Review of the week: Project Fear Max

Well, what an amazingly tedious week it’s been!  Project Fear Max, with a guest appearance from Project Fantasy.

And still no FlexIn plan.

I’ve had to work hard to find anything remotely useful for the referendum debate.  The mass media is giving us only bullshit.

With one month to go before the referendum, it’s time to start closing down the process of collecting data, and start the process of evaluating data and forming conclusions.  For me, last-minute ‘news’ will be inadmissible.  Those who have wanted this referendum have had nearly 40 years in which to make their respective cases, and that’s long enough.  As a consequence, this (far too long) post shall be my last of documenting reaction to mass media.

The lack of FlexIn plan is going to be a material, and desperately regrettable, omission.  The proponents of European federalism seem not to be bothered to do proper job, preferring instead to stoke fear and manipulate emotions, deploying traditional left-wing ‘campaigning’ methodology.

It’s looking like my choice in the referendum is going to be based on an incomplete set of relevant facts, swamped by a tsunami of irrelevant politco-emotional bullshit.

In this far-too-long post:

• Brexit will lead to war!!!!
• Brexit will lead to house price armageddon!!!!
• Brexit will lead to the complete destruction of the British economy and still immigrants will queue to get into Britain!!!!
• The European Union is for the privileged only!!!! (let’s ignore demographics)
• Brexit just isn’t British!!!
• Telecoms: the European Union blocks one merger of telecom firms, but not another
• The British Chamber of Commerce begins to hedge its bets… presumably before its membership revolts?
• European ex-pats in Britain: their stories
• One insider’s view
• What the markets might think, via technical analysis
• Other Europeans want an in-out referendum too
• Friends note
• Does Eurovision give us a good example of how European democracy really works?

Brexit will lead to war!!!!

Reuters, BBC, Telegraph (amongst others) covered Cameron’s suggestions that, geo-politically, Britain was safer within the EU, invoking the image of the Third World War following a Brexit, apparently ignorant of the forces of civil war currently building within member states (specifically of the people against their ruling elites; see also the Ipsos-Mori poll below).  My view: it’s bullshit, ignore.

Nato also got wheeled out to say how awful Brexit would be, too.  No idea why!  Objectively, Nato’s whole purpose is to protect Europe from both itself and the Soviet Union, allowing the American’s to intervene should the need ever have arisen.  Therefore, Nato’s existence is wholly irrelevant to the existence of the European Union.  Nato would continue to exist whether Britain was in or out of the European Union.  At the same time, Nato gives the Americans a fiscal headache: the price to pay for being the referee of Europe is that the European security free-rides off the American defence budget, funded by American taxpayers.  This is unsustainable, and always was.  When the Americans realise this - as some American policy-makers have done so, and said so publicly - Nato’s withdrawal will unleash European vested interests to resume their “politics as normal”, irrespective of whether Britain is in or out of the European Union.  My view: Nato’s opinion on Brexit is bullshit, ignore.

An analysis by Col R Kemp comprehensively demolishes Cameron’s scaremongering.  Entitled, “It is an EU army that could bring about war”, the article says:

“A German defence white paper, leaked last week but supposed to be kept under wraps until after the referendum, leaves no doubt of Germany’s intention to drive through the merger of Europe’s armed forces “and embark on permanent cooperation under common structures”. Germany has begun to combine substantial elements of the Dutch forces with their own.”

“Funds will be diverted from Nato combat forces as the EU army lavishes cash on costly new command structures, including a surfeit of generals with expensive headquarters.  Indeed, reducing the influence of Nato and the US is the aim for several EU members, especially France and Germany. And if we undercut Nato, that aim will succeed, leading to US retrenchment.”

My view.  Brexit’s relevance?  Zero.  If Britain votes EurIin on 23Jun2016, it will end up endorsing the federalist project - whether it likes it or not - meaning that membership of the Single European Currency and Single European Army will happen anyway, and Britain will get roped in whether it likes it or not.  If Britain votes Brexit 23Jun2016, it will save itself permanently from the Single European Currency and Single European Army, but will probably end up having to defend itself from both anyway.

Brexit will lead to house price armageddon!!!!

The Week and the Business Insider (amongst others) covered Osborne's claim in interview with Peston on ITV that Brexit will cause house prices to slump.  Clearly aiming at older voters who quite like having their kids still living at home because the kids can’t afford to buy or rent a place of their own, Osborne blagged the classic psychological pincer-movement, claiming further that mortgage products will become more expensive because, apparently, banks would need to do something that they should have been doing for years, but haven’t really done so because Osborne’s pet central bank is bailing them all out with zero-percent interest rates.  Wow, that was a long sentence.  Anyway, it’s all Project Fear.  Ignore.

