The Month That Was……July 2019

Another month passes……another ‘historic’ moment in the modern history of the UK.

 

A curious process that embraces the unique quirks of UK politics……which results in a new Prime Minister being born.

 

Curious? Quirky?

 

Well……the UK is a democracy where a new Prime Minister was chosen by only 0.25% of the electorate, to form a Government that doesn’t have a majority, in a party that is at 20% in the polls, to threaten a no deal Brexit that only 26% of the population actually want.

 

‘Curious’ and ‘quirky’ seem a little charitable.

 

Here’s how July 2019 will be remembered……

 

 

The Bo Jo Show

BoJo managed to go 6 weeks during campaigning without being racist, sexist, xenophobic, ageist, anti-Semitic, et al and that (plus 92,153 votes) is all it takes to be Prime Minister now. Defining stuff clearly.

 

The biggest task for BoJo is the hot potato that is Brexit. He has thumped his chest for 6 weeks declaring that we are leaving on 31 October 2019 under the campaign slogan……“Deliver Brexit and Unite The Country”.

 

There is no doubting that BoJo is marmite……you love or loathe. There is also no doubting that he is absolutely daft enough to take us as close as anyone to jumping off the ‘no deal’ cliff.

 

I fear that he will be hit with the same issues as Theresa May……in that such a narrow majority in Parliament causes a deadlock in agreeing anything. Don’t be surprised if we see a General Election being called in autumn.

 

Time will tell. But first the important stuff……6 weeks of holidays for the MPs.

 

Desperate stuff.

 

 

Currency Confidence (Lack of)

The exchange rate of sterling against major currencies tells us all we need to know about the confidence (or lack of) the rest of the world has in the UK.

 

Two key measures paint a poor picture:

 

Firstly, against the dollar, the pound fell below $1.25 and was close to its lowest level since April 2017.

 

Secondly, the pound was also at a six month low against the euro at just above €1.11.

 

Political uncertainty and a lack of direction causes this……another unintended consequence of Brexit.

 

Just remember this when you scrunch your face in disgust at the exchange rate when collecting your holiday currency!

 

 

No Deal Disaster? (A)

BoJo’s rhetoric for the past 6 weeks is that he will accept a no deal if a good deal can’t be achieved……in fact he almost bragged of no deal happening.

 

Surveying the political, economic and diplomatic wreckage that Brexit has already caused, one might wonder how much worse it can get. It would appear, a lot worse when inspecting the report from The Office for Budget Responsibility (an independent group of cardigan wearers that we can trust). A timely reality check on the impact to our economy in a no deal scenario, the report stated that our economy would go in to recession and be hit by about £30 billion……with public borrowing having to increase by the same amount to compensate.

 

The 300 page report, was an extraordinary document. It sets out, with graphs and ample data, how Britain is about to fall off a cliff. Willingly. Eyes wide open. With some smiling.

 

In any normal situation, such a prediction would be political dynamite and it would shake the markets to the core……but we have become habituated to chaos. We have not had a normal day in the UK since June 2016 and with BoJo at the helm, it’s about to get a whole lot hairier.

 

Let’s see if Bojo is still thumping his chest come October!

 

 

No Deal Disaster? (B)

Perhaps better prepared than our own Government, the banking sector appears in good health to withstand a no deal Brexit.

 

The Bank of England stated that the UK banking system is resilient to the financial impact of a worst-case disorderly Brexit. This came on the back of its regular health check on the banks (the Financial Stability Report).

 

Since last year, UK banks have been forced to hold back more capital and demonstrate easy access to £1 trillion in funding (liquidity). The Bank says that such a buffer would allow the banking system to continue to lend into the economy, even if the UK were shut out of international markets for three months.

 

Perhaps lessons have been learnt and absorbed from the banking collapse of a decade ago.

 

Perhaps.

 

 

The Trump v BoJo

The back drop to relationships between the US and the UK that BoJo will inherit come from The Trump being angered (to the point of devoting his twitter feed to his anger) at confidential emails from the UK's ambassador (Sir Kim Darroch) being leaked to the Mail on Sunday.

