Brexit – Just Who Is The Enemy?

Brexit – Just Who Is The Enemy? by Tim Price

[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“..I sat at my desk wringing my hands, transfixed by the tragic slapstick of British politics..

“We are in the biggest domestic political crisis of my life..

“This is only the second time I can remember when the normal, trivial business of office life has stopped — and stayed stopped..

“I’ve witnessed a few surprising general election results, a few terrible terrorist events, a few sporting triumphs and defeats where we stopped and gawped and worried or marvelled for a little, but it never lasted long..

“The only other time I can remember when everything ceased was after 9/11..

“Another acquaintance, who holds a senior management job at a well-known company, reported feeling so lethargic and powerless he cancelled all but the most essential meetings and sat in his office staring at the news on screen, feeling increasingly out of control..

“Instead I went to work, and read more gloom about the UK economy. Sterling falling. Buyers pulling out of the property market. Decline in new job postings. And that is before the productivity catastrophe created by all this lethargy and all-round uncertainty..”

– Lucy Kellaway, ‘Carry on Post-Brexit, whether calm or not’, The Financial Times, 3 July 2016.

Ever since The Financial Times was acquired by the Japanese in the summer of 2015, its attitude toward the Establishment (that it partly forms) has hardened into ossified, dogmatic inflexibility. I felt so disturbed by Lucy Kellaway’s response to the Brexit vote that I felt compelled to write to her:

“Hi Lucy

“I’ve been reading my copy of the FT these last few weeks with a growing sense of disbelief – a sort of ‘Invasion of the Body Snatchers’ disbelief as you and your colleagues wail on about the collapse of everything you hold dear. Your piece today encapsulated that sense of rolling economic and cultural dread.

“I’m a fund manager, I live in London, I have a degree, I’m under 50 – and I voted ‘Leave’.

“Not one columnist on the paper has written in terms other than ones which are alienating, patronising, derogatory and spiteful to what I believe I voted for.

“I don’t know how often you get data about subscriber numbers but it would not surprise me if you sustain a large fall in readers when they’re next updated. I am thinking myself whether to maintain my own subscription – I don’t like paying top dollar to be insulted on a daily basis.

“If I am not representative of your “core”, who on earth can be?”

I didn’t get a response and, to be honest, I didn’t really expect one.

Two of the UK’s most influential financial journals of record – The Financial Times and The Economist – backed ‘Remain’ to the full extent of their journalistic resources, and lost. They now seem determined to talk us into recession. It would be a rather sad, pyrrhic victory if it came about.

Last Thursday, the FT’s senior investment commentator, John Authers, published a piece with the somewhat provocative title, ‘Central banks are not the enemy’. It included the following observations:

“..Trust is fragile and under attack. The urge to give the rich and powerful a hard kick links the UK’s vote to leave the EU, the nomination of Donald Trump and the rise of populist movements across Europe. Distrust of ruling elites is often justified but the breakdown in trust that is taking place today is different..”

“Monetary policy has stayed too loose for too long but that is not primarily a failure of central banks. Instead, it is a failure of politicians, who have avoided the spending commitments and deeper economic reforms, very painful at first, that would wean us off cheap money. And it is a failure of markets themselves, which freak out if denied their dose of easy money. Rather than ambitious power-grabbers, central bankers
strike me as awkward technocrats, deeply uncomfortable with the role that the abdication of responsibility by others has forced on them..

“Markets are not efficient, and are often wrong. I have made a career out of explaining this. But they are not part of a political process, and ignoring them is not an option. When they set the price at which we can borrow, or at which we can exchange currency, they create truths we have to live with. Without the basis of trust, which appears to be ebbing away, the economy loses its cornerstone. And not even all the bonds in Christendom can rebuild it.”

The pain of the Brexit vote clearly still smarts over at Southwark Bridge. But the conflation of Brexit with the rise of Donald Trump, and European nationalism, is more than a little contentious. The philosopher John Gray has been one of the most incisive analysts of the UK’s decision to leave the EU:

“As it is being used today, “populism” is a term of abuse applied by establishment thinkers to people whose lives they have not troubled to understand. A revolt of the masses is under way, but it is one in which those who have shaped policies over the past twenty years are more remote from reality than the ordinary men and women at whom they like to sneer.

The interaction of a dysfunctional single currency and destructive austerity policies with the financial crisis has left most of Europe economically stagnant and parts of it blighted with unemployment on a scale unknown since the Thirties.

At the same time European institutions have been paralysed by the migrant crisis. Floundering under the weight of problems it cannot solve or that it has even created, the EU has demonstrated beyond reasonable doubt that it lacks the – capacity for effective action and is incapable of reform.

Europe’s image as a safe option has given way to the realization that it is a failed experiment. A majority of British voters grasped this fact, which none of our establishments has yet understood.”

Mr Authers is surely right to point out that politicians are also partly to blame for the current global economic malaise, in having created a policy vacuum into which central bankers have stepped, however reluctantly. But I cannot accept his statement that the markets are not now part of a political process, nor that they play any real role in setting borrowing prices, when monetary policy and effectively all of the yield curve is under central bank direction. Most frustratingly, he does not choose to follow the trail of breadcrumbs in his argument to an existential question about the validity of central banking itself. So I decided to write to him, too:

“Dear John

“I hope this finds you well.

“As you rightly suggest, social media exchanges tend rapidly to become tribal and divisive, which is why I am writing to you privately in response to today’s piece ‘Central banks are not the enemy’.

“According to the Bank of England’s website, its mission is “to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.” How well they have delivered to this mandate since 2007 I will let you assess.

“In the light of this presumed objective, you may find the following note to one of my publishers interesting:

“I’ve been following with interest your, Bill Bonner’s and Jim Rickards’ exposure of fake money. First let me say that