Sunday, 24 November 2019

THE CASE AGAINST THE EU BY THE SECRET FINANCIER

THE CASE AGAINST THE EU 
(an article I found has reminded me what we should be thinking about)
By The Secret Financier.
I pass this on for you in turn to think about.


AE Thinking......


  1. AN EXISTENTIAL CRISIS: THE EU CANNOT ALLOW THE UK TO DO WELL OUT OF BREXIT. 
    1. THEY WILL DO ANYTHING AND EVERYTING WITHIN THEIR POWER TO PREVENT A SUCCESSFUL BREXIT—EITHER BY PUSHING A “BREXIT IN NAME ONLY” DEAL WITH NO IMPROVED SOVEREIGNTY FOR THE UK, OR REVERSING BREXIT ALTOGETHER . 

    1. A successful Brexit literally creates an existential crisis for the EU. If the UK does well out of Brexit, there will be a domino effect of other countries wanting to leave. 

    1. Furthermore, the EU will never voluntarily give up access to the UK’s deep pockets- they want to keep the UK as their ATM Machine. 

    1. The UK is the SECOND BIGGEST NET PAYER into the EU budget after Germany. But Germany sells QUADRUPLE as much stuff to the EU as the UK does. So in proportion to market share, the UK is the BIGGEST payer into the EU budget, and is MASSIVELY OVERPAYING FOR EU MARKET ACCESS (basically paying QUADRUPLE what Germany is paying in proportion to market share). (https://ec.europa.eu/eurostat/statistics-explained/index.php/Intra-EU_trade_in_goods_-_recent_trends) 

    1. So from day 1 there has been no point in Theresa May promising that the UK could get a “good” trade deal out of the EU. 
    2. It may make financial sense (given that the EU runs a huge trade surplus with the UK, and the UK is the biggest buyer of German cars) for the EU to give the UK a “good future trade deal” however this will never happen. The very existence of the EU depends on it NOT happening. 
    3. Therefore, the best possibility of a good outcome for the UK is a managed WTO Brexit, or Canada Plus, with some money paid to the EU to cushion the transition to WTO/Canada. Leave on WTO/or Canada and move on. The EU have made it very clear from day 1 that they would not allow cherry-picking: that they would not give the UK free trade, without imposing the other EU obligations and costs. 
    4. WTO or Canada offer a very clear path and provide certainty that UK businesses can adapt to (especially if the £40 billion divorce settlement is used to cushion the disruption). Remaining in the EU does not actually provide certainty and stability, as the EU status quo is certain to change (see below, Section 3). 


    1. Other proposed forms of Brexit (Norway, Labour’s Customs Union, May’s Deal) are “BRINO” (Brexit in Name Only) and basically an effort to trick the people of the UK into thinking that Brexit has been delivered- when it has not. It is merely re-joining the EU in slightly different form. But the loss of sovereignty continues, as do the vast payments, as do the trade limitations. 

  1. FROM THE MOMENT THE REFERENDUM RESULT CHOSE BREXIT- THE EU CEASED BEING “OUR FRIEND” AND BECAME OUR “COMPETITOR” 
    1. The EU is terrified of having a powerful and attractive competitor on its doorstep- and will do anything to prevent that from happening. 
    2. Through Brexit, the UK is uniquely poised to become the most competitive business-friendly country in Europe. Able to lower its business taxes and regulatory burden, and tailor its own policies to suit its own needs. A nimble, Singapore-style, business friendly nation. 
    3. Without the shackles of EU regulations and costs, the UK can become incredibly nimble. In a fast-moving, quickly changing world, the UK will be able to be able to move quickly and strategically - something that is literally impossible if the UK remains tethered to the big, slow EU. There's no upside to remaining stuck in the bureaucratic quagmire of slow-moving EU regulations and profligate financial obligations (the very opposite of nimble). 
    4. The UK is an extremely investible country with world-leading rule of law, advanced technological capabilities, low unemployment, and a long period of sustained GDP growth. The UK is not going to turn into a banana republic overnight just because it left the EU. 

