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/ Brexit predictions - mid-term review

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Bob Hughes - on 27 Dec 2017

About this time last year I made some predictions for the Brexit negotiations based on TMay's Lancaster House speech on this forum. I thought it would be interesting to dig them out to see whether I still stand by them and to make some follow-up predictions. I recognise this is a bit self-indulgent. Sorry for that but if you can't do it over christmas...

So here goes. What are your predictions?

> 1. Getting the divorce settlement and trade agreement simultaneously done within two years. More than very difficult, I actually think this is impossible - for me 0% probability

The past 12 months has confirmed my view. In 12 months we have mostly resolved 2 of the 3 first issues. Finance settlement feels pretty much done, citizens rights is almost there but with a few bits and pieces to go (family reunion rights for UK citizens in the EU). Northern Ireland has been kicked down the road. We still have many, many other issues to negotiate (transition, security cooperation, participation in future EU programmes, trade, customs union) and I still think there is zero probability we will get all that done in the next 12 months.

Follow-up prediction: I think that by this time next year we will have agreement on some of the major divorce issues (financial settlement, citizens rights, transition, security cooperation) and others will be kicked down the road: Northern Ireland, customs. On trade I expect we’ll have a political statement of intent but very little substance.

I am going to make a further prediction that I don’t think the trade agreement will be fully tied up by the end of the transition.

> 2. Membership of the customs union, control over immigration and a common travel area with Northern Ireland. I'm stumped on how you combine these three. Not quite impossible, but very hard. 15% probability (i think they'll end up with a common travel area with northern Ireland but compromise on customs union / immigration control.)

A few points here. First, the problem has actually changed since I wrote this prediction. In TMay’s Lancaster House speech the problem was framed as reconciling maintaining the Irish Common Travel Area with Britain taking control over immigration. In the way it was framed, the real problem was free movement but in the past few months it has become clear that the real problem was around trade. In my predictions I had added “membership of the customs union” to the problem (I don’t think I was especially prescient here as, from memory, I think the general commentators were making the same point.). This was because, later in her speech Theresa May said: “I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff. These are the elements of the Customs Union that prevent us from striking our own comprehensive trade agreements with other countries. But I do want us to have a customs agreement with the EU. ”

Which I took to mean membership of the customs union. In any case, whether the UK is a member of the customs union or a customs union, the point is still the same – you can have two of the following three:
• tariff and non-tariff free trade between northern Ireland and the republic of Ireland
• no physical border between Northern Ireland and the republic of ireland
• regulatory divergence

But you can’t easily have all three. I still think you can’t have all three. The original challenge over free movement seems to have been solved by the birth right of Northern Irish citizens to have Irish, UK or dual Irish-UK citizenship.

Despite the fact that this has been completely kicked down the road in the Progress Report (if anyone is looking for an EU concession made in stage one it is surely accepting the fudge on NI as “sufficient progress”), I am getting more optimistic that they will find an agreement on this topic. I’d lift my original estimate of 15% to 30%. I now believe the compromise will lie somewhere between no physical border and regulatory alignment. (i.e. there probably will be some physical infrastructure at the border (80% probability) and there will probably be limits to UK ability to diverge from EU regulations (80%) – this last prediction is basically a re-hash of the Progress Report anyway)

> 3. Membership of the customs union, opt-out of the Common External Tariff and a free trade agreement. Also seems intractable. 25% probability.

We really haven’t seen any progress on this so hard to update my original estimate. In general, though we have seen that the EU is very unwilling to diverge from their negotiating guidelines and that they have the leverage to defend them. So I’m going to reduce my estimate from 25% to 20%. I think the UK will be either clearly in or clearly out of the customs union. Most likely clearly out (75% probability).

> 4. Control over immigration. I think they'll get this. 75% probability

Interestingly, this topic has just completely dropped off the agenda over the past 12 months. I’ll raise my original prediction to 90% probability.

> 5. Rights for EU nationals in the UK and vice versa. Both sides want this and it should be easy to do. 90% probability. The devil will be in the implementation.

It seems that this has already been achieved and I think the progress report confirms my suspicion that the devil will be in the implementation. I didn’t anticipate that the principle of reciprocity would effective put the UK government in the position of pushing to reduce the rights of UK nationals in the EU (esp. on family reunion rights but there is also now a grey area over whether we will need to register for an equivalent to settled status).

I’ll claim a win here.

> 6. Co-operation on security and science. No-brainer. 95% probability.

