by David Stockman, David Stockman’s Contra Corner:
Talk about not waiting for the body to get cold. The establishment oracles are out in force today proclaiming that Brexit has already been cancelled. Apparently, like in the case of the first negative vote on TARP, two days of currency and stock market turmoil have taught the rubes who voted for it the errors of their ways.
The argument is that the unwashed masses outside of Greater London have shot themselves in the foot economically based on some atavistic fears of immigrants and cultural globalization. Racism even.
But those are just momentary emotional outbursts. Right soon they will get back to where their bread is buttered, and demand a second referendum in order to re-board the EU’s purported economic gravy train.
Thus, Gideon Rachman, one of the Financial Times’ numerous globalist scolds, professed that his depression about the Brexit vote has already given way to a worldly vision of relief:
But then, belatedly, I realised that I have seen this film before. I know how it ends. And it does not end with the UK leaving Europe.
Any long-term observer of the EU should be familiar with the shock referendum result. In 1992 the Danes voted to reject the Maastricht treaty. The Irish voted to reject both the Nice treaty in 2001 and the Lisbon treaty in 2008.
And what happened in each case? The EU rolled ever onwards. The Danes and the Irish were granted some concessions by their EU partners. They staged a second referendum. And the second time around they voted to accept the treaty. So why, knowing this history, should anyone believe that Britain’s referendum decision is definitive?
But of course Rachman’s dismissive meme is exactly why Brexit happened. The international financial apparatchiks, who have been controlling the levers of power at the central banks, finance ministries and supra-national official institutions for several decades now, have become so accustomed to not taking no for an answer that they can’t see the handwriting on the wall.
To wit, the rubes are feed up and are not going to take it anymore. In voting to flee the domineering EU superstate domiciled in Brussels, they saw right through and properly dismissed the establishment’s scary bedtime stories about the economic costs.
After all, the UK is a net payer of $10 billion per year in taxes into the EU budget and gets an economically wasteful dose of continental style regulatory dirigisme in return. And that is to say nothing of the loss of control at its borders and the de facto devolution of its law-making powers and judicial functions to unelected EU bureaucracies.
At the same time, increased trade is generally a benefit, but it is not one that requires putting up with the statist tyranny of the EU. That’s because the EU-27, and especially Germany, need the UK market for their exports far more than the other way around.
So after Brexit is triggered, the EU will come to the table for a new trade arrangement with the UK because these faltering socialist economies desperately need the exports. At the same time, the British negotiators will be free for the first time to seek more advantageous trade arrangements with the US, Canada, Australia and others.
It doesn’t take too much investigation to see that the UK has come out on the short end of the trade stick. And contrary to globalist apologists——-persistent and deepening trade deficits are a big problem. If coupled with a weakening savings rate, they mean that a country is getting ever deeper into international debt.
The UK economy exhibits that dual disability to a fare-the-well. Its current account has been plunging further into the red for 20 years. At 5% of GDP its current account deficit—-which includes the favorable benefits of service exports from the City of London and earnings on foreign investments—-is among the highest in the DM world.
To put it bluntly, the UK is slowly going bankrupt.
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