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By Daily Bell Staff – March 17, 2016
The longer-term effects of Brexit are … likely to be adverse. Most studies suggest that economic growth would suffer. A detailed analysis from the Bank of England in October found that EU membership had benefited the British economy. Attempts to model the consequences of Brexit point to economic damage. Two American banks, Goldman Sachs and Citigroup, recently warned that growth and the pound would fall further after a vote to leave the EU. – Economist
As we can see, above, a recent Economist analysis of Britain’s leave-taking from the EU – Brexit – indicates a variety of negative consequences.
This is generally the tenor of the mainstream media in Britain, one of alarmism tinged with negativity.
The tone probably won’t change but a recent poll is certainly deepening tensions.
Suddenly, Pro-Brexit forces seem to be winning.
In what has been called “a huge boost” for Brexit forces, a recent Daily Telegraph poll has revealed that pro-Brexit forces have gained a seven-point lead. The poll shows the numbers at a deadlock, but when actual voters are considered, pro-Brexit forces win by 52 per cent to 45 per cent.
The new poll has stoked concerns that a variety of pressures and “scaremongering” tactics aimed at pro-Brexit forces will be expanded. From an EU referendum article:
Brian Monteith of the Leave. EU campaign said: “The last 100 days of campaigning have already told us what the final 100 days will be like … Downing Street and the self-interested banks and corporations will try every trick in the book … [to] deceive the British public.
London’s City, Britain’s financial engine, is very obviously invested both psychologically and financially in the EU.
In fact, when considering what may be done to resolve them, we’ve come up with a “Brexit trade.” More on that in a moment.
Last year the Bank of England “accidentally” leaked a confidential internal study to The Guardian over Britain’s future in the EU and the impact of Brexit.
When Bank of England Governor Mark Carney claimed in recent testimony that Brexit could severely harm the British economy, anti-EU legislators called his remarks “unacceptable” and asked for his resignation.
But “Project Fear,” as anti-Brexit forces call it, remains ongoing.
- Prime Minister David Cameron recently released a video warning that a pro-Brexit vote would have a negative impact on markets and real estate values.
- A pro-Brexit vote would collapse the value of the pound by 14-20 percent, according to Goldman Sachs economists.
- Morgan Stanley has suggested that British stocks could lose up to 20 percent of their value with an EU exit.
- Financial firms like HSBC have suggested that jobs could move out of the City to countries like France if Britain takes its leave from the EU.
It could be that Britain will face a series of financial difficulties if pro-Brexit forces seem to be gaining the upper hand.
There are historical precedents stretching back several centuries to when US President Andrew Jackson took aim at America’s second central bank.
When President Andrew Jackson made it clear that he was going to shut down the central bank, its head, Nicholas Biddle, fought back by threatening to contract the money supply.
When he actually did so, Congress convened a special Panic Session. Eventually, Jackson won the battle to shut down the bank and the US did without a central bank until 1913, when the Federal Reserve came into being.
It sounds fairly absurd to suggest the Bank of England and proponents of the EU within London’s square mile financial City would take aim at Britain’s economy in order to remove the threat of Brexit.
And yet reading between the lines, the warnings seem clear enough.
During his recent testimony Bank of England governor Mark Carney stated forthrightly that London Mayor Boris Johnson’s decision to back Brexit cause the pound to slump in February to seven year lows.
Carney called the currency movements that took place after Johnson’s statements “relatively large [but] not unprecedented.”
And he added that Brexit had the potential to “amplify risks.” Especially affected could be housing and market functions.
Two questions occur: Has Carney issued a specific (veiled) threat to Johnson et. al? Has the pound has already been crashed as a warning?
In other words what Biddle did to Jackson, Carney and his backers are suggesting they will do to punish pro-Brexit forces.
This is only one reason why we believe pro-Brexit forces may not win this one. Another has to do with what seems to be the REAL reason for the Brexit vote.
In never made any sense to us that Cameron would call for such a vote. The answer may lie in the results of Cameron’s recently announced deal with the EU.
Under the deal, Britain received certain concessions to stay in the EU.
One was that Britain would not be part of an “ever closer union.” More importantly from our perspective, further EU regulations will not be imposed on the City.
The City may exercise significant EU power behind the scenes, but this can’t be fully admitted for various reasons. And thus the need for a formal show of negotiations leading to the exemptions that Cameron has generated.
And now that these have been negotiated, there is no further reason for London to pursue Brexit. The movement, once created, must now be halted.
They’ve already fired one shot by linking the pound’s February decline to Johnson’s statements. And perhaps there are more to come.
None of it will be directly traceable to the Brexit debate. Instead, it will be made clear in various ways, including through the controlled British media, that the “market” itself is reacting negatively to Brexit.
No threats will be issued, as Biddle once did, but the message will be quite clear, nonetheless.
We hope we’re wrong about our analysis. It would be great if those in the City finally miscalculated and Brexit acquired such momentum that it actually freed Britain from the clutches of an increasingly authoritarian EU.
Conclusion: One Brexit speculation involves shorting the pound. Another involves industrial equity plays as there are a variety of ways that the Bank of England can probably contract the money supply without being too obvious.