No new information on this and I’m sticking by my original prediction.

(original predictions here: https://www.ukclimbing.com/forums/t.php?n=656944&v=1#x8483479)

Edited to add:

I missed the most obvious sticking point by not giving any prediction on the settlement bill. In restrospect that was a major omission.
Post edited at 14:40
tom_in_edinburgh - on 27 Dec 2017
In reply to Bob Hughes:

My prediction is the EU position stays pretty much exactly where it has always been on everything. But month by month the level of discontent in the UK rises as the economic fall out becomes harder and harder to ignore. At some point in the second half of 2018 the economic news gets bad enough to provide a pretext for a change of course and either May uses it to reshuffle all the Brexiteers out her cabinet or she is deposed by the Tories or there is an election.

Either way the final outcome is we move sideways into the EEA or something which is effectively the EEA but is glossed over with a different name. That is the only option which leaves us economically largely intact and saves enough face.
neilh - on 27 Dec 2017
In reply to tom_in_edinburgh:
As a remainer I fundamentally disagree. The economic news will be good to excellent as the global economy continues to pick up. We will therefore be dragged, if that is the right word, along on an upward spiral .

Unfortunately this does not help the remainers arguments about the economy falling off a cliff edge.
Post edited at 15:51
HansStuttgart - on 27 Dec 2017
In reply to tom_in_edinburgh:

I agree that something similar to EEA is the most likely endpoint. It is the obvious compromise, it is a good solution for EU27 and they hold all the power.

I expect that if the negotiations go nowhere, EU27 will just work out the scenarios for something EEA like and something Canada FTA like and present it as a take it or leave choice to the UK parliament.
RomTheBear on 27 Dec 2017
In reply to HansStuttgart:

> I agree that something similar to EEA is the most likely endpoint. It is the obvious compromise, it is a good solution for EU27 and they hold all the power.

Not without a change of government.


RomTheBear on 27 Dec 2017
In reply to neilh:
> As a remainer I fundamentally disagree. The economic news will be good to excellent as the global economy continues to pick up. We will therefore be dragged, if that is the right word, along on an upward spiral .

> Unfortunately this does not help the remainers arguments about the economy falling off a cliff edge.

In the scenario of customs union and single market exit, yes, dragged allong, that is, behind, with lower growth than otherwise possible and behind the growth rates in the local area. We’re talking about an 5-10% impact on GDP over 15 years depending o the scenario.

The impact on growth we are experiencing now is simply due to uncertainty and currency shock (bang on as the treasury predicted, may I add). Once this is over then the impact depends on the future trade relation.

The two treasury analysis are worth reading in full, really...
Post edited at 17:43
GridNorth - on 27 Dec 2017
In reply to Bob Hughes:
Sadly I agree with Peter Hitchens. We've spent that last 40 years half in and we will probably spend the next 40 years half out. If the EU doesn't collapse that is.

It's the worst of all possible scenarios. I would prefer all in or all out.

Al
Post edited at 17:42
neilh - on 27 Dec 2017
In reply to RomTheBear:

Well as the latest updated stats show we are still level pegging with Germany on growth. It just means the Remainers message on it becoming an economic disaster does not stand up to scrutiny.

It is becoming embarrassing.

john arran - on 27 Dec 2017
In reply to neilh:

You can't artificially stimulate growth by devaluing your currency indefinitely.
john yates - on 27 Dec 2017
In reply to John arran:

This is not 1967 http://bit.ly/2BJErLZ and May is not in Harold Wilson's position.

Since Gordon Brown made the BoE independent, direct political control of monetary policy has been handed to the Governor (though it could be argued QE is a way of the of the government printing money).

So. Mr Arran is wrong. We have not devalued. We have been devalued by the markets.

The prevailing consensus is that Sterling is now undervalued: but when market sentiment will change is anybody's guess. Such is life in the global casino economy.

Carney can, of course, raise rates – when he allowed rumours to circulate of a November rise, the pound rallied briefly – but life is never easy for central bank Governor. He has other difficulties to deal with. Not least, how to end almost a decade of QE without precipitated a panic in the financial markets. Finessing this issue makes Brexit look piss.

What was designed as short term measure has been allowed to become a dangerous and debilitating narcotic. The result is misallocation of investment risk and capital - much of it going into another unsustainable house price boom; but also into vast increases in personal and public debt (none of which have been touched by so-called austerity).