Brexit will lead to the complete destruction of the British economy and still immigrants will queue to get into Britain!!!!

On 10May2016, the Guardian covered an analysis by National Institute of Economic and Social Research that Brexit would be terrible.  Apparently, Brexit would cause inflation, a slumped currency, slumped investment, slumped consumer spending, lower economic growth and so on.  Inexplicably, however, the same report says that Brexit won’t stop immigration.

Hold on… immigrants are more productive than the British, and they come to Britain not because of the benefit system, but because there are jobs here.  And the jobs are here because the British prefer to not to work (best examples: the agriculture and housebuilding sectors).  And because immigrants are therefore productive, they generate economic growth.

And, in any event, UKGov would love to see some inflation, to erode the value of public sector debt.

“But in all possible scenarios, our simulation exercises show a substantial loss of export trade.”  Yeah right.  Was the loss of export trade an input parameter, or an output calculation?  I’ll guess that it was the former, because Brexit has no impact on trade.

So, this sounds like the NIESR is just talking Project Fear.  Ignore.

On 12May2016, the Governor of the Bank of England appeared to advocate a “scorched earth” policy, talking down the economy as a consequence of Brexit still with zero evidence to justify his assumptions input into his economic models, effectively inviting currency traders to short the Bank’s own currency.  It turns out that Carney’s Bank didn’t bother doing the numbers: the Bank just tried to play theory - as academic economists do, with equally useless results, hence why they choose to remain in academia instead of making money for clients - and did it deliberately with wonky thinking.  It seems that Carney might be begging the markets to become the tail that wags the dog (the British electorate).  Chancellor Osborne, of course, lapped it all up: Carney has now given him a report that ticks one of his little boxes (“Look, it’s in writing, must be true!”).  On 13May2016, the International Monetary Fund rubber-stamped the Bank of England’s silly little games, deliberately attempting to conflate “risk” with “loss”, and participate fully in Project Fear.

Ultimately, the Bank needs to plan in advance for likely outcomes, whether its political masters like the outcome or not.  So it’s fine for the Bank to forecast a recession triggered by the repatriation of power from one jurisdiction to another.  I’m fine with that.

But Carney’s intervention is not so.  Project Fear.

On 13May2016, the Bundesbank published data to show that German investment into Britain is falling.  It fell by 40% in 2015, and again by 6% in 2016Q1.  Uncertainty about the British referendum is said to be the key cause, but I suspect that this is just a smokescreen for a more realistic, cash-based harsh truth, i.e.  that the Chinese just aren’t buying as much as they used to.  The referendum and its consequential effects are too trivial and too short-term.  England demographics are far more important to anybody investing into something that English consumers are set to buy, and Chinese demand is way more important for any investment into a cross-border supply chain.  So to claim that the referendum delays investment plans, I say Project Fear.  Ignore.

The European Union is for the privileged only!!!! (let’s ignore demographics)

On 10May2016, Iain Duncan Smith said that the European Union favours privilege.  The full text of the speech is here.  One extract:

“[The Euro] has greatly favoured already wealthy Germany and its export industries at the expense of southern Europe. The euro has meant serious unemployment for millions of young Greeks, Portuguese, Spaniards and Italians and has produced political extremism. The EU is also working well for big banks. The bailouts being financed by extreme levels of austerity in countries like Greece have largely benefited financial institutions that lent irresponsibly before the crash. The EU is also working for big corporates that benefit from mass immigration. Businesses that have under-invested for decades in the productivity and training of their own and local workforces have no reason to mend their ways so long as cheap labour can be imported from abroad.

“But if the EU is working for Germany, for banks, for big corporates and for the public affairs companies with large lobbying operations in Brussels, the EU isn’t working for over regulated small businesses and lower-paid and lower-skilled Britons.”

Whilst I recognise this description - and read similar themes very often in Moneyweek - there is a hard question to answer first.  Is IDS describing the root causes, or the consequential effects?  Is ISD attacking the symptoms only?

Just as Project Fear falsifies economic models to sketch as deliberately misleading picture of ‘consequences’, is Project Fantasy sketching out a current outcome as if it is a direct consequence of the European Union? (i.e. conflation of relevance?).