 

It contained a string of criticisms of The Trump and his administration, describing them as “clumsy, dysfunctional and inept”.

 

Surely an investigation should be launched to find out why he missed out ‘dangerous’ and ‘idiotic’.

 

Anyway, what the issue does though is force BoJo to consider, pretty quickly, what the relationship with the US will be……especially as we want a trade deal post-Brexit.

 

The Trump question for BoJo is……tackle, tame or tolerate? Perhaps it will be more a ‘roll over and request a tummy tickle’.

 

 

 

July’s Biggest Loser……Option 1 – Mail on Sunday

Surely an ambassador doing their job in (rightly) identifying The Trump and his administration as “clumsy, dysfunctional and inept” is exactly what we want from those with their ear on the ground in the US?

 

Why does a newspaper (in the loosest sense) feel that this is so important to print (legally / illegally) even at the expense of political tensions?

 

Surely a half decent moral compass tells us this is wrong on every level?

 

Come on……we deserve better than this. Surely.

 

 

July’s Biggest Loser……Option 2 – Jeremy Hunt

What the UK needed was an opposition candidate that stood for what the country needed and make a decent argument and alternative to BoJo.

 

What we got was a vanilla MP who has held a seat for nearly 20 years and a cabinet position for 10 years trying not to be anything other than ‘nice’ and be a vanilla MP. Nothing controversial. Loyal to his position. Feathering his nest for the next General Election and next cabinet position.

 

We needed more. We deserve more.

 

 

July’s Biggest Loser……Option 3 – UK Politics / Democracy 

A Government with a majority this small isn’t going to keep it for long. A defection or two, a by-election or two, a disagreement with the DUP or two and it will be gone. The chances of surviving all the way to the end of parliament seems pretty small. And the chances of running out of road some time very soon seems pretty high……particularly the moment BoJo starts actually doing something that requires legislation.

 

Regardless of who you voted for in the last General Election, it wasn’t BoJo. Yet he will determine when the next General Election will take place……he will decide it for political tactics not with you or the UK in mind.

 

And this is all completely legal and acceptable.

 

 

Bizarre of The Month……

A troupe of Morris Dancers held a ‘dance off’ in Westminster to protest at the new Prime Minister. What next……Pimm’s at dawn?

 

 

And Finally……

After Donald Trump said people should go back to their own countries if they’re unhappy in America, one can only presume that the First Lady has immediately boarded a one-way flight to Slovenia?

The Month That Was……June 2019

Nothing stands still for too long these days……just ask Theresa May. Remember her? Already moved to the history books.

 

Whilst our economy stalls until the political line dance comes to a conclusion next month, we must continue to tread water for any sign of a Brexit resolution.

 

Still, there is plenty of action surrounding The Trump to keep us entertained in the meantime. He really is the gift that keeps on giving.

 

Here’s how June 2019 will be remembered……

 

Bo Jo No Show

If we are going to get our economy firing, we must get a Brexit solution. To get a Brexit solution we must sort out our politics. Which to be fair, has been a mess since……insert year (there is no wrong answer here!).

 

UK politics is like that moment when you realise that you’ve only got coffee flavours left in your bag of Revels and at the same time stand bare foot on an upturned plug. Painful, disappointing and all so avoidable.

 

What originally started as 11 candidates to replace Theresa May has been whittled down to two. The process involved a series of votes by Tory MP’s and, bizarrely, an admission of what drugs each candidate has taken.

 

With Boris Johnson the clear favourite, the only thing to keep us interested whilst the process got us down to two was the league table of drug taking.

 

There really was quite a list: Andrea Leadsom is a cannabis kind of girl. Michael Gove strictly a Class A cocaine kind of guy. And then there is Boris. Oh, Boris. "I think I was once given cocaine but I sneezed and so it did not go up my nose. In fact, I may have been doing icing sugar." You simply can’t make this stuff up.  