    1. In 2018, despite impending Brexit, the UK had the second highest Foreign Direct Investment (investment into the UK by foreign investors) than any other country in the world except China. (https://www.gov.uk/government/news/uk-leading-europe-for-fdi-as-fox-hunts-future-investors-in-china) 
    2. This proves that Brexit makes the UK more attractive for investment, rather than less so. 
    3. The UK has an enviable geographic position, being able to cover Wall Street and Asia financial markets in the same business day. And of course speaking English – the language of global business- on a native level of fluency. 
    4. The UK is perfectly poised to act as a conduit between the USA and the rest of the world. 


  1. REMAINING IN THE EU DOES NOT GUARANTEE FUTURE STABILITY OR GROWTH. THE EU WILL NOT BE ABLE TO MAINTAIN THE CURRENT STATUS QUO INDEFINITELY. EITHER IT WILL FURTHER INTEGRATE WITH POOLED-TAXATION OF ALL EU COUNTRIES, OR BREAK APART ALTOGETHER DUE TO INSURMOUNTABLE STRUCTURAL PROBLEMS AND RISKS. IN EITHER SCENARIO, THE UK WILL HAVE TO PAY FOR THE CONSEQUENCES IF IT REMAINS IN THE EU. 

  1. THE ITALIAN DEBT-BOMB, €3 TRILLION OF GOVERNMENT DEBT- LIKELY TO CAUSE A GARGANTUAN EU BANK BAIL-OUT (WHICH THE UK WOULD HAVE TO HELP PAY FOR IF IT STAYS IN THE EU) 
    1. The government of Italy is carrying an unsustainable debt load, that makes the Greek €180 billion debt crisis look like crumbs by comparison 
    1. Circa €1 trillion of the €3 trillion Italian debt is held by European banks outside of Italy. €2 trillion of government debt held by Italian banks 
    2. If Italian bond yields (cost of borrowing) go up, servicing the debt becomes utterly unsustainable, and Italy becomes insolvent. The slightest political instability or populist uprising in Italy can cause the bond yields to increase to dangerous levels 
    3. Mario Draghi had been buying the debt, to help sustain the situation. 
    4. But basically it is a sticking plaster and the EU is kicking the can down the road 
    5. Italian populists are keen to default on the debt, and let the EU banks crash, creating true financial Armageddon in the EU 
    6. Italy never should have joined the Euro. Over three decades, between 1970 and 1999, the Italian lira currency had steadily lost over 80% of its value relative to the German mark currency. As the new millennium neared, Italy was being out-competed by emerging East European economies and even more dramatically by China. Unable to raise productivity growth, Italy would need more lira devaluations - since joining the Euro Italy has been a time bomb. 

  1. THE EU IS FUNDAMENTALLY UNDEMOCRATIC –LOSS OF SOVEREIGNTY FOR INDIVIDUAL STATES 
Forces member states into a “one size fits all” model of laws and finances, that may not suit the needs of the individual member state 
    1. Model of increasing centralisation of power- taking power away from member states and giving it to the EU Commission 
    2. All relevant and important decisions are taken by the EU Commission, an unelected and un-removable body. 
    3. Increasing loss of sovereignty for member states, due to requirement of increased EU-superstate-integration toensure future survival of EU (see section below)
    4. POPULATIONS ARE INCREASINGLY ANGRY AT BEING DISENFRANCHISED- subjected to policies they do not want and did not vote for- rise in populist sentiment and anger at EU 

    1. The unelected and unaccountable ECJ has also seized power- declaring itself as superseding the law of individual countries. Always adjudicating disputes in favour of the EU 

