Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Trend Forecast 2024 - 15th June 24
Gold Price Consolidating at High - 15th June 24
NVIDIA Stock Market: Price Prediction for the Future - 15th June 24
When Will the Boom/ Bust Rollercoaster End? - 15th June 24
Stock Market Trouble Lies Ahead. Are You Ready For It? - 15th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Is Scotland's Referendum Already A Black Swan? Cataclysmic Uncertainty

Politics / UK Politics Sep 14, 2014 - 06:17 PM GMT

By: DK_Matai

Politics

1. The pound sterling is falling. It has already fallen by 6% over the past two months. Sterling may yet fall further next week in the absence of official intervention. Investors pulled out around GBP 17 billion from the British economy last month as fears that Scotland could go independent began to hit the prospects of the whole United Kingdom. More money flowed out of British assets in August than at any time since the height of the financial crisis during the collapse of Lehman Brothers in September 2008. Over the course of this year, more than GBP 120 billion has been pulled out of British financial assets, compared to a net gain of around GBP 40 billion in 2013.


2. Deutsche Bank -- Germany's largest bank -- chief economist David Folkerts-Landau states: "Everyone has the right to self-determination and to exercise his or her democratic rights. But there are times when fundamental political decisions have negative consequences far beyond what voters and politicians could have imagined. We feel that we are on the threshold of one such moment. A "Yes" vote for Scottish independence on Thursday would go down in history as a political and economic mistake as large as Winston Churchill's decision in 1925 to return the pound to the Gold Standard or the failure of the Federal Reserve to provide sufficient liquidity to the US banking system, which we now know brought on the Great Depression in the US. These decisions -- well-intentioned as they were -- contributed to years of depression and suffering and could have been avoided had alternative decisions been taken." Mr Folkerts-Landau compared an independent Scotland to struggling eurozone countries such as Ireland, Spain and Portugal, claiming that investors would stay away due to the uncertainty caused by a break-up of the Union. He also predicted that Scotland would have to undergo a period of severe austerity in order to establish itself as a credit-worthy economy.

3. Nomura -- one of Japan's oldest, biggest bank and broker-dealer -- has been advising its clients to withdraw funds from the UK until after the poll in case the pound suffers extreme downturns in value. Nomura described such an outcome as a 'cataclysmic shock'.

4. Société Générale -- France's third largest bank -- figures show an apparent flight of capital from the UK. Investors have been pulling funds out of the UK for weeks and months, according to data on UK stock market funds cited by Société Générale, which show a worsening exodus of global money from shares in British companies.

5. A large number of businesses and entrepreneurs, including John Lewis, BP and Sir Richard Branson, have previously come out against independence and urged the people of Scotland to vote "No" next week.

6. The City of London is one of the most important financial centres on the planet where more than a trillion dollars are exchanged every day. If and when anybody rattles that kind of platform, other forces come into play. It is no longer about politics, it is about money.

7. There is no doubt within the minds of many ATCA 5000 distinguished members that a "Yes" vote next week would constitute a "Black Swan" or "Low Probability High Impact" event for the UK financial markets and possibly beyond. A "Yes" vote would materially raise the level of uncertainty associated with all UK financial assets.

8. However, the risk today of a Scottish "Yes" vote may be enough to move markets in advance of the referendum. Rational investors need to think now about positioning their portfolio for a possible "Yes" vote later this coming week.

9. Such anticipatory market activity could have a self-fulfilling impact. For example, if investors worry that a run on Scotland could result in a deposit moratorium, a run could occur before 18th September. Further, a run on Scotland could prompt a run on UK financial assets.

10. There is an enormous supra-national interest that resides in the UK financial world which is in a semi-panic mode about how much money can be lost not just because of a UK break-up, but because of the uncertainty surrounding that potential break-up.

11. The entire financial world, of which the City is a large part, has been caught on the wrong foot as much as the UK government.

12. The City of London will now do even more not to lose a substantial part of their wealth. And this time around, many distinguished members of ATCA 5000, don’t think they properly hedged their bets: the surge of the "Yes" side is as close to a black swan as we, and the City of London, have seen since September 2008.

13. Neither the Yes side nor the No side have gone into this thing terribly prepared; there are hundreds of questions surrounding the independence issue that won’t be solved before the vote takes place: passports, currencies, central banks, monetary unions, there’s too much to contemplate.

14. The reasons ATCA 5000 distinguished members think it may get out of hand regardless is that there is not one side that was ever prepared for the situation in which they find themselves today. Further, Scotland may not be financially viable and could go bankrupt. The former British Prime Minister, Gordon Brown, has said Scotland spends GBP 40 billion a year on health, education, pensions and benefits – but would make just GBP 2.9 billion from oil in year one.

15. With four more days to go until the vote that could end the 307-year-old union, major question marks hang about the stability of currency of an independent Scotland, what form it will take, or how much national debt it would take on. This is already a black swan given the high probability of a "Yes" outcome and the uncertainty that it is already creating on an enormous scale across the interconnected global financial markets.

What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.

By DK Matai

www.mi2g.net

Asymmetric Threats Contingency Alliance (ATCA) & The Philanthropia

We welcome your participation in this Socratic dialogue. Please access by clicking here.

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The Philanthropia, founded in 2005, brings together over 1,000 leading individual and private philanthropists, family offices, foundations, private banks, non-governmental organisations and specialist advisors to address complex global challenges such as countering climate chaos, reducing radical poverty and developing global leadership for the younger generation through the appliance of science and technology, leveraging acumen and finance, as well as encouraging collaboration with a strong commitment to ethics. Philanthropia emphasises multi-faith spiritual values: introspection, healthy living and ecology. Philanthropia Targets: Countering climate chaos and carbon neutrality; Eliminating radical poverty -- through micro-credit schemes, empowerment of women and more responsible capitalism; Leadership for the Younger Generation; and Corporate and social responsibility.

© 2014 Copyright DK Matai - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

DK Matai Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in