Project Fantasy is likely doing just that.  IDS said:

“The construction of the Olympic Park was a powerful illustration of the way in which immigrants undercut UK workers through their willingness to endure family-unfriendly living conditions. Visiting job centres in East London at the time I met both skilled and unskilled workers who struggled to get work on the site. When I asked why they said that people from Eastern Europe, often living in bedsits, without UK housing and family costs, hugely underbid them for their work. Since then those stories have been borne out by the facts. Despite the all the statements about the Olympic Park helping British workers, we now know that nearly half of all the jobs on the site went to foreign nationals.”

Strategically:

• if you want to live in a free-market, than open immigration is part of the deal, otherwise you have no free-market in labour.  That means accepting competition, in which sellers (workers) make themselves more attractive to buyers (employers) in any way they see fit, ethical, politically-correct or otherwise;
• if not, then you must choose to live in a rigged market, where i) barriers to entry into the labour market; and ii) a requirement to discriminate on racial grounds; must exist;
• Either way, you shall live with the consequences of your choice; you are entitled to no exemptions from the consequences of your choice.

Immigration is a red hot issue for the masses, and IDS verbalises it excellently, gliding over the two strategic points above, as if they don’t matter.  IDS then attributes ‘under-cut immigration’ to the European Union, and that a Brexit would enable us to prevent ‘under-cut immigration’.  IDS’s case looks plain misleading.  Having been a minister of welfare, IDS should know better than anybody else that Britain is unable to afford the cost of becoming Fortress Britain.

IDS also looks to ignore the root cause of his story: ageing demographics.  British jobs go to immigrants not just because they can successfully (and rightfully) avoid the bloated overhead (the Ponzi welfare state) that Britain has voted for itself.  British jobs - especially in building sites and farm fields - go to immigrants because they are often the only people willing to apply for the job.  Although the an opinion of NFU is that the British are lazy, it’s equally likely that British workers are just too old to do manual work!  (but note that measuring the percentage of jobs taken by immigrants is hard, as a study in Herefordshire shows).

The comments on the conservativehome.com page are also very illuminating, in particular about how confused even the politically-motivated really are.  Some think that equality can happen only via benefits (a falsehood).  Others think that workers’ rights originated exclusively from the European Union (a falsehood, e.g. Health and Safety At Work Act 1974, being nothing to do with Europe at all!).

Brexit just isn’t British!!!

Gordon Brown has waded into the debate on the EurIn side.  On 10May2016, he wrote and spoke about why Britain should remain in the European Union.  He has a book to plug, “Britain: Leading, Not Leaving: The Patriotic Case for Remaining in Europe”.

I don’t often agree with Brown - I shall never forgive him for allowing the Bank of England to follow a 0% interest policy and the devastation that it (and his other policies) wrought on my pension by 2005/2006, long before the big crash - but I do agree with his rejection of Fortress Britain that Project Fantasy tends to portray.

About the evolution of the European Union, Brown writes:

“And the right balance between autonomy and cooperation can be struck without putting our national identity at risk. The past decade has seen the one-time fashion for harmonising laws and practices across Europe yield to the mutual recognition of each country’s distinct standards and traditions. Exchange of information between independent tax authorities now takes precedence over attempts to create a uniform European tax rate. And, most important of all, intergovernmental decision-making by 28 leaders in the European council has been taking over from the centralised diktats from a once overbearing European commission.”

Brown is basically saying that Cameron’s mid-air position - the deal of 19Feb2016 - is not just tenable, but also a preference for the other 27 governments of Europe.

Do I believe that?

No.

For Brown & Cameron to believe with justification that the mid-air position is tenable, we need fundamental treaty reform, for which the European governments have repeatedly said they have no appetite.  The treaties still point towards a single, unified, federal country of Europe.  Until those treaties change, any appeal to UKGov’s half-in-half-out mid-air position is nonsense.  Elsewhere in this post, I refer to the Single European Army.  So I would go so far to say that any appeal to UKGov’s mid-air position is politically suicidal.

Telecoms: the European Union blocks one merger of telecom firms, but not another

On 11May2016, the BBC reported the European Commission has blocked the sale of telco O2 to CK Hutchinson.

This is a normal function of the European Commission and is allowed by treaty.  The idea is to ensure competition in the marketplace by preventing oligopolies from forming, using market abuse to constrain consumer choice, and profiteering excessively at consumers’ expense.  It is inherently interventionist and has equivalence in American anti-trust law.

But there are two problems with the European Commission’s decision.