 

After all the Westminster dodgeball we are left with a political fight-off between Boris Johnson (BoJo) and Jeremy Hunt (Jezza).

 

Jezza is the current Foreign Secretary and is the massive outsider. He knows it and he is using it to his advantage as he has nothing to lose. In fact, he seems to be enjoying himself in a way that being buttoned up in Cabinet for nearly a decade never allowed him to.

 

The biggest threat to BoJo winning is, well, errrrr……BoJo. So far the strategy for Team BoJo has been to avoid as much public questioning and direct debate as possible. That way the prospect of a racist, sexist, xenophobic, ageist, anti-Semitic, et al comment is reduced. That really is a worrying and appalling strategy for the clear favourite as PM of this fine land.

 

Although BoJo has the political balls to bring Brexit to a head (even if it is a no deal scenario), it is very difficult to see how having BoJo as PM would make this country a better place in the long term. Very difficult.

 

Economic Embarrassment?

Glass Half Empty:

Clearly nobody voted for the current state of our economy in the 2016 referendum……but the unintended consequence of a stalling economy is exactly what we have got.

The Bank of England has said it expects economic growth to be flat in the second quarter of this year (previously predicted growth of 0.2% over the period). The downgrade in part reflected by an easing of stock-building ahead of Brexit deadlines. In the run-up to the end of March, when the UK had originally been expected to leave the European Union, businesses from pharmaceuticals companies to food manufacturers stockpiled goods. Add to that the perceived likelihood of a no-deal Brexit has risen, we are stuck in an economic rut. 

Glass Half Full:

Business leaders from some of Britain’s most important trading partners expect to be more eager to invest in the UK after Brexit, according to a survey.

A poll of 1,300 chief executives in 11 of the world’s largest economies found bosses from the US, China and Japan — the UK’s top investor and the world’s second and third biggest economies — expect to be more likely to invest in Britain after it leaves the European Union.

KPMG, which conducted the poll, said it showed many international chief executives “still view the UK as an attractive investment destination”.

Fingers crossed.

 

Trump Tear-Up #1 - Iran

The Trump’s presidency resembles that of a third-world corrupt regime, complete with nepotism and attacks on objective sources of information. Instead of Trump serving the people, US Government is converted into an operation designed to cater to Trump’s needs……which is pretty much picking a fight whenever possible.

 

And The Trump loves a fight. Or rather, he loves starting a fight. The list is long……China, Mexico, Germany, North Korea, women, Hispanic men, women and children (he’s not fussy)……and this month we can add Iran, our NHS and The Fed.

 

The issue with Iran is oil. It always is. Everything else is a side story and smoke screen. By his own admission, The Trump confirmed he was within 10 minutes of giving the ‘OK’ to a bombing attack on Iran. Brilliant. The US on the attack over oil……who would have thought it!

 

Trump Tear-Up #2 - NHS

The Trump’s state visit and royal reception was pretty unremarkable in reality. I’ve seen more people down at the local garden centre on a hot day than those to greet The Trump at Buckingham Palace. Remarkably, there were fewer people along The Mall for The Trump’s visit than there would be on a day without anyone visiting.

 

The only point of note during the visit (aside from the cost of security and policing at the expense of UK taxpayers……don’t get me started on that one) was The Trump committing the US to “a phenomenal trade deal with the UK” post Brexit.

 

The Trump claimed there was potential for an agreement to double or even triple trade between the two nations after Brexit. Brilliant. I’m all in.

 

But then the bombshell……

 

“When you're dealing with trade everything is on the table, so the NHS or anything else, or a lot more than that. But everything will be on the table, absolutely.”

 

Current rules allow foreign firms to bid for NHS contracts and a subsidiary of the US company United Health is among private groups which have already successfully done so. The Trump knows how much money is spent in providing NHS services and he can see a way to leverage a bigger piece of the action.

 

Ah. Maybe not quite all in after all. A phenomenal trade deal for whom?