  1. UK REMAINERS SAY “STAY IN THE EU AND REFORM FROM WITHIN” HOWEVER, THE EU HAS SEVERE STRUCTURAL FLAWS AND IS NOT REFORMABLE- ONE SIZE DOES NOT FIT ALL – THE POLITICAL AND FINANCIAL MODEL IS FUNDAMENTALLY UNSUSTAINABLE. 
    1. The overall model includes contradictions that cannot be overcome—the model cannot continue without increased EU “superstate” integration- but nationalist public opinion in member states emphatically does not want increased integration 
    2. The EU Must create fiscal union (pooled taxation) or die 
    3. Free movement of capital and people is creating increasingly unsustainable financial inequality between member states
      1. Free movement of capital and people means that both capital and people have moved to the rich northern European countries- making the poor countries much poorer. 
        1. Millions of high –earning, highly skilled, productive people from poor countries have emigrated to rich countries, leaving pensioners and low-earners in the poor countries, further impoverishing the poorer countries (this problem has been highlighted in an Economist article: https://www.economist.com/europe/2017/01/19/eastern-europes-workers-are-emigrating-but-its-pensioners-are-staying) 
        2. This shift - free movement of capital and people toward richer countries- makes richer countries richer, and poorer countries poorer- and creates a need to subsidise the poorer countries. The only efficient way to do this is fiscal integration (a pooled, centralised federal tax system) but the citizens of richer European countries will never agree to this. i.e. Hard working Germans don’t want to pay for “lazy” Greek pensioners - regardless of the fact that many thousands of high-earning Greek doctors/lawyers/engineers/scientists- whose education & training was paid for by Greek taxpayers- are working in Germany, contributing to the German economy, and paying taxes to Germany rather than Greece. 
    4. Currently EU subsidisation of poorer countries is done by a system of handout “subsidies” and “bailouts,” which come with humiliating and heavy conditions attached (such as imposition by Germany of caretaker and technocrat governments, austerity, and troika oversight). 
    5. Extremely different cultures, languages, and national identities among member states means it is not the “United States of Europe” (in the United States there is a centralised pooled federal tax system: rich/productive states like New York have always been subsidising poor states like Mississippi. Nobody knows and nobody cares, because it is all one country and one culture. This is not and never will be the case in the EU. Every country has a national identity it wants to maintain and protect). 
    6. Without fiscal union (pooled taxation), the entire EU remains massively, unfairly "rigged" and skewed in favour of Germany. To the rest of the countries it causes more harm than good. 

  1. GERMANY-- THE ENTIRE EU, AND EURO CURRENCY MODEL, IS MASSIVELY BIASED IN FAVOUR OF GERMANY: Biased currency system, and Vendor Based Finance System 
    1. BIASED CURRENCY SYSTEM: The EURO currency is massively biased in favour of Germany 
    2. Since the creation of the EURO, Germany (a country of hyper-productivity) has enjoyed a much cheaper currency than it should have had in proportion to its level of productivity (unfairly making its products much cheaper and more competitive for export), and the southern European nations have suffered from a much more expensive currency than they should have had (making their products much more expensive and less competitive for export). (i.e. Despite the fact that Greece is an EU member, Germany buys its raisins and nuts from Turkey, because the Turkish lira currency is much cheaper than the EURO that Greece has to sell its products with. So mountains of Greek raisins are being left to rot- because Turkey can offer the same product with a cheaper currency). 
    3. The “one size fits all” Euro currency has decimated the less productive economies, because they no longer have the power to deflate and manipulate their currency to increase their competitiveness on the world market. And it has made daily life extremely expensive. 
    4. Clearly, with currency, One Size DOES NOT fit all. (Again, like the free movement of people and capital, the single currency helps the richer countries and harms the poorer countries) 