Risk weighting for mortgage debt is now running at about 13% in the commercial banking sector. Comparable weighting for company loans is 100%. Many believe this is one of the key causes of UK productivity flat lining. There is little evidence of export income gains being fed back into investment in capital/machinery to improve productivity,.

The reality is we have mismanaged the medium term response to the crash of 2008. With the result that we – and the rest of the EU – are in a seriously weakened position to deal with a big, exogenous shock: like the meltdown of the 'awesome' Chinese economy with its $18 trillion corporate debt (equal to 169% of GDP) and no corporate bankruptcy regime.

None of this is, in any way, casually linked to Brexit. It is, however, politically linked - chiefly though the issue of EU efforts towards banking union...a topic in itself.

For what it is worth I am less pessimistic about EU negotiations than Bob, who has clearly given this some considerable thought.

Interesting comments from Sigmar Gabriel on a 'smart deal' over the weekend, and Jonathan Ford in the FT today who reminds us that City's pre-eminence long pre-dates the invention of the passport....and suggests we accept French negotiators' position and allow the City to "continue to expand its global trade."

I am sure there are many out there that take a gloomier view - especially when the sun falls out of the sky so early in the afternoon and climbing is forced indoors for those without a lantern and/or a gritty resilience to the cold.
john arran - on 27 Dec 2017
In reply to john yates:

For crying out loud, do you really have to misinterpret EVERYTHING? It's getting tedious.

Neil's point was about growth and the UK's surprising level of it, apparently suggesting that the UK economy isn't doing so badly after all. My point was that this growth has been substantially a result of currency devaluation, which isn't a sustainable condition. How the devaluation came about is not relevant, what was relevant is that the experienced growth is not sustainable, and the economic disaster is still very much in progress.
neilh - on 27 Dec 2017
In reply to john arran:
I think both of you are wrong.You are both misinterpretationing what is going on globally and how that is affecting the uk economy.
john yates - on 27 Dec 2017
In reply to john arran:

It makes all the difference. Which is why Gordon Brown’s first move was to make BoE independent. It assured the markets that monetary policy was now in the hands of technocrats. If it made no difference, there would have been no reason to make a fundamental policy shift.
My point is that the fall in value of Sterling is a vote on the relative merits of the U.K. economy. What we do with its upside and downside will determine whether it is sustainable or not.
Had you not been so blind to this you would have understood that I am agreeing with you. But it is important to understand that governments can no longer devaluae in the way Wilson did. In the end the markets will decide all our fates.

john arran - on 27 Dec 2017
In reply to neilh:

I'd be happy to agree that UK growth is substantially due to global upturn. But I'd still contend that in the UK's case a substantial part of it was living even more on borrowed time that is the case for other booming economies, as it's been artificially bolstered by an unsustainable combination of low-value currency and low inflation.
john arran - on 27 Dec 2017
In reply to john yates:

Your line of argument, once again, seems to be to ignore the point being made and to propose something that wasn't ever in question. As such, we seem to be, unsurprisingly, in agreement.
Big Ger - on 27 Dec 2017
In reply to Bob Hughes:

> YouGov’s Eurotrack results for December shows that whilst 48% of Brits asked prefer that the UK leaves the EU, only 39% now say they would prefer for the UK to remain, a 9 point lead for those now full square behind Brexit. An additional 13% of those asked are undecided.
john yates - on 27 Dec 2017
In reply to neilh:

I hope you a right. My feeling is that Brexit is a sideshow. It might preoccupy U.K. media and social and UKC-land, but it is not the main threat. For me, world leaders have not dealt with consequences/causes of the crash. Many of the numbers are now much worse than pre-2008 and the patient is in a much less robust condition to withstand the next shock which is slouching towards us. Building walls as the EU and Trump are trying will not work. The waves will be too big. Banks now have debt levels once the reserve of sovereign states. The next crash will be brutal.
john arran - on 27 Dec 2017
In reply to Big Ger:
The question asked appears to have been "At this point would you prefer that Britain stays in or leaves the European Union?"
Do you not think the poll results might be in part because of a desire to honour the expressed 'will of the people' even if that will might no longer be the case? Were we to have a second referendum, how many of those 48% do you think might vote Remain? The answer is that neither of us knows, but a growing body of evidence would suggest a majority would back Remain if it was now supported by a positive referendum result, even though some of those I suppose may not support remaining without such a second referendum. I can't say I blame them either, as a political move to remain without a second referendum to support it would be just as divisive as the current fiasco situation.
Post edited at 20:26
summo on 27 Dec 2017
In reply to john arran:

> You can't artificially stimulate growth by devaluing your currency indefinitely.