First, it looks like double standards.  The takeover by BT of EE has resulted in 40% of the mobile market controlled by BT.  This means that competition law was not enforced on that transaction.  Why?  The excuse given was that BT wasn’t then a player in the mobile market, apparently ignoring the fact that giving 40% of the mobile market to BT would make it a player, whether BT it likes it or not.  BT also controls the overwhelming majority of the fixed broadband market prior to the takeover of EE.  So, after the takeover, BT’s power in the telecoms marketplace is vast, and substantially primed to abuse.  The UK regulator had flagged this concern to the European Commission as part of the process.  The European Commission took no action.

Second, it looks short-termist.  Networks of any description need a lot of resources to build and to maintain, so their builders will seek to protect its use from competitors who have no such overhead to fund.  The parallels in the labour market - with immigrants not needing to pay for British infrastructure - are striking.  But with the regulators enforcing competition to regulate prices downwards and therefore also profit margins, the regulators are effectively making investment into improved telecoms unaffordable.  Worse, the regulators are putting the network operators into a position where they need to borrow money just to incur a cash cost of interest to prove to regulators that they aren’t profiteering.  This is a major issue for any economy with ‘too much private debt’ (assuming that is measurable).  The balance between monopoly profits and tomorrow’s investment looks out of kilter, and the regulators seem not to have a commercial clue about where the balance should lie.

So, what we’re basically looking at here is that the European Commission delivers the same sort of hackneyed ‘regulation’ so disgustingly typical of our little, national tin-pot regulators.  There is no improvement in quality arising from the uplegation of regulation to the federal level.  We still end up in the situation of same-circumstances-different-outcomes.

There is a whiff of corruption here, whether it be wonky-thinking, vested interests, corporate racism or brown paper envelopes stuffed full of cash.

Corruption.  Hmmm… That’s another can of worms that David Cameron opened this week.  I think the world’s political establishment is going to have Cameron’s historic role written down as a random weapon of mass self-destruction with unlimited collateral damage.

Meanwhile, other European regulation is biting into companies listed on junior exchanges (in the UK, the Alternative Investment Market).  This particular regulation is primarily the reporting of stricter corporate governance, but its implementation just commits our economy to yet more valueless overhead resources, that - like welfare states - an economy with an aging (and therefore shrinking) taxable workforce simply cannot afford.  Whilst the objective is to enforce transparency - a noble end in all cases - it doesn’t pass the sniff test, or the “so what?” test.  It also seems to duplicate Cameron’s Register of Beneficial Owners, which itself appears to be a duplicate dataset of Companies House.

The British Chamber of Commerce begins to hedge its bets… presumably before its membership revolts?

On 10May2016, the British Chamber of Commerce, having dumped its Eurosceptic leader at the start of the referendum campaign, reported that its members would prefer to stay in Europe… but the gap between EurIn and Brexit preferences amongst the membership was apparently narrowing.

My view: the CofC is re-positioning itself to preserve the small residue of its credibility it might still have with its members.  It’s a damage limitation exercise.  The damage was self-inflicted: firing your leader at the invisible behest of politics is a costly business  The announcement is all part of Project Fear.  Ignore.

European ex-pats in Britain: their stories

I know quite a few expatriates living and working in Britain, so I was happy to see the Guardian cover the Brexit issue from their perspective.  This is all good stuff, extolling the virtues of an open economy with a relatively open door at the border, with some honest truths about the English to boot.  Brexit, of course, has no impact whatsoever: Britain can’t afford to turn migrants away, because it has an over-committed, bloated, Ponzi-style welfare state to pay for.

One insider’s view

Crispin Blunt - our German-born chair of Parliament’s Foreign Affairs Select Committee, which recently published a relevant report - opined in favour of Brexit.  “I witnessed the all-consuming battle to protect our view of the EU against those of our partners”, he writes.  “This long defensive bureaucratic battle has been draining. It consumes the energy of ministers and officials, even if our position has been defended over three decades with typical British grit and determination and quite a lot of skill.”

My view: quite.  A lot of employees paid from the public purse rather like this state of affairs, because it ‘justifies’ their income.  Personally, I can think of many better uses for public money than talking for the sake of talking.