    1. There cannot be successful implementation and integration of a unified currency when there are massive GDP gaps among countries (surplus for some ie Germany and deficit for others ie Greece). (Excellent article from Harvard Professor of Economics Martin Feldstein http://www.nber.org/feldstein/fa121311.html) “The euro should now be recognized as an experiment that failed. This failure, which has come after just over a dozen years since the euro was introduced, in 1999, was not an accident or the result of bureaucratic mismanagement but rather the inevitable consequence of imposing a single currency on a very heterogeneous group of countries. The adverse economic consequences of the euro include the sovereign debt crises in several European countries, the fragile condition of major European banks, high levels of unemployment across the eurozone, and the large trade deficits that now plague most eurozone countries.” 
    2. The biased currency system is creating massive imbalances and it is possible that the EURO will have to be abolished- or conversely the EU may insist that all member countries adopt the EURO, if they succeed in imposing fiscal unity and pooled-taxation (This will obviously hit the UK if it stays in the EU). 
    3. VENDOR BASED FINANCE SYSTEM- Germany has created a “Vendor-based finance” system for the EU (loans money to poor EU countries, so they can buy German goods, creating a perpetual state of indebtedness so that it can wield influence) 
    4. Germany exercises power over the entire EU by being a creditor-nation- and this is causing mass discontent throughout the EU 
    5. An example of Germany exercising power over the EU is in the area of immigration: 
      1. Germany may need a large influx of migrants in order to have cheap workers for its factories. But other countries with high unemployment certainly don’t need or want immigration. 
    6. Other EU countries being forced to accept immigration are angry and increasing support for far right populist parties- to seize control of their borders back from the EU (i.e. Italy, Hungary, Austria, France, Greece, even Spain) 
    7. Low-cost unskilled labour coming into rich countries like Germany has supressed wage growth in rich countries, helping the business owners but hurting the workers- and increasing income inequality even within rich countries. Germany has created its manufacturing superpower by quite ruthlessly supressing labour costs. 


  1. UK- EU TRADE IS NOT BALANCED—ANNUAL £100 BILLION TRADE DEFICIT- EVERY YEAR WE BUY £100 BILLION MORE EU PRODUCTS THAN THEY BUY OF OURS. 
    1. External trade policies are decided by the unelected, unaccountable EU Commission 
    2. Despite EU subsidies, EU products are more expensive to produce than comparable non-EU products 
    3. But EU membership hinders the UK from buying cheaper goods from outside the EU 
    4. The EU is hindering free trade with poor African countries by imposing colonial era trade practices (EU won’t allow free trade deals with poor African countries, unless those countries allow EU businesses to run the deals and open up operations in the poor countries) (see Kenya-EU trade deal collapse) 
    5. The UK does already buy huge amounts of cheap goods from China and elsewhere in Asia, but EU tariffs make these items more expensive than they need to be, making these items more expensive for the poorer people in the UK 

  1. UK EXPORTS TO THE EU ARE STAGNANT, WHILE UK EXPORTS TO NON-EU COUNTRIES ARE GROWING RAPIDLY 
    1. In 2017, eight of the ten fastest growing markets for UK exports since 2010 were outside of the EU, while exports of services to the key non-EU markets of USA, China and Japan have all increased by more than 85% since 2010. (https://www.gov.uk/government/news/latest-ons-figures-show-rise-in-exports) 
    2. Recent ONS (office of national statistics) figures show exports from the UK to non-EU markets are up over 13% this year; while exports to the EU are dropping. 
    3. The EU is comprised of overly developed economies with stagnating growth- basically no growth, no opportunities for growth. Failing “zombie” businesses and sectors are being propped up by EU subsidies and tariff protectionism, and are not actually competitive on a world stage. 
    4. Despite ECB artificially inflating EU growth through QE (quantitative easing) in the past 3 years, the EU-QE has now ceased. The UK has actually performed better than the Eurozone on long term growth and other economic indicators (https://blogs.spectator.co.uk/2018/11/the-conundrum-of-britains-continued-growth/?utm_source=Adestra&utm_medium=email&utm_content=20181117_Money_weekly&utm_campaign=Money&fbclid=IwAR0pu7yaPiuz4Z717gJCQ1X6e532fU-Eg0qzeEYZaB-37xawR7dEr4Ba0JY) 