 

Trump Tear-Up #3 - The Fed

The Trump’s re-election campaign ramped up a few notches this month.

 

Although the US is prospering, voters are likely to judge the president on his character just as much as his record.

 

With typical self-effacement, The Trump tweeted: “In the ‘old days’ if you were president and had a good economy, you were basically immune from criticism. Today I have, as president, perhaps the greatest economy in history . . . and to the mainstream media it means NOTHING. But it will.”

 

It’s as near definitive an example of The Trump in one tweet as one can find. It’s all there. Bombast. Vanity. Falsehood on a picturesque scale. Obsession with the media. More than a hint of pathological insecurity.

 

For once The Trump is on to something……in the past a strong economy has been a sufficient and necessary condition of a president’s re-election.

 

A necessary condition of a solid and growing economy is low interest rates. What seemingly frustrates The Trump more than anything else is his lack of power or persuasion over The Fed to reduce interest rates.

 

The chairman of the US Federal Reserve made a forceful defence of the central bank’s independence this month over pressure from President Trump to cut interest rates. Jerome Powell (Chair of the Federal Reserve) said that the Federal Reserve was “a non-political institution” on a mission to “extend the economic expansion” and did not think about “short-term political considerations” when assessing what to do with rates.

 

That’s a pretty clear response and one that the rest of the world should take heart from. We need the dollar and interest rate from the world’s largest economy to be run independently – it is the default currency in the majority of trade agreements.

 

The Trump responded in his usual petty manner on twitter……claiming that the US Federal Reserve “blew it” by not cutting interest rates, “doesn’t know what it is doing”. Toys out of pram big style.

 

Reassuringly, Jerome Powell vowed to stand firm against attacks from the White House. “The law is clear that I have a four-year term and I fully intend to serve it,” he said.

 

He’s a nice insurance policy to have for the rest of the world currently.

 

 

June’s Biggest Loser……Option 1 – Chis Grayling (again)

From awarding a £14 million ferry contract to a company with no ferries……to having to make a £33 million out of court settlement to Eurotunnel for breaking anti-competition laws……there is quite a back catalogue of cock-ups in his current role as Transport Secretary.

 

This month has seen an investigation in to the previous senior positions he has held in Government including Employment Minister and Justice Secretary and there is quite a history to his failures.

 

The results have concluded that he has racked up £790 million of losses through failed schemes in his previous positions. When added to the £2.7 billion he has cost the country since becoming Transport Secretary in July 2016, we are at £3.5 billion he has wasted of taxpayer money.

 

And still Failing Grayling is Transport Secretary.

 

Come on……we deserve better than this. Surely.

 

 

June’s Biggest Loser……Option 2 – Piers Morgan

Try watching Piers Morgan for 10 minutes and dare your eyes and ears not to question whether the TV licence fee is worth it. He really is horrid.

 

But there is one thing worse than Piers Morgan……it is Piers Morgan interviewing The Trump during his State Visit. For somebody who self-declares his strong will and personality……it was embarrassing to watch Morgan turn into a lapdog.

 

There was no journalistic questioning or probing of a man who needs questioning and probing……it was simply a platform to allow The Trump to flirt with us. Pathetic.

 

June’s Biggest Loser……Option 3 – UK Politics / Democracy 

The cherry on the political cake……only 0.34% of the UK"s population will decide who the next Prime Minister will be.

UK politics and democracy summed up in one sentence. It lacks all sense.

Word of The Month……

"Hustings"

Definition (A): A meeting at which candidates in an election address potential voters.

Definition (B): A social gathering for former Oxford / Cambridge graduates that involves them failing to answer any question that they have been asked and trying not to say anything semi-controversial in the process.

 

And Finally……

The future of 1p is in doubt and may be removed from circulation. Surely they are worth keeping just for the fact that it is embedded in our everyday language?

 

From ‘pretty penny’ to ‘spend a penny’, there are dozens of phrases in the English language in which pennies play a part. It’s part of our British culture.

