G20 and the Financial War

By Alasdair Macleod – Re-Blogged From Goldmoney

This weekend, the G20 nations meet at Buenos Aires. The most important issue will be America’s use of trade policy, ostensibly to bring an end to China’s unfair trade practices. Rather, it could mark a significant milestone in the cold war against China and drive the global economy into a slump.


President Trump initiated the trade war with China. There is a widespread assumption he is pursuing his “art of the deal”, coming into negotiations aggressively to get a satisfactory compromise. Therefore, the script goes, China will be forced to climb down on its restrictive practices, technology and patent theft, and modify its Made in China 2025 (MiC2025) initiative to open it to American corporations. Trade negotiators from both sides have been working in the background to achieve some sort of progress before Presidents Trump and Xi meet at the G20 this weekend, which buoys up hopes of a positive outcome.

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UK MP Jacob William Rees-Mogg Rips Theresa May With Letter Of No Confidence

By Mike Shedlock – Re-Blogged From Freedom Outpost

We need politicians who are clear, concise, articulate, well-educated, and correct. I found one. Alas, he’s from the UK.

Please consider this video clip of UK MP Jacob William Rees-Mogg. He slammed Theresa May with a letter of no confidence then fielded questions from the public.

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Psychology Of Systemic Consensus

By Alasdair Macleod – Re-Blogged From Silver Phoenix

We are all too familiar with established views rejecting change. It has nothing to do with the facts. Officialdom’s mind is often firmly closed to all reason on the big issues. To appreciate why we must understand the crowd psychology behind the systemic consensus. It is the distant engine that drives the generator that provides the electricity that drives us into repetitive disasters despite prior evidence they are avoidable, and even fuels the madness of political correctness.

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Will Gold Prices Soar After March 2019?

By Arkadiusz Sieroń– Re-Blogged From Gold Eagle

After the Salzburg summit, the prospects of the Brexit deal are gloomy as never before. Will gold gain on failed talks between the EU and the UK?

Cake Philosophy And Gold

The Salzburg summit was held last week. It was an informal summit of heads of the EU member states or governments. The participants discussed immigration, internal security and Brexit. The negotiations between the UK and the EU attracted the most attention, as Donald Tusk, the European Council president, said that the Chequers plan for Brexit “will not work” and mocked Theresa May’s negotiating strategy in social media (he posted a picture of May and himself at a cake stand with the caption: “A piece of cake, perhaps? Sorry, no cherries.” Continue reading

What if Brexit Happened Without an Exit Deal?

Re-Blogged From Stratfor


  • If the March deadline for the United Kingdom to exit the European Union arrives without a Withdrawal Agreement between both parties, Brexit would happen with no transition period, forcing businesses to immediately adjust to the new rules defining EU-UK relations.
  • Under a “no-deal” scenario, British exporters would face EU tariffs that are low on average, but high in specific sectors like automobiles and agriculture.
  • The strongest economic effect of a no-deal scenario would be felt in the United Kingdom and its close trade partners, like Ireland, the Netherlands and Belgium.
  • Without a deal, London and Brussels would probably arrange temporary agreements to minimize disruptions while they continued to negotiate.

EU Chief Brexit Negotiator Michel Barnier (R) and Britain's Brexit Minister Dominic Raab hold a joint press conference after their meeting at the European Commission in Brussels on July 26, 2018.

(JOHN THYS/AFP/Getty Images)


Negotiators for the United Kingdom and the European Union are racing the clock to reach agreements on a long list of remaining issues before the United Kingdom formally leaves the bloc on March 29, 2019. Ongoing discussions are focused on a Withdrawal Agreement that would establish the legal terms of the Brexit and a political declaration outlining the general framework for future ties between the European Union and the United Kingdom. London and Brussels would ideally like both documents to be finalized in time to be signed during a European Council summit in October. But negotiators are still far apart on both deals, opening the door for a no-deal scenario, in which Brexit would happen without any prearranged conditions. If that happened, the economies and the political and institutional systems of both would have to cope with a number of possibly disruptive effects.


The Big Picture

Stratfor’s Annual Forecast noted that the European Union and the United Kingdom would spend the year trying to figure out what their future relationship would look like in the wake of Brexit. Furthermore, it said that disagreements over the future of the Irish border would be one of the main obstacles to a deal, and that the British government would remain internally divided on the approach to negotiations. The complications leave open the possibility that the Brexit date will arrive with no agreement over how to handle a host of issues.