Works for Germany. Just keeping getting more nations to join the euro and devalue theirs.
john yates - on 27 Dec 2017
In reply to john arran:

Had the vote been narrowly the other way would you have been so vocal in declaring it illegitimate?
HansStuttgart - on 27 Dec 2017
In reply to RomTheBear:

I do consider a change of UK government likely in almost all scenarios.
john arran - on 27 Dec 2017
In reply to john yates:

Sorry to spoil your narrative but I have never considered it illegitimate, despite its many failings. But that's not to say that it ever should have been sufficient to justify constitutional change.
RomTheBear on 27 Dec 2017
In reply to neilh:
> Well as the latest updated stats show we are still level pegging with Germany on growth. It just means the Remainers message on it becoming an economic disaster does not stand up to scrutiny.

> It is becoming embarrassing.

Hum... no... not at all...Germany YoY gdp growth stands at 2.80, U.K. at 1.80 (latest revision). France 2.30, Euro area 2.60.

https://tradingeconomics.com/country-list/gdp-annual-growth-rate?continent=g20
Post edited at 21:18
Big Ger - on 27 Dec 2017
In reply to john arran:

> The question asked appears to have been "At this point would you prefer that Britain stays in or leaves the European Union?"

> Do you not think the poll results might be in part because of a desire to honour the expressed 'will of the people' even if that will might no longer be the case?

Do you not think the poll results might be in part because of a desire to get rid of out EU membership due to the shoddy and unpleasant way the EU has reacted towards our desire to leave?

> Were we to have a second referendum, how many of those 48% do you think might vote Remain?

Most I should imagine.

> The answer is that neither of us knows, but a growing body of evidence would suggest a majority would back Remain if it was now supported by a positive referendum result, even though some of those I suppose may not support remaining without such a second referendum.

The majority may also like to consider calling my aunt my uncle, should she develop testicles.
john arran - on 27 Dec 2017
In reply to Big Ger:

> Do you not think the poll results might be in part because of a desire to get rid of out EU membership due to the shoddy and unpleasant way the EU has reacted towards our desire to leave?

As far as I can tell, the EU has always been firmly of the opinion that it would prefer the UK not to leave, but if it was determined to do so, it would not be granted any preferential treatment that might jeopardise the coherence of the remaining 27-nation union. Any shoddy or unpleasantness seems to have been introduced in the UK rags' printing process.

> Most I should imagine.

Me too, but that would most likely still leave a minority still in favour of exiting.

> The majority may also like to consider calling my aunt my uncle, should she develop testicles.

You lost me there. If people see that the world isn't as they formerly perceived it to be, it's only right that they are at liberty to change their outlook.
Bob Hughes - on 27 Dec 2017
In reply to tom_in_edinburgh:

> My prediction is the EU position stays pretty much exactly where it has always been on everything.

I’d agree with this with one caveat. So far the EU has been smarter in giving itself wiggle room where it needed and sticking firm where it had drawn clear red lines. “Sufficient progress” was always going to end up with a fudge but I think the level of fudge on Northern Ireland basically amounts to a concession from the eu.

> But month by month the level of discontent in the UK rises as the economic fall out becomes harder and harder to ignore. At some point in the second half of 2018 the economic news gets bad enough to provide a pretext for a change of course and either May uses it to reshuffle all the Brexiteers out her cabinet or she is deposed by the Tories or there is an election.

I don’t think this will happen. As Neil says the global economy is looking pretty good and we still won’t have left the EU so there will be limited real affects of Brexit. We may see a steady drum beat of banks and multinationals moving jobs and or operations abroad but I think these will end up being less than anticipated, especially in the financial sector. There was a story in the fT the other day saying just that.

> Either way the final outcome is we move sideways into the EEA or something which is effectively the EEA but is glossed over with a different name. That is the only option which leaves us economically largely intact and saves enough face.

Explicitly in the EU is out of the question. It just wouldn’t pass the Brexit MPs and I think there are a lot of remainers who wouldn’t accept it either. Some sleight of hand might solve it but the fundamental question of whether we will accept being a rule taker will still nebe d to be solved.

Big Ger - on 27 Dec 2017
In reply to john arran:

Ah well, we'll have to agree to disagree, or go around in circles again.

