Brexit: Things Are Always Darkest Before They Go Completely Black

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The UK press today appears to be trying to find happy potents in the entrails of the roadkill of this round of Brexit negotiations. May gave a speech to Parliament in which she didn’t blame the EU for the collapse of the talks, after a week of breathless “breakthrough” rumors. Since her man Dominic Raab was the one to reject the latest draft text, which had apparently been agreed at the negotiator level, it would be hard to pin this last minute deadlock on the EU, although I should not underestimate the willingness of Fleet Street to amplify jingoistic messaging from No. 10.

However, May, while insisting a deal could still be had, also maintained that an Irish border backstop could only be a temporary measure. This is yet another retrade of deal terms; it’s at odds with the Joint Agreement she signed last December. Moreover, it is hard to see how the EU can give ground. No backstop or one that becomes void as of a date certain means the UK could try to use it as a weapon in negotiations if it hits an impasse in its trade negotiations. The EU presumably recognizes this and wants to put the matter to bed, as it thought it had with the Joint Agreement.

We thought we had made a mistake on reading the “order of battle” issues, but perhaps in the end we hadn’t. We had initially read May after Salzburg as succeeding in getting the EU to drop its demand, which appeared to have been made in anger, that she hop to and show enough progress by October 18 or else. That interpretation looked all wet as the Government went into frantic negotiations mode, only to have Raab throw cold water on the UK presenting a final framework in October.

May is now apparently not only angling to have the EU keep negotiations open until November, but even hopes to have until December. From the Financial Times:

Theresa May will try to hold together her fractured cabinet on Tuesday by playing for time on Brexit, amid rising expectations that the timetable for finalising an exit deal could slip into December.

The prime minister sought to lower tensions on Monday ahead of an EU leaders’ summit on Brexit that starts on Wednesday. She told MPs that it was a time for “cool, calm heads” and insisted: “I don’t believe the UK and European Union are far apart.”

Instead of confronting her cabinet by trying to force through agreement on a Brexit withdrawal treaty ahead of the European Council, originally billed as a key moment in the negotiations, Mrs May has left important issues unresolved.

It’s not obvious why the EU should go along. Even if it were to plan only to go through the motions, it has seen May refuse to commit and even try to wriggle out of settled points too many times. The reason for the rough handling of May at Salzburg was likely not just a display of personal pique, but also collective frustration that she is not “agreement capable” and there’s no point in continuing this farce. Indeed, there are now large, looming costs. No one wanted to take a crash out as a serious possibility, so everyone is very far behind in preparation. The EU has deep enough bureaucracies that it has some hope of stitching up a lot of what it needs if it goes into overdrive now (that does not mean there still won’t be a very large amount of dislocation, but governments will have done much of what they can to reduce the pain). Continuing to talk to the UK if there really is no deal to be had sends all the wrong signals to EU officials and even more important, businesses. It’s hard to press them to get all hands on deck to prepare for a disorderly Brexit when talks are still underway. This may be one of the downsides of Barniers’ patience as a negotiator: he may not be willing or able to walk away from the table, yet some of his principals may want him to say things look unsolvable before they pull the plug.

And as for May having gamed all this out, the UK side has never exhibited strategic genius. This outcome is more likely the result of accident and error.1 At a minimum, May saw what we did: the DUP and the Ultras would oppose the plan her team had tentatively worked out with the EU, and she couldn’t begin to get enough votes from Labour or anywhere else to make up for their loss. A failure on a Withdrawal Agreement vote would almost certainly bring down her Government, if the DUP didn’t take it out and shoot it sooner by opposing her budget.2 As Financial Times reader Sean Citizen said in commments:

I’ve been reflecting self critically on the headline “Mrs May plays for time on Brexit Agreement”.

I have repeatedly accused Mrs May of inconsistency and at a superficial level, this is true. For example she has twice given the EU a written commitment to an all-weather backstop but now misrepresents her broken promise as a new demand by the EU.

But the headline is a reminder that, at a deeper level, she has actually been quite consistent in her approach. Playing for time seems to be the only trick in her playbook. And in relentlessly playing for time, she is willing to ignore scuples and logic. To gain time, the Prime Miniter will promise anything to anybody, break any commitment, ignore or misrepresent inconvenient truths.