See 2018 Annual Forecast

See Europe section of the 2018 Annual Forecast

See Brexit and Beyond

The Current Situation

London and Brussels are already aligned on several aspects of the Withdrawal Agreement. For example, the United Kingdom has agreed to pay its “Brexit bill” — some 39 billion pounds ($52 billion) to the European Union to honor its financial commitments to the bloc, and both have pledged to preserve the residency rights of EU citizens living in the United Kingdom and likewise of British citizens on the Continent. They have also negotiated a transition period that would allow the United Kingdom to remain within the EU single market until December 2020. This would give both parties time to adapt to the new reality and to negotiate a trade agreement.

But the Withdrawal Agreement is not complete, and several sticky issues remain unresolved, including future cooperation on police and judicial issues and the role of the European Court of Justice in the United Kingdom after Brexit. But by far the most controversial issue remains the eventual status of the border between Northern Ireland and the Republic of Ireland. Both parties want the border to remain open, but they cannot agree on a way to accomplish that. In March, negotiators settled on a “backstop option” that would leave Northern Ireland in the EU customs union if a better solution cannot be found before Brexit day arrives. In July, however, the British House of Commons voted to make that option illegal, possibly complicating the chances of reaching a border agreement (the bill has yet to be ratified by the House of Lords).


British Prime Minister Theresa May’s government is internally divided between those who want to keep close ties with the European Union and factions pushing for a hard exit. This has forced May to seek compromise with both groups, often resulting in complex policy proposals. Further complicating the situation are the divisions in the British Parliament between hardliners and softliners, meaning that even if May can hold her government together, she cannot guarantee that her proposals will pass parliamentary muster. The European Union, in the meantime, says that it will not approve an ad hoc agreement with the United Kingdom, insisting that it must follow an existing trade model, whether that be membership in the single market or the customs union or a free trade agreement.


British Trade With the EU

What a No-Deal Scenario Would Mean For Trade

If the two sides fail to reach a Withdrawal Agreement by early 2019, or if they sign a deal that either the British Parliament or the European Council reject, it would most likely force the United Kingdom to exit the European Union under a no-deal scenario. While EU rules allow for the negotiation period to be extended after the March 2019 deadline, the bloc would likely demand concessions on a soft exit in exchange, a prospect that British politicians could find unacceptable.

Without the Withdrawal Agreement, beginning March 30, 2019, the United Kingdom would find itself suddenly out of the single market, and EU laws and regulations would no longer apply to it. The European Union would treat the United Kingdom as it would any other country with which it has no agreements, applying tariffs and customs controls, and enforcing EU sanitary and phytosanitary standards for British goods. The new border controls would cause delays at borders and ports, and supplies of food and other goods would stack up as they awaited inspection. (The British government recently suggested that in a no-deal scenario, it could waive checks to keep traffic moving, but it would require the European Union to do the same.)

Without a deal, World Trade Organization (WTO) rules would govern relations between the European Union and United Kingdom. British exporters would have to contend with EU tariffs that are low on average (roughly 5 percent). However, the rates run higher in specific sectors (10 percent for cars, for example, and an average of 11 percent on agricultural products). EU exporters, in turn, would have to deal with whatever tariffs London decides to impose. Even if the United Kingdom unilaterally reduced or eliminated its own tariffs to prevent an escalation of the price of imports, non-tariff barriers (such as standards and regulations) would still create obstacles for bilateral trade. The United Kingdom could try to remain aligned with EU standards and regulations to limit disruptions in trade, but it’s only natural that over time, the two would progressively drift apart.


EU Import Tariffs, Select Goods

The effects of a no-deal situation would be even more pronounced in the case of services, which constitute about 80 percent of the British economy. The British financial sector would lose the “passporting rights” that allow companies to sell their services within the single market without having to apply for authorization in each country. Without those rights, the financial services sector, which accounts for more than 6 percent of Britain’s gross domestic product, would be among the main losers. Although not every financial activity would be affected in the same way (banks that operate domestically would not be as affected as other activities that rely on foreign customers), a no-deal could deal a heavy blow to the sector.



UK Financial Services Trade with EU Countries

And the impact on services would go well beyond finance. Providers of professional and business services, like legal, accounting, advertising, architectural and engineering services, now have relatively unrestricted access to EU countries through the single market. In a no-deal scenario, London would have to reach specific agreements with Brussels to preserve this access. Similarly, a no-deal would mean that for British airlines to maintain the access to European markets that they now enjoy though the European Common Aviation Area, London would have strike a new agreement with the European Union. At the same time, to preserve their access to the single market, companies in a wide range of other sectors would have to move some of their operations to continental Europe.

Under a no-deal scenario London would be free to sign free trade agreements with any countries it wishes to (such as the United States and Australia). But negotiating, ratifying and enforcing such deals takes years. In the meantime, the United Kingdom would lose access to the free trade agreements that the European Union already has with countries like Canada, Japan and South Korea.