    1. By staying in the EU, the UK would be tethering itself to an unwieldy financial system of low growth and high unemployment that will drag the UK down, not lift it up 
    2. The EU comprises only 6% of the world’s population. Continued membership of the EU is preventing the UK from creating trade deals with the remaining 94% 
    3. Due to emerging economies and technology, the remaining 94% are becoming increasingly active consumers 

  1. PROJECT FEAR PART 2 - REMAINER PROPAGANDA (AND FALSE FINANCIAL MODELLING BY THE BOE) THAT A “NO DEAL” WTO BREXIT WILL CAUSE COLLAPSE OF UK TRADE TO EU 
    1. “No deal” “Worst-case-scenario models” have garnered massive media attention, and have created misleading “Remain” Propaganda 
    2. Recent Scenario models from the BOE have been UTTERLY FALSE AND MISLEADING- based on input premises that are completely unrealistic and untrue (even as a worst case scenario). (They have also been discredited by the doomsday scenario models of Project Fear part 1 before the referendum vote)
    3. Models have been created on false assumptions designed to create fear 
    4. Even “remainer” economist Paul Krugman believes that the BOE models are ridiculous and exaggerated, based on ridiculous premises (i.e. that the border disruptions of “no-deal” will go on forever, and never be addressed by the UK with better technology and procedures) 
    5. That there will be a TOTAL TRADE EMBARGO WITH THE EU if we leave with no deal/WTO (i.e. there will never be another sale of an item between the EU and the UK). 
    6. This is obviously untrue and preposterous. Even on “no deal,” there will be UK/EU trade- even if it is more expensive to do so. Average WTO tariffs on goods are 2.8% 
    7. The model also assumed ZERO growth in non-EU markets- EVER. Again, which is patently ridiculous and untrue, given that non-EU markets are the fastest growing segment of UK export. 
      1. According to ONS figures, 55% of UK exports used to go to the EU, in the past few years that has reduced to a current 50%, with the trend increasingly going toward rapid growth of exports to non-EU markets, and reduction of EU markets 


  1. PROJECT FEAR PART 1-- THE UK VOTED FOR BREXIT –DESPITE BEING BOMBARDED WITH DOOMSDAY PREDICTIONS in 2016. THE VOTERS DECIDED THAT DESPITE THE NEGATIVE PREDICTIONS, REGAINING SOVEREIGNTY WAS WORTH THE RISK.
    1. According to prior BOE and Treasury Scenario Models- prior to the referendum vote- The UK by now was supposed to have lost almost a million jobs since Brexit vote (in fact the opposite is true). Bond yields and interest rates were supposed to have skyrocketed (again, didn't happen). Each family supposedly £5k poorer- didn't happen. 
    2. Economy plunged into recession- didn't happen (and in fact outperforming the EU). 
    3. The only economic indicator affected by Brexit has been the drop in GBP- which has had the perverse effect of increasing exports and manufacturing. 
    4. The UK economy is sturdy enough to weather the economic disruption of a transition to WTO or Canada in the event of no deal. Will the economy take a hit? Yes, but it won't be an insurmountable hit (especially if there are £40 billion available to cushion the blow). There will be short-term pain for long-term gain. 
    5. The UK may as well go to "no deal WTO" or Canada, because the EU has strong incentives to make sure the UK does not do well out of Brexit- in this context they are our enemy not our friend


  1. DESPITE PROJECT FEAR PART 1- VOTERS MANDATED A CLEAN BREXIT TWICE, NOT ONCE 
    1. First Brexit Mandate-The outcome of the referendum vote. There was a very clear democratic outcome of the Brexit vote (the outcome was unpalatable to many - but it was a clear outcome nonetheless ) . And that was TO LEAVE. It wasn't "to leave, but only to leave subject to getting an EU trade deal" It wasn’t "to leave some bits of the EU, but remain in other bits like the customs union" (cherry picking)(half in, half out) It was simply TO LEAVE. 