And for the umpteenth time, I’m reminded of Einstein’s definition of madness: repeating the same experiment and expecting a different result. Various commentators are speculating that the Prime Minister is pursuing some complex and subtle strategy. I prefer Occam’s razor and choose the simplest explanation.

Mrs May has been grossly overpromoted and is completely out of her depth. There is no grand strategy. There aren’t even any short term tactics. Unless she is removed from office, the hapless Mrs May will continue to aimlessly play for time, right up to when the bus hits the wall on the 29th March deadline – for the simple reason that she hasn’t a clue what else to do.

Finally, on another happy UK press idea of the day, that May’s upcoming speech Wednesday at the EU summit might open new paths up, I could explain why not, but Richard North has already done so with considerable vigor:

But there was no need to rest with the perception that the prime minister’s words were unreal. By any measure, they were beamed down from another planet, lacking corporeal form and unable to exist in this atmosphere.

This is the woman who, just days before the crucial European Council which is supposed to resolve the Brexit agreement, has watched her strategy crash and burn, with negotiations totally stalled and no likelihood of a deal this month.

And despite that, and all the background that goes with it, she stands up in the Commons and declares: “I continue to believe that a negotiated deal is the best outcome for the UK and for the European Union.

She then tells us that she continues to believe that such a deal is achievable, and that is the spirit in which she will continue to work with our European partners, then burbling somewhere in between about the EU wanting a backstop to a backstop…

The paper [the Guardian] has it that the prime minister is expected to plead with EU leaders to drop their Irish backstop proposal “at a make-or-break summit dinner on Wednesday night after seeking the support of members of her cabinet on Tuesday morning”.

After all this time, it still doesn’t understand that Mrs May will not be allowed to negotiate directly with EU Member States. If they hear Mrs May on Wednesday evening, then protocol demands that she is heard in silence, with no questions asked of her.

In that context, the Commission proposes and the Council disposes. There are no circumstances where Mrs May can short-cut the process and work round the established system. The best she can hope for is aa grudging resumption of talks once the Council is over.

In the 2015 bailout negotiations, the Greek government knew it was playing a game of chicken with the Troika and overestimated how much damage it could do by defaulting, and thus the odds that the creditors would relent. But the government was inexperienced and Greece was prostrated by austerity and desperate to break free of rule by the IMF. It was a high-stakes gamble but Greece only had poor choices.

By contrast, it would be hard to chart a course for Brexit worse than the one the UK has followed. And of course, the so-called leaders responsible for this mess will suffer far less than UK and EU citizens.

_______

1 From Frank Herbert’s Dune: “Then, as his planet killed him, it occurred to Kynes that his father and all the other scientists were wrong, that the most persistent principles of the universe were accident and error.”

2 As we’ve said, it isn’t clear that failing to pass a budget would force new elections under the Fixed Term Parliaments Act. The Government of course argues not but my sense is that this is an untested question. UK readers are encouraged to pipe up.

I also very much discount the idea that the DUP could be bought off. The leaders all survived the Troubles. Foster’s father nearly died and she had a close call when a school bus she was on was targeted. You can deplore their aims, but they do seem to be willing to go down for their principles.

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88 comments

  1. The Rev Kev

    At this late stage maybe May can pull a Trump. That is, she could simply say that as the whole subject of trying to square the circle of Northern Ireland is so problematic, that she is “taking it off the table”. Announce that come 29th March 2019, that the UK is granting Northern Ireland their independence which would serve to concentrate the DUP’s minds wonderfully.
    After that of course they could eventually decide to reunite with Ireland or try to become the Hong Kong of the North Atlantic or even dig a canal to make themselves an island separate from Ireland if they want. It would be up to the 1.811 million people that live there to decide what they want to do. So May could say: “To the people of Northern Ireland – prepare for true independence!” And you know what? This stupid comment I wrote is no more stupid than what has been coming out of London the past two years which is real depressing.

    1. Redlife2017

      I think at this point you could say that May has been in with our Cylon leaders who have taken residence in Kobol and that she is expecting them to send help for last minute negotiations. And not be considered that far flung.

