Just as a historical note, I believe discussion of Brexit pretty much destroyed the TMF UK Discussion boards to the point the boards were shut down, at least partly due to excessive moderation demands. It more or less took over every thread and was a little bit divisive. Beware Pandora’s Box.
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CMF, that is not true about Thatcher or Reagan. They slowed GDP growth in both countries. They lowered taxes which created a pattern of creating massive deficits. Then pointed at poverty and welfare as the culprit. The less we spent on welfare the more debt the federal govt ended up with. It was a lie that poor people were causing debt. Instead the wealthy were being paid out of the public coffers ie defense spending, and a lot of other spending. The only thing I can say is you were lied to a lot. Reagan called it disinformation. We all know or I thought we all knew that means lying to the public. It was shrouded as fighting the Russians. Laughable. It was screwing the public. It sank the American economy for about 80% of the public.
Today 90% of white males over age 50 wont be able to afford to retire. That was done out of spite to profit a few. The spite was padded in all sorts of lying. Reagan did really well?
I guess lying never goes away.
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Steve,
There is a time for supply side econ. It comes and goes rather quickly. Then greed sets in and we keep it. Lie lie lie.
But for the US and UK riding together is now a time of demand side econ. This move to do a supply side stunt in the UK has sunk the UK. Supply side econ usually takes decades to sink an entire nation. This was overnight because it goes completely against the needs of the UK economy. It was a dunce move. What is the point of owning a bank in the UK if the currency sinks faster than a cannon ball in the Thames?
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Interesting thread. So Thatcher and Reagan were supply siders, correct? They seemed to do pretty well as I recall.
Depends on how you define “do well.” Moderators please note: Although politicians were mentioned in the quoted text, the following discussion is 100% macroeconomics.
Supply side economics is a theory that if you cut taxes for wealthy people, they will have capital to invest in factories, R&D, etc. which will create many jobs. And in fact, these supply side tax cuts will actually increase government revenue.
When Supply side tax policy was first seriously proposed in 1981, it was promised that the federal budget would be balanced by 1984. Now, just as you’d expect and common sense would dictate, cutting revenues without cutting spending is going to increase the deficit. And the deficits increased by a lot.
Now at this point, someone usually says “yeah, but Congress increased spending.” That’s true BUT the executive branch proposed the increased spending and the same government passed both bills.
So what happened? We had increased government spending, paid for by deficit spending. That is classic Keynesian stimulus. And this stimulus worked. These economy improved (also thanks to plummeting oil prices), people went back to work and the economy grew.
But it didn’t grow particularly fast. The economy grew faster in the both the 1970s and the 1990s than it did in the 1980s. And thanks to the tax cuts that targeted the wealthy, unlike previous eras almost all of the wealth growth went top the top 25% while the lower classes stagnated.
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Leap,
Yes, this first move of the new PM was a dunce move, an obvious dunce move. Why? I do not believe it was just “I am a stoned JC/aristocrat and want a cookie.” I truly suspect behind it all lies a motive and strategy to reap cartons of cookies, basically by leveraging the valuation of the pound in the coming inflation. If my conjecture is correct, then the BIG question is for how long will they destroy the pound, and what happens next to save their underlying wealth.
david fb
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That theory is known as the “merely a flesh wound” theory of knighthood.
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When the GBP was devalued from $2.80 to $2.40, the press described the impact in terms of the drop in price of a new MG. That metric is useless now, as the volume UK auto industry has gone extinct. Outside of a few specialist brands, which are all foreign owned, there are no British cars made anymore. The British aircraft industry has been reduced to making subassemblies for Airbus. When was the last time anyone bought a piece of stereo equipment from Garrard or BSR?
All manufacturing and production in the UK now, accounts for less than 21% of UK GDP. Financial speculation, tourism, retail, and entertainment, account for over 75% of GDP. For the record, the US is even worse off, only 18% from industry and 77% from parasitic services. For comparison, industry accounts for 29% of German and Japanese GDP and nearly 32% of Mexican GDP.
So, what impact would devaluing the GBP have on the UK economy? They cut themselves off from easy access to the EU, which accounted for about half of UK exports. Meanwhile, goods imported to the UK will cost more, turning up the heat on inflation.
Steve…the fool now says my favorite term for the US is now verboten, unless I insert a hyphen.
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On the US board foreign topics with political content have never been an issue as the majority of posters have no skin in the game so discussion tends to be constructive. Mention the US health system and you get an endless flurry of involved posts though 
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I am sorry for the Brits, but I am also short via puts on the FXB. There may be a better way to do that, but the positions has been nicely profitable.
If the are going to wreck it, go along.
I expect that soon they will try a coordinated effort to reverse the dollar. Feel like it is one big game of chicken.
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As you note, financial services make up a significant part of the UK’s economy. The big problem of brexit, political incompetence and chaos, and the current pound crisis, is that none of it is very helpful for the financial hub aspect of the UK. For example, look into the concept of ‘passporting’
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Yup, UK banks limited to only a few services in the EU, if they comply with EU regs. It was those EU regs “the City” was always whining about. They were no doubt trying to have it both ways: easy access to the EU, without EU regs. Didn’t work out that way. So the government is apparently topping up the pockets of the financial honchos to make up for BREXIT not working out the way they wanted. Reminds me of the then CEO of Chrysler demanding the government give Chrysler a Billion dollars to make up for the “burden” of safety and emissions regs. Unlike the City, Mr Ricardo didn’t get his way.
Actually I haven’t heard of even a single major UK financial institution in favour of Brexit at any point in the last 8 years i.e. before, during, and after.
