The economic consequences of Brexit (Vol 2)
Discussion
PurpleMoonlight said:
Sorry, but it's just a blog and, plainly, a fairly biased, left wing one at that, so I read the comment, but do not take too much of the opinion to heart.FiF said:
TLandCruiser said:
It's ideas like this why I'm glad we are leaving the EU;
EU members face paying 'Brexit tax’ to fund shortfall - The Telegraph
https://apple.news/A34RCKgbwQAWppXsXJPixtA
The answer is more EU. Now what's the question?EU members face paying 'Brexit tax’ to fund shortfall - The Telegraph
https://apple.news/A34RCKgbwQAWppXsXJPixtA
Once again a news media source with no idea about the EU. Such a tax would require a treaty change so never going to happen.
FiF said:
Garvin said:
guango
I see what you did there, perhaps a new urban dictionary definition, guano, a combination of quango and guano, a useless organisation that produces a lot of sshhh you know what.
I wish it was deliberate, alas just a classic Freudian slip! Perhaps there is an overseeing Almighty guiding our very actions after all!
Edited by Garvin on Friday 13th January 12:48
Murph7355 said:
BTW, I get the arguments on passporting. I'm not convinced the broader EU has the ability to pick that business straight up though, so at worst I think a transitional deal would happen.
I also think, however, that traditional global market barriers in the world of finance have been falling for a while and will continue to do so. I can see the need for passporting becoming a little moot in the short to medium term, and other factors determining where the centre of gravity for finance will be. Whether the UK will succeed on that front, who knows. It's done OK for decades though - we have skills here, we have a respected legal system, our tax regime isn't the harshest, we're a safe country for high earners at present etc etc etc. We should be able to do OK..
The problem with your idea is the passporting regulations are implemented by directive not regulation. So even if the EU agreed the relevant changes would need to be enacted into law in all 27 countries.I also think, however, that traditional global market barriers in the world of finance have been falling for a while and will continue to do so. I can see the need for passporting becoming a little moot in the short to medium term, and other factors determining where the centre of gravity for finance will be. Whether the UK will succeed on that front, who knows. It's done OK for decades though - we have skills here, we have a respected legal system, our tax regime isn't the harshest, we're a safe country for high earners at present etc etc etc. We should be able to do OK..
MIFID 2 offers a better option but that will never be ready by 2019.
Digga said:
PurpleMoonlight said:
Sorry, but it's just a blog and, plainly, a fairly biased, left wing one at that, so I read the comment, but do not take too much of the opinion to heart.He is both right of centre and a committed brexiter.
Mrr T said:
FiF said:
TLandCruiser said:
It's ideas like this why I'm glad we are leaving the EU;
EU members face paying 'Brexit tax’ to fund shortfall - The Telegraph
https://apple.news/A34RCKgbwQAWppXsXJPixtA
The answer is more EU. Now what's the question?EU members face paying 'Brexit tax’ to fund shortfall - The Telegraph
https://apple.news/A34RCKgbwQAWppXsXJPixtA
Once again a news media source with no idea about the EU. Such a tax would require a treaty change so never going to happen.
This extract shows the complete lack of common sense in the EU "Jean Arthuis, chairman of the European Parliament’s budgetary committee, said: “If there is a new Europe-wide tax, in each member state the national authorities will reduce the amount to be paid at the national level.”"
No they wont you Muppet, the only way they could is by reducing the national tax take paid into the governments exchequer, which means cuts to services.
FiF said:
"kiptard ","moron" and "toryboy".He has a great way of convincing people who do not share his views that he is right....all he manages to do is sound like a hysterical moron himself. Which is a shame as if there's any substance in there it is lost.
Mrr T said:
Digga said:
PurpleMoonlight said:
Sorry, but it's just a blog and, plainly, a fairly biased, left wing one at that, so I read the comment, but do not take too much of the opinion to heart.He is both right of centre and a committed brexiter.
Mrr T said:
Your right most FX execution is now via order execution systems. However, these systems are not trading systems they just match buyers and sellers. I am sure there are automated trading systems as well but a) the Volker rule means these will not be used by banks so it will only be hedge funds, b) this will limit capital because hedge funds do not have much capital.
I agree they will have more effect today than a few years ago because the Volker rule means there is less liquidity in the market.
The real movers in the FX market are those who are buying/selling curacy because of their underlying operations. The biggest of these are investors, and the biggest investors are the Sovereign wealth funds. The slide in GBP means it’s likely they are reducing holdings of gilts. That’s bad news for a country with a massive debt problem.