      Actually having Caprica Six as our negotiator would be a HUGE improvement. Oh well…

      1. voteforno6

        Well, considering that Boris Johnson looks like, and was about as effective as Muffitt from the original series, yes, Caprica Six would be a yuuge improvement.

    2. Clive

      The UK cannot simply put NI in the constitutional dumpster like some mark-down at a garage sale which didn’t find any takers.

      There has to be a so-called “border poll” which is a) in London’s gift to call but which the results would be by no means certain and b) the timelines for which would go well beyond March 29.

    3. CWB

      I appreciate your comment is a bit tongue in cheek, but in reality that would cause a literal constitutional crisis in the UK, as opposed to the figurative one playing out in the US.

  2. Redlife2017

    Yves – I have nothing to add here. Stellar work. It’s because of Cfdtrade that I’ve been better informed than almost every single person at work (a large UK asset manager) and so have been getting ready for the what looks now to be inevitable (at work and at home).

    And I will add a few extra £s to my donation as anyone who can quote from a deep cut in Dune is on my extra special list of awesome. Thank you to your team!!

    1. JW

      I’m curious as an outsider with no ties to EU or UK, what general kinds of things are you doing to prepare? I personally would have been seeking a new passport.

      1. Clive

        In what nationality? I spoke at some length to an immigration attorney about relocation to the US (short version: I’d quality for an investors’ visa but I’d have to realise every asset I had to my name, including a pension, my sole property and cash-in-hand). Thus I would be going very long on US dollar assets and staking my entire future prosperity on everything working out — I could not suddenly have second thoughts and acquire the same assets at the same prices a few years later. I’d have to start a business (or purchase an existing one) and become its proprietor. As I’m pushing back 50 so hard my hands are hurting, I’m thinking of retirement, not starting out from scratch. Have you experienced just how hard it is to run your own business and what the failure rate is?

        I’d also have to sever all ties to the UK — not just financial ones but even a too-frequent visiting pattern to relatives can snag a tax liability tripwire and I *really* don’t want to pick a fight with the UK tax authorities.

        Then there is the horror show of the US health care system — a gamble I would be extremely loathed to take.

        Australia and New Zealand have imposed much more stringent residency eligibility requirements and while I might just quality on my skill set, I’d get ginormous minus points for age.

        I qualify for Irish (Republic of) citizenship as a result of a great-grandparent but again, there is work, tax and “where to live” questions. As for the rest of the EU27, if there is to be an acrimonious parting of the ways, you’re hardly going to want to try and make your way there, are you? Plus, as with Ireland, you have more-or-less the same questions: where are you going to live, what are you going to do and how do you set your financial position so as to not create tax liability risks in the UK or get hit with double taxation. Oh, and there is also a new language to learn or as a minimum having to give my schoolboy French and German a serious makeover.

        Scraping the bottom of the barrel, I did also look into Monaco. To which I would simply ask “have you ever been there?” and, if the answer was “yes”, to follow on with a “and you’d actually consider making it your home?”. If you also answered “yes” to that question, I’d say you were either out of your mind or else were particularly fond of spending your days propping up overpriced bars and talking bollocks to some of the most loathsome people on the face of the earth. Which is saying something.

        Short version: it’s pretty crappy everywhere.

        1. Colonel Smithers

          Thank you, Clive.

          Have you thought about some consulting in Mauritius and the mainland? Happy to discuss off line.

          There has been an increase in Brits moving there in the past couple of years, nothing to do with Brexit. None speaks French or has to.

          1. Clive

            I shall do some research! But I fear everyone there would have had enough (way more than…) of clueless Brits!

            1. Which is worse - bankers or terrorists

              Consider Dubai, Clive. $5000-20,000 for a free zone company and residence visa; $5000 if your work is outside the UAE. I have s if you like. No local income taxes or corporate taxes.

              1. Clive

                Hmm. I’d rather liken it to a Monaco with more sand. Once described, and this wasn’t a compliment, as Milton Friedman’s beach club. Which I think sums up the place nicely. Oft featured in one of ZeroHedge’s recurring pieces on how to become an “international man” — a libertarian fantasy about a stateless existence, paying no taxes and supposedly beholden to no-one anywhere.