Shake?
Bob Hughes - on 27 Dec 2017
In reply to HansStuttgart:

> I do consider a change of UK government likely in almost all scenarios.

This is an interesting question. Earlier this year I would have agreed with you but now I am less sure. Theresa May and the Tories have showed remarkable staying power this year.
john arran - on 27 Dec 2017
In reply to Big Ger:

Delighted at the prospect of not going round in circles again.
john yates - on 27 Dec 2017
In reply to john arran:

So Juncker’s office leaking confidential talks was not unpleasant and shoddy.
On the earlier reply you omitted to answer whether you would have been so vocal had the vote gone narrowly in your favour.
Your constant questioning of what the vote signifies is indicative of your doubt as to its constitutional legitimacy. So it’s your narrative not mine. I imagine you might even have suggested a Parliament is not bound by the decision. Though in the Givernment’s long, highly biased referendum document issued to voters urging remain it quite clearly said the government would be bound by the voters’ decision.
john arran - on 27 Dec 2017
In reply to john yates:

Not sure who you're trying to convince by your repeated misrepresentation but I'm off to bed rather than rise to it. Good night.
john yates - on 27 Dec 2017
In reply to john arran:

Night dude
tom_in_edinburgh - on 27 Dec 2017
In reply to john yates:

> The prevailing consensus is that Sterling is now undervalued: but when market sentiment will change is anybody's guess. Such is life in the global casino economy.

The prevailing consensus among people putting money on the line is what sterling is trading at. If that wasn't the prevailing consensus the price would change.
RomTheBear on 27 Dec 2017
In reply to neilh:

> As a remainer I fundamentally disagree. The economic news will be good to excellent as the global economy continues to pick up. We will therefore be dragged, if that is the right word, along on an upward spiral .

What we do know, is that, in 2017, the UK economy slowed, while the global economy strengthened considerably.

Make of that what you will.
john yates - on 28 Dec 2017
In reply to tom_in_edinburgh:

Nope. Investors now going net long on sterling.
Significant undervaluation, perhaps to 20 per cent.

https://www.poundsterlinglive.com/eur/7381-armageddon-gbp-to-eur-conversion
birdie num num - on 28 Dec 2017
In reply to Bob Hughes:

Hurrah for you. If I had anticipated a follow up post, I'd have predicted your smugness
BnB - on 28 Dec 2017
In reply to john yates:

> Nope. Investors now going net long on sterling.

> Significant undervaluation, perhaps to 20 per cent.


Have you got any evidence other than a four month-old bit of speculation? I'm inclined to agree that GBP is oversold but the price today represents the consensus of every trader on the planet. With more negotiation crises and dramas in prospect before any trade deal gets near to agreement, GBP and EUR both look vulnerable against USD, but the former more so.
Big Ger - on 28 Dec 2017
In reply to Bob Hughes:

Italian Government dissolved today. Election still a couple of months away, with another weak coalition Government the likely outcome.

http://abcnews.go.com/International/wireStory/italian-leader-hopes-2018-campaign-avoid-fear-mongerin...

Renzi's PD party has tanked in the polls, with 5 star ahead of it under new leadership. Lega Nord and Forza Italia are also polling strongly, and the thing they have in common is Euroscepticism. A coalition of at least two and maybe all three will be as strong as any Italian government ever can be and a thorn in the side of the EU.

Not that they have a particularly strong hand given the level of Italian debt.

It's difficult to see Brexit talks moving forward quickly, while so many of the EU's major players are distracted by internal issues, (Spain and Catalonia etc.)
john yates - on 28 Dec 2017
MG - on 28 Dec 2017
In reply to john yates:

Thanks for another report from months ago....
john yates - on 28 Dec 2017
In reply to MG:

Does the age of a report somehow invalidate the opinion or the insight? Only a fool would think that.
MG - on 28 Dec 2017
In reply to john yates:

> Does the age of a report somehow invalidate the opinion or the insight? Only a fool would think that.

Given it was making predictions about the end of 2017, yes. Or do you expect dramatic changes tomorrow?
Ian W - on 28 Dec 2017
In reply to MG:

The report wasnt from oct 17; it even says at the head that it was modified in Oct 2017, and reading it shows it was clearly written many moons before then......
john yates - on 28 Dec 2017
In reply to MG:

OMG. It’s pretty clear this sentiment persists.
Markets now net long on sterling for first time in s number of years.
http://citywire.co.uk/wealth-manager/news/is-sterling-now-undervalued/a1069513
Bob Hughes - on 29 Dec 2017
In reply to Big Ger:


> It's difficult to see Brexit talks moving forward quickly, while so many of the EU's major players are distracted by internal issues, (Spain and Catalonia etc.)

