Sajid Javid as the likely next Chancellor, will prove far more radical on domestic economic policy than the current incumbent Philip Hammond. In 2016, I wrote that the Labour leader’s “…emphasis on a strong industrial strategy, the revival and expansion of the state and the proposal that central banks print billions to invest in national infrastructure, like renewable energy, are policies that could enter the political mainstream within the next ten years”. This increasingly looks like the right call.
All the signs are that a Javid Treasury will adopt much of the proposals outlined in Ambrose Evans Pritchard’s recent article in the Telegraph. A national investment bank, paid by central bank QE, will pump tens of billions into infrastructure spending: “flood defences, to railway electrification, full fibre broadband, 5G networks, renewable energy, space technology, research on advanced materials, beamless light, or semiconductor catapults, as well as smart motorways, super sewers, and social housing.” The shock of a no-deal Brexit will provide the perfect laboratory for a radical shift in economic policy away from fiscal austerity to full blown activist state spending.
The global economic picture is darkening. Technical indicators suggest that the stock markets will peak around September 2020 before recession hits in 2021 or so. Global central banks have given up on the rate rising cycle in the face of trade tensions, stock market wobbles and poor economic data. The historical pattern is that prior to the next recession hitting, which we are now overdue since the last one was in 2008/2009, there is an oil spike and a rollover in the stock markets. We haven’t yet seen either of those so the good times should roll for at least another year.
The breaking out of gold and bitcoin in recent weeks is another sign that all is not well with the global economy. Global capital is starting to shift assets into offshore safe havens which will survive a coming deflationary Ice Age. As Ambrose indicated in the quote at the top of this post, the centrist political classes across the Western world are likely to be crushed if they don’t alter course on economic policy. Just as the UK led the way in 1979 with the Thatcherite revolution, 2019 might prove to be the start of a new Johnsonian revolution, influenced by the rise of Corbynism in the mid-2010’s, in macro-economic policy.
The wider global background hasn’t changed since I started blogging in early 2016. Our industrial civilisation is in long-term decline and we remain on track, along the lines of the Limits to Growth modelling, for a major systemic crisis after 2030. The only certainty is that the status quo is unsustainable.
In America, the political class are gearing up for a brutal presidential election race with over a dozen candidates running in the Democratic primaries. It is early days but it looks like Biden is the establishment favourite who will likely win the race. The polls suggest that Biden would defeat Trump in a general election but I would treat such polling cautiously. I continue to think that President Trump is likely to get re-elected but we will see in the coming year.
The on-going Brexit saga is only one facet of the electoral rise of nationalistic leaders like Johnson, Trump, Modi, Bolsonaro, Putin, Jinping and Salvini which confirms the prophetic writings of Oswald Spengler on the rise of the Caesars in the 21st century as our global economic system dissolves.