What Else Would Be Affected?

If no Withdrawal Agreement is signed, the future of the roughly 3.6 million EU citizens living in the United Kingdom and the 1 million British nationals living in the European Union would be thrown into doubt. There would not be massive deportations, but they would remain in a legal limbo for weeks, if not months, until their status was defined.

The United Kingdom would be free to set an independent immigration policy, and considering that this was one of the key issues in the Brexit referendum campaign, London would probably impose restrictions, such as work visas or annual quotas, on future migrants from the European Union. Associations representing sectors from tech and manufacturing to construction and tourism have warned that doing so could create a shortage of skills in the British economy, as it would be harder (or at least involve more layers of bureaucracy) for British employers to hire workers from the European Union. Should the United Kingdom decide to impose restrictions for short-term visitors as well, the tourism sector would feel the pinch. And should the European Union retaliate by imposing visas for British tourists, that would hurt tourism destinations like Spain and Portugal.

At the same time, in a no-deal scenario, British individuals, companies and institutions would lose access to EU financing in areas such as education and scientific research. The European Union would also likely restrict, or even exclude, British participation in continental projects such as the Galileo GPS system or in regulatory entities such as the European Medicines Agency.

Without a Withdrawal Agreement, London would probably refuse to pay the Brexit bill, at least initially. That would leave less money for the EU budget and force spending cuts. The British government would be able to redirect that money to domestic needs, such as compensating British farmers for lost access to EU agricultural subsidies. But refusing to pay the Brexit bill would sour UK-EU relations and make it harder for London and Brussels to negotiate the bilateral agreements needed to cope with the effects of Brexit. As a result, London would probably agree to make the payment at some point.

The Economic Impact Would Be Spread Unevenly

Trade, supply chains, capital movement and migration flows between the European Union and United Kingdom are so tightly entwined that the economic impact of a no-deal scenario would be felt in both. But the effects would be spread unevenly. A recent International Monetary Fund (IMF) report found that if the European Union and the United Kingdom start trading under WTO rules, the economic growth of the 27 remaining EU countries would fall by as much as 1.5 percent by 2030. Countries with close ties to the United Kingdom like Ireland, the Netherlands, Denmark and Belgium would feel a particular sting, but the pain would be much milder in those with bigger economies or weaker UK ties like Italy or Spain. The biggest downturn would come in the United Kingdom itself, where the economy could contract by as much as 4 percent in the decade after Brexit. According to the IMF, softer versions of Brexit (like a comprehensive free trade agreement or remaining in the single market) would lead to softer economic impacts everywhere.

In January, British media published a leaked internal British government document that paints an even darker picture. That report estimated that British economic growth would be reduced by as much as 8 percent in the first 15 years after Brexit in a no-deal situation, compared to reductions by 5 percent under a free trade deal and by 2 percent with membership in the single market. Impact reports by private companies offer different figures, but most agree that trade under WTO rules would be the most disruptive scenario for both the United Kingdom and the European Union, and that the British would feel the strongest impact.

The unprecedented situation presented to Europe’s political, economic and institutional actors by a no-deal scenario would generate confusion and uncertainty. But the chaos would not necessarily last for a long period or affect every aspect of EU-UK relations the same way. Even in a no-deal scenario, both parties would still be interested in reaching a permanent trade agreement, which means that negotiations between London and Brussels would likely continue. In the meantime, the United Kingdom and the European Union would probably reach temporary deals to try to minimize disruptions as much as possible, with many people carrying out business as usual while they waited for further instructions. A no-deal scenario would trigger a significant change after four and a half decades of British membership in the EU, but while its ties with the Continent would be disrupted, they would not be completely severed.


Return of the Euro Crisis: Italy Quakes, Rest of the World Shakes and Merkel’s Empire Breaks

By David Haggith – Re-Blogged From Great Recession Blog

Europe’s many fault lines are spreading once again, bringing the endless euro crisis saga back in 3-D realism. Italy gained a new anti-establishment government last week, even as Spain elected a new Socialista government that could crack Catalonia off from the rest of Spain. All of Europe fell under Trumpian trade-war sanctions and threatened their own retaliation. And Germany’s most titanic bank got downgraded to the bottom of the junk-bond B-bin.

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The Gently Rotting Debt-Ridden EU

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

The EU (Euro Union) as a political construction is in a state of terminal decay. We know this for one reason and one reason alone: its core principal is the state is superior to its people. A system of government can only work over the longer term if it recognises that it is the servant of the people, not its master. It matters not what electoral system is in place, so long as this principal is adhered to.

The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.

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