True. Also Germany. Although the counter to that is the structure of the negotiations - ie day to day Michel Barnier is the main man with escalation to Juncker. The member states only need to be present for the key milestones and to sign off the final deal. It’s an interesting question what would happen if eg Italy didn’t have a functioning government when it comes time to ratify the final deal.

summo on 29 Dec 2017
In reply to Bob Hughes:

> True. Also Germany. Although the counter to that is the structure of the negotiations - ie day to day Michel Barnier is the main man with escalation to Juncker. The member states only need to be present for the key milestones and to sign off the final deal. It’s an interesting question what would happen if eg Italy didn’t have a functioning government when it comes time to ratify the final deal.

I think it's more likely that Poland will distract all their attention.
BnB - on 29 Dec 2017
In reply to john yates:

I've called bullshit on so much remoaning economic misery that most posters on here probably mistake me for a Brexiteer. However I'll treat clutching at economic straws from either side with the same suspicion. The relative balance of currencies is down to multiple factors so that, for example, GBP/EUR will likely be different by the end of 2018 even if the likelihood of a "sensible" Brexit is unchanged. That could be down to interest rate policy differences or geopolitical factors, for example, and in no way indicative of the success or otherwise of the negotiations.

For what it's worth, my advisors predict GBP/EUR to deteriorate from 0.89 to 0.92 by end 2018. And they'll probably be as inaccurate as any of the three predictions you've eagerly trumpeted.

No one knows. If anything, the unwillingness of the UK economy to track the currency slump demonstrates what a poor indicator of economic performance FX can be.
MG - on 29 Dec 2017
In reply to john yates:

> OMG. It’s pretty clear this sentiment persists.

> Markets now net long on sterling for first time in s number of years.

No they aren’t
http://www.cmegroup.com/trading/fx/g10/euro-fx-british-pound.html
RomTheBear on 29 Dec 2017
In reply to BnB:
> I've called bullshit on so much remoaning economic misery that most posters on here probably mistake me for a Brexiteer. However I'll treat clutching at economic straws from either side with the same suspicion. The relative balance of currencies is down to multiple factors so that, for example, GBP/EUR will likely be different by the end of 2018 even if the likelihood of a "sensible" Brexit is unchanged. That could be down to interest rate policy differences or geopolitical factors, for example, and in no way indicative of the success or otherwise of the negotiations.

> For what it's worth, my advisors predict GBP/EUR to deteriorate from 0.89 to 0.92 by end 2018. And they'll probably be as inaccurate as any of the three predictions you've eagerly trumpeted.

> No one knows. If anything, the unwillingness of the UK economy to track the currency slump demonstrates what a poor indicator of economic performance FX can be.

The standard approach is to look at the strength of a currency against a historical basket of currency made up of the main trading partners’s currency.
It gives you a good indicator as to what the long term view of the relative economic prospects of that country is.

Not a surprise then, that sterling has been valued so far pretty much in line with the predicted long term cost of the central brexit scenario.
As long as the central brexit scenario of a EU - UK FTA does not change, we’re unlikely to see big shifts in Sterling next year against the major currencies. This seem to have been the case so far with interest rise and phase1 completion having very little impact.

For things to shift in higher or lower gear you’d need something substantial indicating a shift towards a soft “Norway” brexit or a wto terms brexit.
Post edited at 12:57
BnB - on 29 Dec 2017
In reply to RomTheBear:

And a study of 2017 will show you that GBP has risen 10% against USD, despite the the FTSE lagging the growth of the S&P by a factor of nearly 3x. So much for data.
RomTheBear on 29 Dec 2017
In reply to BnB:
> And a study of 2017 will show you that GBP has risen 10% against USD, despite the the FTSE lagging the growth of the S&P by a factor of nearly 3x. So much for data.

Yeah sure but I don’t see the point you are trying to make or how it relates to my post, or why chose these random pairs ? Or are you saying the same thing as I do ?

