Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

British Election Sends Shockwaves Felt Here and Abroad

Politics / UK Politics Jun 16, 2017 - 03:05 PM GMT

By: John_Browne

Politics

Last week's General Election in the United Kingdom was a disaster for the new conservative government of Prime Minster Theresa May. Having called the unnecessary "snap" elections in order to strengthen her political hand, the result actually reduced the number of seats held by the conservatives and delivered large gains to the opposition Labour party, which had seemed in disarray just a few months ago. Although she has announced no plans to step down, her position has been severely weakened, possibly fatally. More pointedly, the UK's hand in negotiating favorable Brexit terms has eroded substantially. Besides creating significant ramifications for the European and global economy, the election also provides important lessons for the potential state of American politics.


In my mind, four main reasons explain the election. The first and most important was May's crucial misreading of British voter sentiment. Like the surprise election of President Trump in November, last year's Brexit Referendum revealed how deep anti-establishment sentiment has become. May failed to sense that this sentiment had shifted to her government which was seen, rightly or wrongly, as responsible for the country's current malaise including low economic growth, mass immigration and local terrorism.

Second, May displayed additional misjudgment when she suggested that health benefits for the elderly should be subjected to a 'means test' that would withdraw benefits from those who were considered well off financially. (5/17/17, The Guardian, R. Mason, H. Stewart & D. Campbell) This policy struck squarely at an important voting block at precisely the wrong time. Bumbled communications around the issue between the Prime Minister and Conservative Party allowed Labour leader Jeremy Corbyn to successfully label it a tax increase. May's eventual reversal on the issue made her look weak. Combined with her previously stating that she would not call a snap election, this lent credence to the rap song, 'Liar, liar' which went viral on social media.

Third, May underestimated how the youth vote had become a bigger factor in politics in the months since the Brexit referendum. Younger voters, who have been long cultivated by pro-EU propaganda, had nonetheless largely sat out last year's referendum, assuming that the "remain" camp would achieve an easy victory. (A similar dynamic depressed younger turnout in the U.S. when an easy Clinton win was assumed). The surprise outcome seems to have shocked that voting bloc out of its complacency. Young voters were further energized by Corbyn's promise of free education.

On a more tactical level May proved to be a weak retail candidate. She declined to participate in a televised debate with other party leaders and instead appeared as a remote and strict schoolmistress. By adopting such a profile, she was clearly hoping to emulate Margaret Thatcher. But unlike the Iron Lady, May could not run on a record of stunning domestic and international achievements. On the other hand, Jerry Corbyn, who I knew in the House, is a natural 'people contact' campaigner. On this occasion he excelled.

The Conservatives in the UK are known for ruthless infighting, and clearly the knives have come out. May's former Cameron cabinet colleague, George Osborne, who she had previously discarded from her own administration, said last week that, "Theresa May is a dead woman walking."

However, in view of the party turmoil and the increased uncertainty surrounding the Brexit negotiations, due to start next week, it may be thought unwise to use these sharpened knives in the short term. On the other hand, a possible majority of anti-Brexit or Remainer backbench MPs could force a leadership challenge in the hopes of scuttling Brexit at birth.

To counter this, May should consider enlisting the talents of the highly popular Nigel Farage by putting him in the House of Lords. As a leading Member of the European Parliament and the former head of UK Independence Party, which triggered and won the Brexit referendum, Farage knows the EU establishment better than almost anyone. He could assist greatly in the Brexit negotiations and help gain their acceptance in the Lords.

But it cannot be denied that Great Britain's hand in the Brexit negotiations has been weakened severely. The trump card of walking away that May described as "No deal is better than a bad deal" in the event of continued outrageous EU demands to punish the UK is unlikely now to be approved by Parliament. This weakened hand likely will result in a so-called 'Soft Brexit' with terms that keep the UK more firmly in the orbit of the EU.

The "Remainers", who opposed Brexit from the start, are now emboldened in their efforts to delay Brexit, in the hope that something will come along to defeat it. Already, they are talking of the UK remaining in the European Economic Area (EEA), a halfway membership of the EU.

To retain a ruling majority, the Conservatives have had to make an alliance with the Northern Irish Democratic Unionist Party (DUP), which is known for its hard line against abortion and gay marriage, positions that the Conservatives have begun to moderate on in recent years. The DUP also favors a 'soft' UK/EU border between Northern and Southern Ireland, a policy that is not supported by the Conservatives. On paper, the DUP might look like firm allies, but when May meets their MPs on June 13th, she is likely to have a mind-bending time. Retaining their vote throughout the, now, far more difficult Brexit negotiations will not be easy. Even when she succeeds, her overall majority will be only two!

That the election disaster should occur just before President Trump's planned State Visit to the UK is another gift to Remainers. Doubtless, May had calculated that Trump's support for a Canada-plus trade agreement would strengthen greatly her Brexit negotiating hand. With the possibility that his personal rapport with May might end, Trump may prove less generous.

During the election campaign, May complained of EU intervention. In this respect, on May 3, Business Insider reported that May had accused European Union officials of trying to influence the British elections, saying, "All of these acts have been deliberately timed to affect the result of the UK general election ... ."(5/3/17, Business Insider, Adam Bienkov) Last Sunday, the Observer released a report, citing an EU source, saying, "It is understood that [EU Commission President, Jean-Claude] Juncker had advised May to call an early general election ... ." (6/11/17, Business Insider, Will Martin)What did he know that May did not?

This all portends a period of great uncertainty that can create difficult conditions for businesses and financial markets. In the short-term, a weakened Pound Sterling likely will shield a potential fall in exports and keep financial markets relatively calm. On the other hand, there is growing evidence that the fall in the currency in recent months has done little on that front. In the medium term, the Brexit negotiations, likely amplified by pro-EU leaks, are likely to cause heightened volatility in which the Remainers and their allies in the media are likely to incite further damage to May's negotiating hand. Parliamentary support was always going to be difficult, especially from the House of Lords, which is dominated by Remainer Life Peers. This potential parliamentary hurdle was perhaps the main factor that tempted May to call the snap election in the first place.

Long-term implications will depend upon the final Brexit result. If the negotiations go badly for May, it will mean that the UK will be forced to maintain relatively open borders and will not be freed from EU funding obligations. Potentially closer bi-lateral trade agreements between the US and the UK will be that much harder to achieve.

Most importantly, the result shows how quickly political pendulums can swing. Republicans should take notice that unless better communication and coordination is achieved with the White House, then midterm elections in 2018 could deliver one, or both, chambers of Congress to Democrats. Proceed with caution.

Read the original article at Euro Pacific Capital

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, Michael Pento, and John Browne delivered to your inbox every Monday.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 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