Wrong. Volcker doesn't apply for SPOT FX transactions, only SWAPS Options and Fwds.I agree they will have more effect today than a few years ago because the Volker rule means there is less liquidity in the market.
The real movers in the FX market are those who are buying/selling curacy because of their underlying operations. The biggest of these are investors, and the biggest investors are the Sovereign wealth funds. The slide in GBP means it’s likely they are reducing holdings of gilts. That’s bad news for a country with a massive debt problem.
Volcker has had an impact in Bond markets, particularly killing liquidity in Corporates and pulling slab means that HFs may well become Market Makers in certain products (Citadel already is I think).
SWFs are NOT particularly large holders of Govt debt, other govts generally are - followed by banks (post BASEL and the requirement of banks to support public sector debt bubbles). Largest holders of US Govt Debt
Japan
China
Ireland
Cayman Islands
Brazil
Switzerland
Luxembourg
UK
In the Eurozone the ECB (in its capacity as the world biggest Hedge Fund) has $4tr is assets from its QE program.
As far as investing goes, a falling £ makes investment in Equities more likely (and its visible). SWFs like Norges etc are overweight equities and this trend is expected to continue.
Mrr T said:
The problem with your idea is the passporting regulations are implemented by directive not regulation. So even if the EU agreed the relevant changes would need to be enacted into law in all 27 countries.
MIFID 2 offers a better option but that will never be ready by 2019.
Passporting is a Mickey Mouse argument for the grad intake. Its just a cost. If the costs of being located in a jurisdiction (say the Eurozone) outweigh the passporting benefit - guess what? With the EC preparing to change resolution and recovery rules for banks - consolidation of Investment & retail units into the same Holding Company - counter Vickers et al & technically illegal for US firms) - Costs up.MIFID 2 offers a better option but that will never be ready by 2019.
BRRD (Bank Resolution & Recovery Directive) is a joke, with captive prisoner pricing on liabilities (significant levy costs to banks located in the Eurozone).
Leverage Ratio for European banks all hover around 3%, ING being the best at closer to 5. DB is about 2.7%. Look at other GSIBs, almost twice as strong. What do you think that means for Risk Costs for non-EuroBanks facing Eurobanks. Once IFRS-9 further erodes their CET1 ratios, their credit extension and credit worthiness drops further. During BREXIT some of the Italian banks had a shock when their AFS Liquidity buffers were modelled for market stress (BoE requires this). The gaming of Risk based costs in the Eurozone is endemic. They all use IMM to cut risk costs; with non-euro banks prone to take standardised (or worst case) stressed capital. The EC is trying to pull the same trick for liquidity, allowing BBB- equivalence with AAA - its a bankrupt system that ultimately the real risk costs of doing business will trump the passporting benefit (and that's before you get into the practical issues of re-writing UK law).
Of course there will be some relocation, but it will be a lot less than the sky is falling camp.
FiF said:
Which may well be correct.But we should still be prepared to walk away from the table otherwise we have no basis for negotiation, so all the insults are rather tiresome and short sighted. As the alternative may well be an agreement that is detrimental to British interests.
What it also comes down too is that we have 45% of our exports going to the EU and that is too high, as trade will always be a weapon the EU uses against those who want to trade freely with them.
An end scenario (after some short term disruption) where only a third or so of our exports go to the EU is to be welcomed not feared.
Mrr T said:
Thanks for reading it makes the discussion easier. The WTO option assumes no agreement with the rEU on tariffs or standards. This effectively makes any goods crossing the UK and the rEU subject not only to tariffs, if applicable, but to inspection to ensure they meet rUK/UK standards.
If you consider this in terms of car manufacturing. The UK volume car assembly plans do not produce cars from raw materials they assemble parts. They for efficiency operate JIT stock systems. The parts come from many places across the rEU and the UK. Indeed, even the suppliers to assembly plant are themselves often no more than assemblers of parts. UK car assembly is in fact a supply web with components crossing and recrossing the UK/rUK border. As part of the single market this web operates without any tariffs or inspections at the UK/rEU borders.
If the UK leaves the EU without this same access to the rEU the chain breaks down with tariffs being paid as the goods cross and recross the border and with delays as goods are inspected as they cross.
For the UK assembly plant this will add costs and slow the chain adding more costs. The car assemblers have been very public that this would seriously effect there business.