    1. Regaining sovereignty and freedom was worth the risk. Even if there isn't any EU trade deal secured, there still is a democratic obligation TO LEAVE- even if that means WTO/no deal. 
    2. The Second Brexit Mandate came during the General Election of 2017- with 80% of MPs having been elected on manifestos of “leave the customs union and the single market” In other words, not Norway, not Chequers, not Labour’s proposed “ New customs union.” All of these “BRINO Options” are a gross betrayal of democracy and the democratic mandate achieved not once, but twice by British voters. 

    1. The 1990’s historic "project fear" projections have also proved untrue (catastrophe if UK doesn't join the Euro currency, catastrophe if UK leaves ERM, etc). 


  1. ONLY WTO OR CANADA FULLY REGAIN SOVEREIGNTY AND ACTUALLY DELIVER BREXIT 
      1. Remove the UK from: 
        1. The Customs Union 
        2. The Single Market 
        3. The ECJ 
        4. Regulatory alignment 
        5. Vast Payments to the EU
        6. Freedom of movement 

    1. EU membership is not some sort of Nirvana- it is an extremely expensive political club that is an undemocratic, unwieldy, outdated, failed experiment that is no longer worth paying so much for, and giving up the right to trade freely with other non-EU countries. 

    1. A simple EEC trading bloc would be better than the inevitable “superstate” 

    1. The benefits of the EU political union are no longer worth the costs and risks- in order to have free trade with only 6% of the world population, in a low-growth stagnant market. 






IN SUMMARY: 
    1. THE EU IS CURRENTLY IN THE PROCESS OF TRYING TO SABOTAGE BREXIT. 
    2. A SUCCESSFUL, CLEAN BREXIT CREATES AN EXISTENTIAL CRISIS FOR THE EU: 
      1. IN THAT OTHER COUNTRIES WILL LEAVE 
      2. IN THAT IT WILL HAVE A LOW-TAX, NIMBLE COMPETITOR ON ITS DOORSTEP 
    3. PRO-EU PROPAGANDA IS TELLING THE UK : 
      1. MYTH THAT CONTINUED EU MEMBERSHIP WILL INSURE STABILITY AND GROWTH 
      2. IN FACT THIS IS NOT TRUE- THE EU IS CHANGING AND CANNOT MAINTAIN THE STATUS QUO: 
    4. THE EU IS RUNNING HIGH RISK OF SUBSTANTIAL FINANCIAL AND SOCIAL DISRUPTION THROUGH: 
      1. THE ITALIAN DEBT CRISIS 
      2. FUNDAMENTALLY UNDEMOCRATIC SYSTEM of EU IS CAUSING GROWING RESENTMENT AND POPULISM/NATIONALISM 
      3. Major decisions taken by unelected and un-removable bureaucrats 
      4. Member states forced to accept things they don’t want and didn’t vote for
    5. STRUCTURAL PROBLEMS CAUSING GROWING INEQUALITY AMONG MEMBER STATES, INCREASING RESENTMENT AT GERMAN DOMINANCE 
      1. Skilled workers and capital are leaving poor EU countries and going to rich EU countries 
      2. Rich EU countries do not want a central pooled-tax system and fiscal integration 
      3. Biased Euro currency system that unfairly favours Germany, creating huge imbalances 
      4. Vendor based finance system that allows Germany to impose its will on other countries 
      5. STAGNATING ECONOMIC GROWTH- lower GDP than the UK 
      6. HIGH YOUTH UNEMPLOYEMENT 
      7. Myth that UK leaving the EU will decimate UK trade/exports 
        1. In fact that is untrue 
          1. UK exports to EU are already decreasing as a proportion of exports 
          2. UK exports to Non-EU countries are increasing rapidly 

    1. Despite “Project Fear Part 1,” the voters of the UK mandated Brexit not once, but twice (with 80% of MPs in the general election being elected on a manifesto of leaving the customs union and the single market) Anything other than WTO or Canada is BRINO, a betrayal of democracy, and does not deliver Brexit. 



WITHOUT INDULGING IN ANY HYPERBOLE- THERE IS A VERY STRONG CASE FOR LEAVING THE EU