To make myself clearer, FX exchange rate are not a good indicator of past or future performance, they are however one of the best indicator as to what the view is amongst the traders of that currency, of that country’s future relative economic performance.
(That is, assuming that the currency markets are not a fraud, but the more I get involved in FX the more I think they are, don’t tell ;-))

So it’s still very useful to look at the GBP trend against of basket of the currencies of our major trading partners. It gives a good idea of what the view is.
Post edited at 15:10
BnB - on 29 Dec 2017
In reply to RomTheBear:

The only point I'm trying to make is that predicting the future is a fool's game.
RomTheBear on 29 Dec 2017
In reply to BnB:
> The only point I'm trying to make is that predicting the future is a fool's game.

Very odd statement. Some things can be predicted with various degree of confidence.

For example, I can predict with near certainty that even if I play the lottery every day I won’t win and will end up financially worse than if I don’t. As such I make the informed decision to not play the lottery. That’s not foolish.

What’s foolish is to say that I shouldn’t try to predict how much worse off or better off I’ll be if I play the lottery, just because I cannot predict how poor or rich I’ll be in the future anyway.
Post edited at 17:50
HansStuttgart - on 29 Dec 2017
In reply to Bob Hughes:

But they achieved this by avoiding all discussion about the choices to be made. This cannot continue because the EU wants a statement somewhere in March.

BTW Labour is just as bad, it is utterly amazing to a EU27 observer that you still don't have a national alliance government of center CON + center LAB + SNP + LD to sort this mess out.
john yates - on 29 Dec 2017
In reply to RomTheBear:

What’s foolish is wasting time on this forum.
RomTheBear on 30 Dec 2017
In reply to john yates:

> What’s foolish is wasting time on this forum.

What are you doing here then ?
BnB - on 30 Dec 2017
In reply to RomTheBear:

> Very odd statement. Some things can be predicted with various degree of confidence.

> For example, I can predict with near certainty that even if I play the lottery every day I won’t win and will end up financially worse than if I don’t. As such I make the informed decision to not play the lottery. That’s not foolish.

> What’s foolish is to say that I shouldn’t try to predict how much worse off or better off I’ll be if I play the lottery, just because I cannot predict how poor or rich I’ll be in the future anyway.

If you think that recognising the the odds are stacked against you winning the lottery is tantamount to predicting the future, then your devotion to data has reached a worrying stage, Rom ;-)
RomTheBear on 30 Dec 2017
In reply to BnB:
> If you think that recognising the the odds are stacked against you winning the lottery is tantamount to predicting the future, then your devotion to data has reached a worrying stage, Rom ;-)

No, BnB... what happens is that you’ve dismissed a point I’ve made with a lazy oversimplification, and now you are resorting to an ever more obvious strawman.

You can predict future events with various degree of certainty, that is obvious.
Making a blanket statement that the future can’t be predicted as a counter argument to those who try to predict a tiny part of the future is just a lazy rethorical gimmick. And slightly hypocritical as well given that you spend your time doing exactly just that.
Post edited at 09:02
neilh - on 30 Dec 2017
In reply to RomTheBear:

That is counter to the recent predictions I have seen where they are talking about the £$ being at 1.48 by the end of 2017.
RomTheBear on 31 Dec 2017
In reply to neilh:

> That is counter to the recent predictions I have seen where they are talking about the £$ being at 1.48 by the end of 2017.

?? I’ve not made any such prediction. I think you are replying to wrong guy.
neilh - on 31 Dec 2017
In reply to RomTheBear:

I was suggesting that the forecasts I am seeing suggest that the £ will strengthen in 2018 upto 1.48 for the £$ rate. Outwardly this flies in the face of the currency markets continuing to have a negative view of the uk economy.

I think you can read to much into currency movements as an indicator.
RomTheBear on 31 Dec 2017
In reply to neilh:
> I was suggesting that the forecasts I am seeing suggest that the £ will strengthen in 2018 upto 1.48 for the £$ rate. Outwardly this flies in the face of the currency markets continuing to have a negative view of the uk economy.

A strengthtening of the GPBP/USD pair is not incompatible with a negative (or positive) view of the UK economy, as I've said before.

> I think you can read to much into currency movements as an indicator.

Again, repeating myself, currency movement are not a very good indicator of future economic performance.
They are however a good indicator of the market view of the long term relative performance of an economy against its other major trading partners. But obviously the market is often wrong.

Hence why I expected the effective sterling exchange rate against a basket of currency of the major trading partner to remain stable up to the point where there is a clear shift from the current central brexit scenario of an EU-UK FTA.