What the markets might think, via technical analysis

On 08May2016, the Market Oracle - a technical research outlet for financial markets - published an opinion by Austin Galt.  Having performed technical analysis on currency pair EURUSD, he believes that Brexit is more likely than not.  A quick Google search on the Market Oracle suggests a general disposition against the disinformation of Project Fear, and a similarly general disposition to forecasting a Brexit vote.  For example:

• “The UK media is out in force to scare Brits from voting to leave the European Union… The Lords of the Crown are saying that they prefer their privilege within the EU super elites, and fear that ordinary Brits might take measures to liberate themselves from the bureaucratic regulatory dictates of unelected continental overseers.” (article)
• “For some reason the dozen or so eastern european block nations led by Poland imagine that the British electorate are just as naive or stupid as their own recently emerged from totalitarianism electorates…” (article)
• “For its critics, Brexit would lead to increasing nationalism and protectionism. Nevertheless, those same critics forget the European Union is not a free-trade area. On the contrary, Brexit could open new perspectives for the old continent, not by bringing more protectionism but by bringing more competition between governments.” (article)
• A fairly brutal undermining of Osborne’s treasury report (article).
• And somebody else has twigged that the Financial Times isn’t a credible witness (article).

Other Europeans want an in-out referendum too

On 09May2016, the Daily Caller reported an Ipsos-Mori poll that surveyed 6,000 Europeans from eight countries, and from the survey guessed that 45% of Europeans want an in-and-out referendum too.  The survey reportedly noted that those who want to leave the EU amounts to >40% in Italy, France… and Sweden!

Friends note

On 09May2016, I met up with friends and discussed Brexit.  One of them, who is wholly disinterested in politics, said many of his other friends dismiss the referendum, wrongly referring to the European Union as a trading thing only.  “It’s all about trade,” he said, “all about trade.”

Zoiks!  The depth of ignorance out there, with a month to go to the referendum, sounds like it could be very, very deep indeed.

Does Eurovision give us a good example of how European democracy really works?

On 20Apr2016, Cameron did admit a limit to his Project Fear.  He admitted that Brexit would have zero impact upon Britain’s ability to pay into the Eurovision fund.  That’s because the European Broadcasting Union has nothing to do with the European Union.

On 14May2016, Ukraine won the Eurovision song contest with a very personal, emotional and political song about Stalin’s ethnic cleansing in Ukraine.  It beat the bookies’ favourite Russia - a classic euphoric club theme - and the superlative vocal performance of Australia.  (Yes.  Australia.  In Eurovision.  Also broadcast live in America and China for the first time in 2016.  Go figure!).

2016 was another Eurovision contest in which the all of the finalists and semi-finalists were all solidly strong technical and creative performances.  They just get better and better.  I perceive this trend being the case for about 5 years, prior to which too many competitors still lampooned themselves and Eurovision by submitting the campest possible entry to represent their nation!  Even the French and British take Eurovision seriously nowadays, and they were amongst the last to do so.  For 2016, it is alleged that France even took scientific measurements to determine what a song needed to be a regular appearance on radio playlists (answer: in a united Europe, sing in English).  Similarly, Britain submitted a boy-band duo with a seriously good grip of harmonics.  So seriously is Eurovision taken, that the 2016’s Swedish hosts satirised - in immaculate English, complete with semantic jokes -  the whole contest in the only way that works, and bolstered its reputation (entertainment value) in so doing (and did so in two big song-and-dance numbers to explain how Eurovision worked for the benefit of the new audiences in China and America).

For 2016, the Eurovision contest changed the weightings it gave to the votes of each participating country’s jury and the plebiscite telephone vote.  And in so doing, Eurovision breathed transparency into the process by presenting the jury votes first, then presenting the plebiscite telephone votes second.  The result was a nail-biting conclusion, truly gripping stuff that demanded quite a few gin-and-tonics to get a grip of the nerves.

A quick glance at the scores for 2016, compared to 2015, revealed a particularly interesting pattern.  The votes of the juries looked substantially de-politicised, and followed a reaction to the overall performance of the song, and the quality of its writing and its originality.  But was the telephone plebiscite vote truculent, nationalistic and tribal?

The votes of the United Kingdom in particular seemed to point to this possibility.  In both 2015 and 2016, the UK telephone vote gave 12 points to Lithuania and 10 points to Poland.  Similar patterns existed in the UK telephone vote for the semi-finals from 2014 to 2016 (where applicable).  Yet, in 2015 and 2016, songs from both countries were completely different and consequently evoked different votes from other participating countries.  So why was the UK plebiscite vote so consistent?

I shall leave that question to the Eurovision psephologists.  All I know is that Eurovision seems to comply with Churchill’s law: “The best argument against democracy is a five-minute conversation with the average voter.”  So, for the Brexit referendum, I can well understand why the ruling elites just want the demos to keep paying and shut up...

Roll on 23Jun2016….