On a practical measure have you considered the implications for the flow through the ferry ports and the Chunnel?
The tunnel has at least a lot of space to build new facilities. The port of Dover does not.
Am always prepared to read new (to me) material and be persuaded If you consider this in terms of car manufacturing. The UK volume car assembly plans do not produce cars from raw materials they assemble parts. They for efficiency operate JIT stock systems. The parts come from many places across the rEU and the UK. Indeed, even the suppliers to assembly plant are themselves often no more than assemblers of parts. UK car assembly is in fact a supply web with components crossing and recrossing the UK/rUK border. As part of the single market this web operates without any tariffs or inspections at the UK/rEU borders.
If the UK leaves the EU without this same access to the rEU the chain breaks down with tariffs being paid as the goods cross and recross the border and with delays as goods are inspected as they cross.
For the UK assembly plant this will add costs and slow the chain adding more costs. The car assemblers have been very public that this would seriously effect there business.
On a practical measure have you considered the implications for the flow through the ferry ports and the Chunnel?
The tunnel has at least a lot of space to build new facilities. The port of Dover does not.
Where standards are concerned I struggle on two counts...
(1) we are already in 100% conformance to EU standards. Our testing regimes are evidently trusted. So where standards are concerned as long as we agree to remain up to date for anything being exported to the EU, and to follow all current processes in doing so, there is no problem. That is not a 2yr task to agree. Unless there is a political will to make it a problem.
There is, of course, no guarantee that this will not happen. But if it does will it really be any less manageable than...
(2)... other countries who currently cope with conformance. And one assumes competitively so. Would the EU apply punitive checks over and above those that the US, China and others have to?
OK, exporters are going to have additional hoops potentially. But I was assuming that was being covered in the 2% cost noted in one of his papers... Expand the staff you currently employ to assert EU conformance to cover the hoops and away you go. It's not as if we are starting from scratch as we already know the standards inside out, what les grandes fromages look for etc. No?
Ref the auto industry, same thing really. JIT does not mean goods have to be able to be imported through customs in 5mins with no paperwork. It means you order them just in time allowing for all factors. OK, there's nothing to stop Manuel or François feeling a bit anti-UK and causing random delays. But it can all be planned for. It may mean ordering things earlier, may impact how much stock you hold, cash flow etc. But materially so? R North doesn't say.
There is not a business in the UK, and probably very, very few individuals who would not say that not raising these barriers would be preferable. But they can be managed. As Nissan evidently believe despite CGoshn's foot stamping. Perhaps they're being a little more pragmatic than R North. Or allowing for other factors?
There are lots of ifs, buts and maybes out there. But none of it seems to realistically accommodate that the businesses involved will want to trade and will make situations to do this workable. They did so before 1973. They will do so after 2019. Were we better off in between? There is not a single person on this planet who has been able to empirically state this either way, and never will be.
PS ref Dover.. Despite being a member of the EU we are too regularly impacted by French belligerence where the ports are concerned. We cope.
PurpleMoonlight said:
Yes, because someone whose posts includes "John Redwood has s
t for brains" and "We will pay a high price for Tory arrogance" are clearly a balanced and informative commentator.FFS
Mrr T said:
The problem with your idea is the passporting regulations are implemented by directive not regulation. So even if the EU agreed the relevant changes would need to be enacted into law in all 27 countries.
MIFID 2 offers a better option but that will never be ready by 2019.
Things can happen as quickly as people want them to. MIFID 2 offers a better option but that will never be ready by 2019.
Faced with funding drying up if lock stock movement of the City to the EU overnight does not happen overnight, I suspect people will start to move.
Regardless of the rhetoric I don't see either side causing catastrophic collapse for the sake of it. I've heard commentators note Brexit is lose:lose. There's no need for that at all and I cannot see anyone striving for that to prove a point to about a project in serious trouble anyway.
Digga said:
Mrr T said:
Digga said:
PurpleMoonlight said:
Sorry, but it's just a blog and, plainly, a fairly biased, left wing one at that, so I read the comment, but do not take too much of the opinion to heart.He is both right of centre and a committed brexiter.
With a WTO exit, and no agreements on mutual recognition, the EU would be required to carry out border inspections. These are done on a risk assessment but the UK woukd beautiful year zero country and subject to inspections at the highest rate. Nearest border inspection post is Dunkirk, apparently, capable of 5,000 inspections per year, currently Euro tunnel and Dover port handle 10,000 trucks per day. Operation Stack^(n+1) anyone?