 

If they are replaced by digital payments, will the language become less elegant?

 

‘A crypto-currency for your thoughts’ just doesn’t seem as poetic to me.

The Month That Was……May 2019

Changes at the top of the political tree will ensure that May 2019 will be a significant month in modern history.

 

The concern now is the economic reality of three years of Brexit ‘nothingness’ and no solution being imminent. In fact a change of Prime Minister delays everything further. What a farce.

 

Here’s how May 2019 will be remembered……

Economic Issue #1 - Broken Brexit

Brexit claimed its second Prime Minister since the referendum in 2016……and who is to say it will be its last.

 

As a last throw of the dice, Theresa May promised a “bold offer” to all political parties on Brexit. However, this was essentially an act of representing her withdrawal bill yet again but with a thicker font.

 

Within 48 hours of intense political pressure, Theresa May made a painful and tearful resignation speech and that was that. As soon as she walked back in to Number 10 and the door was closed, the process of electing a new Conservative leader (and Prime Minister) was underway.  

 

Michael Gove, Jeremy Hunt, Boris Johnson, and Dominic Raab are the front runners to replace her, with Boris Johnson the red hot favourite to win the leadership contest. In reality, it will be the candidate with the most ‘likeable’ Brexit policy that will win.

 

Boris Johnson said in 2003: "I have as much chance of becoming Prime Minister as being decapitated by a frisbee." I think I speak for many when I say……please, please, please keep hold of your frisbees for the next few months!

 

Many argue that Boris Johnson is the biggest threat to Jeremy Corbyn becoming Prime Minister. I would argue the biggest threat to Jeremy Corbyn has always been Jeremy Corbyn.

 

Seriously though, any candidates with a chance of winning will have to (a) insist they have a better, tougher negotiating stance which will bring results from the EU and (b) insist they are ready in a way that Theresa May never was to embrace no deal.

 

I am not sure which is worse……selecting a new leader of the sixth largest economy in the world based on their stance on Brexit or leaving it to 150,000 members of one political party to decide the next Prime Minister. I’m not sure we signed up to that as part of the referendum. 

 

There are a few things we do know for certain:

 

Firstly, the current outlook for a ‘no deal’ Brexit looks far closer than a deal being struck given the new Prime Minister is likely to need to renegotiate with the EU given the lack of confidence in Theresa May’s grand master plan.

 

Secondly, the economy continues to stutter and stall whilst there is such uncertainty. How many more British Steel and car manufacturing jobs need to go before W1 gets this. There are real consequences to the lack of future certainty happening outside of London……if only MPs looked further afield.

 

3 years wasted……how many more can we afford to waste financially? We live in dangerous times as no deal creeps closer.

Economic Issue #2 - Bull in a China Shop

Aside from Brexit, the next biggest threat to our economy is the trade war between the US and China.

 

When you’re an ego maniac and the publicity goes quiet 18 months before your quest for re-election there is only one thing for it……pick an economic fight with your biggest competitor. Brilliant. Great thinking The Trump.

 

The latest round of tariffs affects a wide range of Chinese goods, from Christmas lights and vacuum cleaners to seafood and modems. They mark a dramatic escalation in a trade conflict that has simmered since The Trump entered the White House.

 

And this is the bit that The Trump doesn’t seem to get……he thinks that China pays the tariffs rather than US businesses and consumers with higher priced goods. How can someone with such power not understand how this will significantly impact their own economy so negatively?

 

Trump appears to be gambling that the American economy is strong enough to withstand any blowback from the trade conflict. A strong performance in the first quarter of the year has certainly strengthened his hand.

 

Or perhaps he is gambling the US voters aren’t bright enough to understand they have to pay for the tariffs one way or another.

 

The Trump really is frightening.

Economic Issue #3 - Greecey Italy

Aside from Brexit and US v China, ignoring Italy’s economic problems is like ignoring an unexploded bomb.