This is so far more or less what happened so far with the effective exchange rate remaining dead stable since the start of the 2017, despite significant political events in the meantime.
Post edited at 14:28
Big Ger - on 07 Jan 2018
In reply to Bob Hughes:

> But buyer’s remorse strategy required the UK to fall into recession and it has not come remotely close to doing so. The economy’s performance has been lacklustre – especially in comparison with other major developed countries – but buyer’s remorse would have required the economy to contract sharply and for unemployment to rocket. Something equivalent to 2009 – when the economy shrank by more than 4% – might have done the trick. Instead of which the economy is growing slightly below its long-term trend and unemployment has fallen to a 42-year low. The absence of economic Armageddon has simply reinforced the lack of trust in expert forecasters.

> The stickiest patch for the economy since the referendum was in the first half of 2017, when inflation rose sharply as a result of the depreciation of the pound triggered by the Brexit vote, and even then growth averaged 0.3% a quarter. Since then, things have picked up a bit and, with inflationary pressures abating activity, is likely to remain reasonably firm in 2018. Expectations for the global economy are being revised up and that will help UK exporters of both manufacturing goods and services. Some of the exuberance in stock markets is froth, but one thing can be said with confidence: 2018 is not going to be another 2009. The tide turned for the global economy around the time of the Brexit vote and the upswing will continue for some time yet.

https://www.theguardian.com/business/2018/jan/07/brexit-why-buyers-remorse-hasnt-hit-the-uk-economy

Sorry to have positive news.
BnB - on 07 Jan 2018
In reply to Big Ger:


> Sorry to have positive news.

Is it good news? I read it as a reasonably objective critique of Remainism, both pre and post-referendum. And as a rather less trenchant dissection of economic developments in 2017.
Big Ger - on 07 Jan 2018
In reply to BnB:

I referred to it as "positive" not "good", inasmuch as it doesn't fit the agenda here of some, ie those who only look for and see (and revel in,) negative doom and gloom reports about how the UK is fast becoming the Somalia of Europe. ;-)
RomTheBear on 08 Jan 2018
In reply to Big Ger:

> I referred to it as "positive" not "good", inasmuch as it doesn't fit the agenda here of some, ie those who only look for and see (and revel in,) negative doom and gloom reports about how the UK is fast becoming the Somalia of Europe. ;-)

“The economy’s performance has been lacklustre – especially in comparison with other major developed countries ”

Your expectations were probably lower than mine if you think it’s “positive”
Bob Hughes - on 08 Jan 2018
In reply to Big Ger:

thanks - agree with the other posts that its not exactly positive (unless you regard remainers being wrong as positive news... ;-) ). But it is a good article and in my view on the money. He's absolutely right that most people don't care whether GDP is half a percent up or down. They care when people are predicting the end of the world - as in 2009 -
or when their own livelihood feels affected. Nobody will personally feel the fact that the economy is growing less than it could be doing.

Perhaps optimistic would have been a better word. Given that there is no good time to fundamentally reset a country's trading relationships, during a global economic upswing is a less bad time to do it.
RomTheBear on 08 Jan 2018
In reply to Bob Hughes:
> thanks - agree with the other posts that its not exactly positive (unless you regard remainers being wrong as positive news... ;-) ). But it is a good article and in my view on the money. He's absolutely right that most people don't care whether GDP is half a percent up or down. They care when people are predicting the end of the world - as in 2009 -

> or when their own livelihood feels affected. Nobody will personally feel the fact that the economy is growing less than it could be doing.

The cumulative effects are large though. A negative impact in the order or 0.1-0.2% of GDP, not even half a percent, over 15-20 years, is massive... people don’t understand cumulative growth...We would be visibly poorer than the neighbours unless we find some magic wand to offset that somehow.

As with many things brexit, it’s the younger generation paying the price.
Post edited at 12:23
Big Ger - on 08 Jan 2018
In reply to Bob Hughes:

> Perhaps optimistic would have been a better word. Given that there is no good time to fundamentally reset a country's trading relationships, during a global economic upswing is a less bad time to do it.

That sounds horribly positive, look to Rom for a more downbeat take.
RomTheBear on 08 Jan 2018
In reply to Big Ger:
> That sounds horribly positive, look to Rom for a more downbeat take.

Funnily enough my assessment had been broadly similar to that of Larry Elliot, and I’m pretty much in full agreeement with the article. But you’re too busy caricaturing everybody else’s position to even see that.
Post edited at 21:39
Big Ger - on 21:43 Sat

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