But hey, try and knock an observation down as just a blog. Reality should strike one day that in this discussion it's the bloggers who have the facts and the balanced arguments, the media and politicians are way way way behind the curve on this one.
Would agree with whoever observed that the Norths are sometimes too prickly for their own good, and that's from one who would fully admit to having days when far too snippy myself. But having seen some of the utterly offensive bile they've had to put up with one can sympathise. Responses which are of no more substance than calling them the c-word simply for suggesting that we can exit the EU, or that we may need to compromise on certain issues could get a bit tiresome one imagines.
FiF said:
With a WTO exit, and no agreements on mutual recognition, the EU would be required to carry out border inspections. These are done on a risk assessment but the UK woukd beautiful year zero country and subject to inspections at the highest rate. Nearest border inspection post is Dunkirk, apparently, capable of 5,000 inspections per year, currently Euro tunnel and Dover port handle 10,000 trucks per day. Operation Stack^(n+1) anyone?
It will never happen, because there is a perfectly feasible quid pro quo. A more rational agreement will be found.FiF said:
Ignore the left -right twaddle, just consider the technical arguments over the logistics.
With a WTO exit, and no agreements on mutual recognition, the EU would be required to carry out border inspections. These are done on a risk assessment but the UK woukd beautiful year zero country and subject to inspections at the highest rate. Nearest border inspection post is Dunkirk, apparently, capable of 5,000 inspections per year, currently Euro tunnel and Dover port handle 10,000 trucks per day. Operation Stack^(n+1) anyone?
But hey, try and knock an observation down as just a blog. Reality should strike one day that in this discussion it's the bloggers who have the facts and the balanced arguments, the media and politicians are way way way behind the curve on this one.
Would agree with whoever observed that the Norths are sometimes too prickly for their own good, and that's from one who would fully admit to having days when far too snippy myself. But having seen some of the utterly offensive bile they've had to put up with one can sympathise. Responses which are of no more substance than calling them the c-word simply for suggesting that we can exit the EU, or that we may need to compromise on certain issues could get a bit tiresome one imagines.
Do I need to stock up on tinned food and bottled water then or not?With a WTO exit, and no agreements on mutual recognition, the EU would be required to carry out border inspections. These are done on a risk assessment but the UK woukd beautiful year zero country and subject to inspections at the highest rate. Nearest border inspection post is Dunkirk, apparently, capable of 5,000 inspections per year, currently Euro tunnel and Dover port handle 10,000 trucks per day. Operation Stack^(n+1) anyone?
But hey, try and knock an observation down as just a blog. Reality should strike one day that in this discussion it's the bloggers who have the facts and the balanced arguments, the media and politicians are way way way behind the curve on this one.
Would agree with whoever observed that the Norths are sometimes too prickly for their own good, and that's from one who would fully admit to having days when far too snippy myself. But having seen some of the utterly offensive bile they've had to put up with one can sympathise. Responses which are of no more substance than calling them the c-word simply for suggesting that we can exit the EU, or that we may need to compromise on certain issues could get a bit tiresome one imagines.
On a serious note, as all our exported goods will comply the day before we leave it's a reasonable assumption they will the day after. So, deeming everything high risk is somewhat over zealous and unnecessary, unless the EU want to use it as a dis-incentive to others to consider leaving.
Murph7355 said:
Am always prepared to read new (to me) material and be persuaded
Where standards are concerned I struggle on two counts...
(1) we are already in 100% conformance to EU standards. Our testing regimes are evidently trusted. So where standards are concerned as long as we agree to remain up to date for anything being exported to the EU, and to follow all current processes in doing so, there is no problem. That is not a 2yr task to agree. Unless there is a political will to make it a problem.
There is, of course, no guarantee that this will not happen. But if it does will it really be any less manageable than...
(2)... other countries who currently cope with conformance. And one assumes competitively so. Would the EU apply punitive checks over and above those that the US, China and others have to?
OK, exporters are going to have additional hoops potentially. But I was assuming that was being covered in the 2% cost noted in one of his papers... Expand the staff you currently employ to assert EU conformance to cover the hoops and away you go. It's not as if we are starting from scratch as we already know the standards inside out, what les grandes fromages look for etc. No?
Ref the auto industry, same thing really. JIT does not mean goods have to be able to be imported through customs in 5mins with no paperwork. It means you order them just in time allowing for all factors. OK, there's nothing to stop Manuel or François feeling a bit anti-UK and causing random delays. But it can all be planned for. It may mean ordering things earlier, may impact how much stock you hold, cash flow etc. But materially so? R North doesn't say.