I have heard though that EU tax transparency rules designed in the 2010’s were about to ensnare a number of hyper-wealthy Brits who were using tax havens for investments, and the timing of Brexit just happens to correspond exactly with the initiation of those new regulations.
The solution appears to have been, rather than flee the UK and move to the tax havens, simply turn the entire UK into a giant tax haven. This has since been extended to include e.g. zero-tax physical areas of the UK, freeports.
Specifically I’m thinking of the EU’s “anti tax avoidance directive” (applies member states Jan 1st 2020 onwards).
and e.g. related things like
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The bankers aren’t going to publicly say “we want BREXIT for our own benefit, and we don’t care how much it messes everyone else up”, are they? BREXIT sold to the mob as getting rid of foreign regulations and keeping foreigners out of the UK, gets votes. A bunch in the US did the same kabuki dance about keeping foreigners out, but, outside of a bit of enforcement theater, what did they actually do? Pass another huge, unfunded, tax cut for the “JCs”.
I may have picked up the City whining about EU regs because I was hearing the same narrative from the USian financial sector, and it’s water carriers on bubblevision: constant sniveling about “intrusive, burdensome, big gummit regulations, that make it so hard for New York banks to compete and keep their rightful place as the financial center of the universe”.
Bankers seem to think the road to financial nirvana is to have the most corrupt, sleazy, operation, so the US and UK are in a race to the bottom.
Steve
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The bankers aren’t going to publicly say “we want BREXIT for our own benefit, and we don’t care how much it messes everyone else up”, are they?
Well, I’ve followed the topic quite closely for the last 8 years or so, and every single senior & chief banker I’ve ever seen interviewed, has spoken along the lines of ‘brexit is extremely awful for us, hopefully the government will not go for full-on ‘hard brexit’, as we quite enjoy these 10-100’s of billions we extract as rent simply by being the established financial hub of Europe’.
It really isn’t for their benefit at all. There has been absolutely colossal job destruction & profit destruction in London as a result of Brexit. And if there were any gains of any form whatsoever, the “ERG” [A] would be yelling about them and pointing to them continuously. Notably, they are silent on this topic.
[A] anti-europe political extremist group within the conservative party, that were pushing for a hard brexit and using their MPs as leverage to control each PM
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I take it as a given that every CEO public pronouncement is a lie. I saw Rich McGinn on bubblevision talking his book with great enthusiasm, only a few months before Lucent was exposed as a long running fraud. I remember all the happy talk from Compaq, while the company stuffed it’s distribution channels to inflate it’s numbers. I remember honchos from Wordcom and Enron being hailed on bubblevision repeatedly, before their operations were exposed as frauds.
When I see a CEO, or his water carriers, crying about a regulation, and the pols are moving to remove that regulation, I take it as a given the regulatory change is for the benefit of the CEO, regardless how much the CEO denies it.
your own mileage may vary
Steve
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You are welcome to be cynical as much as you like, but as far as I’m aware, the facts line up with what they said would happen.
So far, off the top of my head
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Amsterdam has now become the primary exchange for trading european stocks
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London derivative-trading lost about 3/4 of their business to Amsterdam & New York
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CDS clearing is now moving out of London. They’d have lost some other clearing last year in June but apparently the EU decided to (kindly, unilaterally) allow them to continue til 2025, just checked: e.g. 'End of the road' for euro clearing in London after June 2025, says EU official
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Additionally the best part of 10000 of Britain’s highest paid jobs lost. Less than expected but still a huge hit to the London economy and national economy.
If you know of any gains to London finance from Brexit, that are guiding your views, please do let me know, I will be very happy to be informed of that.
I should probably point out that I didn’t say “CEOs”, I said ‘senior and chief bankers’.
And that your ‘instincts’ do not in any way cause me to feel I should disregard 8 full years of reading newspapers on this topic…
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Steve, in a parliamentarian system the bankers would be frank and honest. Even here Dimon is out there frankly saying it wants fewer regs. It is not a trick. Just not honest.
The UK is not going to benefit from a depreciated pound. The input costs will go up. It kills the UK’s economy. The bond market and forex laid that out very clearly. It was about the dumbest thing the conservatives could have done. A dunce move.
Shiny-land has been doing the same thing for forty years. Round after round of unpaid for tax cuts for the “JCs”. What was the net cost of the one in 17? Net $1T added to the national debt over 10 years, from one piece of tax legislation? In 2019 the US economy was supposedly going full steam, low unemployment, high stock market, and a $1T deficit for that one year. Why wouldn’t the Tories think they could get away with the same sort of banana republic fiscal policy? After all, it was what they wanted to do, so, of course, they would look at the Shiny-land example for confirmation.
As for what Jamie Dimon says, he thinks he is God. He openly says he is not intimidated by laws and fines. They never directly impact him. He writes out a check of the shareholder’s money, to settle the latest suit, then sets to work on his next fraud. Besides, saying you want deregulation, and describing exactly how you are paying out bribes to put backdoors in legislation that you can exploit to cheat more, are two different things. It’s like a carny magician, that does things in plain view, but knows how to distract the mob, so they don’t see that one hand slipping into his pocket, or palming an egg.
Steve
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Keep in mind, if a banker tells you to get out of the way, a bus is going to hit you, he’s probably not just saying it to make a quick buck.
When UK bankers were saying ‘you know, ending our most favourable trade agreement with our biggest and closest trading partners, might have a somewhat negative impact on trade’, it wasn’t hard to believe they were speaking their true thoughts.
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@Thread: If you don’t mind the minimal fund raising the site does, there is a free course online on supply side economics, including lectures by Arthur Laffer. See: Supply-Side Economics and American Prosperity with Arthur Laffer | Hillsdale College Online Courses.