 

Though not on its death bed, Italy is certainly chronically ill. Based on International Monetary Fund (IMF) figures, net public debt of $2.6 trillion was 1.2 times the size of its economy last year and will be almost 1.3 times by 2025 because it is not growing its way back to fiscal health. Only Greece and Japan are worse among advanced nations. Italy has just escaped its third recession in a decade.

 

Were Italy not the third largest economy in the eurozone and eighth largest in the world, you could be forgiven for thinking it was a struggling emerging country. But it’s not. As the world learnt in the dark days of the Eurozone sovereign debt crisis from 2010 and 2012, Italy is not only too big to fail…..it is too big to bail.

 

Rescuing Greece cost almost €300 billion, the biggest bailout in history. Those funds paid the debt that Athens owed its creditors. Italy’s debt is multiples larger. This year alone, it must raise €220 billion. To put it another way, a Greece-sized rescue package would get Italy through little more than a year. The Eurozone’s pockets simply are not deep enough.

 

Making matters worse is the ‘doom loop’ between Italy’s banks and the state as Italian banks are big holders of state debt. On one hand, that’s a good thing……as much of the interest paid by the Government will, in theory, go back into the economy through the banking system (rather than leaking abroad). But it also creates a dangerous vulnerability.

 

Today, Italy is more fragile than ever……its credit rating is just two notches above ‘junk’, At last month’s IMF meetings, Italy was considered a bigger threat than a no-deal Brexit.

 

You might have thought Brussels would be pulling Italy into line. But it can’t. Brussels may be able to draw up rules on bendy bananas, but when it comes to stuff that matters it is remarkably toothless.

 

Italy’s growth and debt problems are now so severe that its fate is intertwined with that of Brussels. It is an unexploded bomb and time is running out.

Economic Issue #4 - UK Interest Rates

Interest rates are staying where they are because an overheating economy is the lesser evil.

 

Brexit has been blamed for many things: weighing on economic growth, deterring overseas investment, leaving holidaymakers out of pocket and driving up inflation. But one crime nobody has dared pin on it is Brexit causing a super-charged economic overexpansion. Until now……that is the implication of the Bank of England’s latest interest rate decision and Inflation Report forecasts.

 

The Bank of England’s outlook paints a picture of an overheating economy. In 2022, the last year of the forecast, inflation is 2.2% (above the 2% target). Joblessness is 3.5%, well below the Bank’s 4.25% estimate of the natural rate. The economy is 1% bigger than it can manage.

 

Despite this, the monetary policy committee unanimously chose to ignore all the warning signs and leave interest rates on hold.

 

Why?

 

In short, a no-deal Brexit could kill economic growth so why slow it now by increasing interest rates!

 

Overheating is the lesser evil.

May’s Biggest Loser……Option 1 (of 1) – Theresa May

There can only be one loser this month…… Theresa May.

 

Albert Einstein’s definition of ‘insanity’ springs to mind……“doing the same thing over and over again and expecting different results.”

 

Theresa May asked MP’s repeatedly to accept the same deal they emphatically said “no” to originally and expected different results. This really is insanity.

 

Whilst it is only natural to feel empathy for Theresa May’s tearful resignation speech, ultimately she caused the environment that we are in and there is no getting away from that.

 

Yes she had an almost impossible job trying to deliver the almost impossible……but she really didn’t help herself and, ultimately, didn’t have the human skills, political leverage or warmth of personality to bring 650 MPs together to find a middle ground.

 

She has failed and the history books will report so on her legacy. She was in above her head. Elected because all the more suitable candidates eliminated themselves and she never had quite what it takes to be Prime Minister. Every day she showed her greatest failing……a total lack of political imagination.


May’s Government was a festival toilet on wheels careening down a hill toward a children’s face painting booth. Messy.

 

Now the baton will be handed on……and I fear dropped again.

And Finally……

Imagine a democratic society so broken and untrusted that a pollical party that is only 6 weeks old with no manifesto and only one policy (leave the EU with no deal) is the most attractive option in European Elections and wins the most votes. Welcome to the UK in 2019!