There is not a business in the UK, and probably very, very few individuals who would not say that not raising these barriers would be preferable. But they can be managed. As Nissan evidently believe despite CGoshn's foot stamping. Perhaps they're being a little more pragmatic than R North. Or allowing for other factors?
There are lots of ifs, buts and maybes out there. But none of it seems to realistically accommodate that the businesses involved will want to trade and will make situations to do this workable. They did so before 1973. They will do so after 2019. Were we better off in between? There is not a single person on this planet who has been able to empirically state this either way, and never will be.
PS ref Dover.. Despite being a member of the EU we are too regularly impacted by French belligerence where the ports are concerned. We cope.
Its pleasant to be able to have a sensible exchange of views on here. Where standards are concerned I struggle on two counts...
(1) we are already in 100% conformance to EU standards. Our testing regimes are evidently trusted. So where standards are concerned as long as we agree to remain up to date for anything being exported to the EU, and to follow all current processes in doing so, there is no problem. That is not a 2yr task to agree. Unless there is a political will to make it a problem.
There is, of course, no guarantee that this will not happen. But if it does will it really be any less manageable than...
(2)... other countries who currently cope with conformance. And one assumes competitively so. Would the EU apply punitive checks over and above those that the US, China and others have to?
OK, exporters are going to have additional hoops potentially. But I was assuming that was being covered in the 2% cost noted in one of his papers... Expand the staff you currently employ to assert EU conformance to cover the hoops and away you go. It's not as if we are starting from scratch as we already know the standards inside out, what les grandes fromages look for etc. No?
Ref the auto industry, same thing really. JIT does not mean goods have to be able to be imported through customs in 5mins with no paperwork. It means you order them just in time allowing for all factors. OK, there's nothing to stop Manuel or François feeling a bit anti-UK and causing random delays. But it can all be planned for. It may mean ordering things earlier, may impact how much stock you hold, cash flow etc. But materially so? R North doesn't say.
There is not a business in the UK, and probably very, very few individuals who would not say that not raising these barriers would be preferable. But they can be managed. As Nissan evidently believe despite CGoshn's foot stamping. Perhaps they're being a little more pragmatic than R North. Or allowing for other factors?
There are lots of ifs, buts and maybes out there. But none of it seems to realistically accommodate that the businesses involved will want to trade and will make situations to do this workable. They did so before 1973. They will do so after 2019. Were we better off in between? There is not a single person on this planet who has been able to empirically state this either way, and never will be.
PS ref Dover.. Despite being a member of the EU we are too regularly impacted by French belligerence where the ports are concerned. We cope.
RI will not do a point by point reply because I suspect we will never completely agree. Which is fine as everyone is entitled to a view even don4l.
My comments are.
1. Obviously the fact we currently have the same regulations does make an agreement on standards easier (which then means it’s not a WTO exit). However, such an agreement is not simple. You would need to agree which world bodies standard you will automatically accept, how you will agree new standards which do not come from the world bodies, and a dispute resolution process. Since these form the basis for most such agreements and the average time to negotiate seems to be about 7 years, 2 years maybe optimistic.
2. If the UK/rEU border becoming a true customs border is not about a couple of blokes checking goods. A customs border requires paper work to cross and maybe tariffs and VAT to pay. This process will introduce costs where none exist now.
3. Actually JIT does mean moving stock through borders in 5 minutes. If moving through borders involves delays then the volume of parts in the supply change is greater. This increase stock costs money. That why JIT is so important.
4. Nissan view is clear they expect full access to the single market as they do now. The May government has promised the same.
5. The difference between 1973 and today is business in the UK have built there processes assuming full access to the single market.
6. You are right businesses will adapt. They can take on more people, which costs money, they can hold more stock which costs money. Or they can move operations out of the UK.
7. I am not suggesting Nissan, for example, would do this on day one, they have too much money invested. However, I would think it’s likely they would start to run down there investment in the UK.
8. With regard to Dover, my point is practical. A true customs border needs a bonded area, where goods can wait while paper work is processed. The foot print of Dover port is tiny with no room to expand, so I am not sure how they would cope.
Finally one more point an exit to WTO would destroy the food export industry (this is also courtesy of R North). I do suggest you read his postings, its far more informative in my view than any of the media.
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