Geopolitical Update : Queen suspends UK parliament; Pound’s upside & UK to go global
By Christian Takushi MA UZH, Independent Macro Economist & Geopolitical Strategist. 28 Aug 2019
Prime Minister Boris Johnson visited the Queen and made a request for the suspension of the UK parliament. The Queen accepted the request and ordered the prorogation of the current parliament for 4 to 5 weeks – from approximately the 12th of September to mid October.
The move has sparked strong reactions from Remain-factions across parties and mainstream media. They argue that this is a constitutional outrage.
Allow me to give you my preliminary assessment:
(This is the current state of my research. My main scenarios are continually tested – adapted or rejected if necessary)
- Ever since predicting that the UK would vote to leave the EU in June 2016, I have maintained that a Hard BREXIT (incl. a No Deal Brexit) is the most likely outcome. Today’s events are in line with our main scenario, but risks remain – albeit at a lower scale. The likelihood of Britain exiting the EU in October is rising. Some say it is about to crash out – I disagree, Britain is about to “blitz” out of the EU
- Today’s claims by the opposition and Remain-supporters are partly justified. This is an astute political maneuver by the Prime Minister, and not a means to advance his new legislative agenda as he has implied. But the fact is that the constitutional crisis began already some three years ago, when the UK Parliament openly expressed its contempt at the outcome of the referendum, and began to frustrate or thwart BREXIT by all available means. Their subsidiary goal has also been for the “chaos and fear campaign” to turn Leave-voters against BREXIT, but this has failed. If anything, we see that many Remain-voters want the democratic outcome of 2016 to be respected by parliament. This speaks for the maturity of democracy in the UK
- Ideologies and agendas aside, in a way, the UK has been taken “hostage” by its parliament over the past three years. The UK, like most European nations, lacks a procedure that would dissolve a parliament that is openly opposing the outcome of an official referendum. Governments and parliaments across Europe often refuse to implement the will of the people. They frustrate and repeat referendums until they get what they want
- The blame for the chaos cannot be placed on a dysfunctional parliament alone. The Conservative Party had the duty to appoint a Leave-Prime Minister and a Leave-cabinet after the referendum outcome. Instead, the Conservative Party surprisingly appointed a staunch pro-EU leader and Remain-campaigner, Mrs. Theresa May. She led negotiations without preparing the country for a No-Deal and without putting it on the table. Thus, she negotiated from the weakest of positions and strengthened the EU hand with the passing of time. The failures of the Conservative party are now haunting it: The BREXIT party enjoys the momentum and popular support, and they no longer trust any negotiations with the EU. They will oppose the government if PM Johnson brings back a slightly adjusted version of Theresa May’s Deal. They cannot prevent it, but they could decimate the Conservative Party at the next general elections
- I think the Prime Minister was able to convince the Queen to take this controversial step, because the alternatives are more unsettling yet. A parliament bent on frustrating BREXIT at any cost could inflict a larger damage to democracy in the country. I expect Labour and Liberals to try to win enough Remain Conservative MPs over the next few days in order to bring down the government by the end of next week
- Remainers can still try to join forces in the aftermath of the Queen’s speech, but that will overlap with the Queen’s speech debate (5 days) and any deliberations about any deal the UK might have been able to reach with the EU by mid October
- Opposition and Remain camps are also considering legal challenges against the prorogation itself. I expect MP’s to ask outsiders (lawyers or Remain campaigners) to file the challenges. MP’s may abhor the Referendum outcome, but they are aware that they may face the anger of their constituencies back home that voted Leave. Many MP’s will lose their jobs at the next elections. They want to keep the UK closely tied to the EU, but they also know that the longer they frustrate BREXIT the more they are saying de facto to their constituencies: “You the people are not in charge, we are”.
- Overall and despite the temporary pain that lies ahead, I think the majority of British people want to get on with BREXIT. While the country is still divided, many citizens that voted for Remain are upset the democratic decision from June 2016 has still not been implemented, because of parliament and the London establishment. Thus, I think many Britons accept the need for suspending a parliament that from the beginning has opposed the outcome of the 2016 referendum. The BBC interviewed a family in Birmingham today that voted REMAIN in 2016, they said today’s move was necessary in order to deliver on the will of the people. The LEAVE voters that were interviewed said “we decided to leave the EU, deal or no deal”. Others said, it is time to get clarity, no matter the outcome. While the mainstream media and London establishment may be trying to drum up a major constitutional crisis, I sense that the vast majority of people in Britain is not interested in another showdown. They want parliament and government to deliver, deal (if possible) or no deal (if needed be)
Forecast – UK to go global
My main (forecast) scenario is still for Britain to go through a rough period of adjustment after BREXIT, but within 2-3 years I see a dynamic UK growing and thriving again. Deregulation, lower taxes and massive fiscal investments will re-boot the economy. The continent has always underestimated the ability of Britain to overcome challenges. Five years after BREXIT I already see the UK clearly outperforming the EU economy.
The UK will not look inwards after BREXIT, it will rather go back to its natural maritime global mindset. Britain has by nature an open risk-taking attitude. One that many European leaders have a hard time to understand. Many on the continent are highly risk averse and they desire the security of a big state. Sadly, the EU is an over-regulated and stagnating economy – and a somewhat undemocratic at that. Thus, the UK will be able to focus her resources on the many young and fast growing economies around the world, without any strings attached. No nation is better wired to do that than Britain. Only the USA could come close to match it.
This also means that from a long term perspective the British Pound is undervalued. It may have some more downside in the near term chaos, but the downside should be limited to …
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By Christian Takushi MA UZH, Independent Macro Economist & Geopolitical Strategist. 28 Aug 2019.
Disclaimer: None of our comments should be interpreted or construed as an investment recommendation
A distinct broad approach to geopolitical research
(a) All nations & groups advance their geostrategic interests with all the means at their disposal
(b) A balance between Western linear-logical and Oriental circular-historical-religious thinking is crucial given the rise of Oriental powers
(c) As a geopolitical analyst with an economic mindset Takushi does research with little regard for political ideology and conspiracy theories
(d) Independent time series data aggregation & propriety risk models
(e) He only writes when his analysis deviates from Consensus