                1. Lambert Strether

                  There’s always Southeast Asia, where entry costs are relatively low, but that works for retirement, not employment (unless you can connect to an international firm that locates you there, and then they’d have the option of moving you).

                  There is also the issue that in a very foreign culture, where both the language and even the script are not Western, you never really know what’s going on around you. Some find this stimulating; others might not.

                  1. PlutoniumKun

                    I’ve met a lot of expats who work around Asia – many are English teachers (cynically, these are the ones who can’t or won’t get a proper job), many others live off a variety of freelance activities, legal, grey, or otherwise. Some live in a complete bubble – I met once a Scotsman in Kyoto who had managed to live in Japan 20 years without bothering to learn a word of Japanese. Some have settled in very well to local communities, running small businesses, living modestly and (apparently) well. Others are only there because they can’t fit in anywhere else or their activities would put them in prison.

                    But its definitely an option if you are the sort of person who doesn’t mind being in that sort of odd bubble – as you put it, you have no idea what is really going on around you (some I’ve met claim they do, I suspect they are delusional). Personally, I could do it, I’d find it stimulating – but I suspect most people couldn’t.

                    1. JW

                      The expat bubble in Latin America is nuts and it’s possible only because of the language barrier. Every day I’d read in Spanish about some unbelievable series of horrific crimes (lynchings, mass murders) that had the locals abuzz and meanwhile expats are talking about how to get X flavor of Pringles and writing patronizing the locals as if they were Gaugin’s Tahitians.

                      Not speaking the language also insulates you from the unbelievable xenophobia in Mexico and to a lesser extent elsewhere. Definitely a fool’s paradise.

        2. JW

          @Clive another NC commenter had said she was establishing residency in France. I don’t know if she’d eventually qualify for a passport but she’d at least be in a place with running water and fully stocked hospitals if the worst happens.

          I do appreciate that the vast majority of us are trapped in our countries. I’m so sorry this is happening. Knowing people like you are getting caught up in this is killing all the Shadenfreude toward all the ultras and the smarmy 1% Remainers.

          1. Lambert Strether

            I haven’t done serious research on this, but it seems that the cost of living in the European fringe — places like Croatia, or Portugal, or Greece — is reasonable. Seems like in Croatia you can apply for permanent residency after five years — but five years seems like a long time to me, having at this point no hostages to fortune.

        3. Yves Smith Post author

          I was able to get in to Australia on a 4 year entrepreneurial visa in 2002, in large measure because that visa was pretty lax (the US $ was super strong then and you didn’t have to bring assets to Australia, just show you had them). But they wanted me to reach a level of employment-creation that it was pretty clear I would not hit by my visa expiration, in part due to the Iraq War putting all new business development in the deep freeze for about six months, forcing me to restart a lot of my marketing.

          9 out of 10 new businesses fail. And it’s way harder starting a business as an expat with no/few local connections. I had some cachet in Sydney due to having both a fancy firm finance + consulting background making me a unique beast. And while a lot of Sydneysiders were very open to giving a newcomer a shot, a lot of others would only hire their mates.

          Oh, and BTW Oz has eliminated that visa type because it was abused by Chinese claiming to want to be wool merchants.

          So the only realistic way to emigrate if you are older is spousal or having a company with sufficient clout hire you. Some countries also favor academics. But if you are sponsored, you need to stay employed by a sponsor until you get permanent residence. Oh, and spousal isn’t easy. Most countries go to some length to smoke out fake marriages, like separating the partners and asking each personal questions, like what their spouse eats for breakfast, what movies he/she likes, when they get up, what color are the sheets, what was their first date, who was the best man/maid of honor, details re in-laws.

          Clive’s best shot would be to talk his TBTF into a foreign posting but if that were at all an option, I am sure he would have mentioned it.

          1. Colonel Smithers

            Thank you, Yves.

            With regard to “hiring mates”, headhunters in Zurich said that I should ask my friends working for Swiss firms. They also recommended internal transfers from London, as per your conclusion.

          2. PlutoniumKun

            Over the weekend I was talking to a young US couple (friends of another US couple who moved here for work) who have moved to Ireland via Australia and France (doing post PhD assignments). They have the advantage of being young and having jobs/academic posts already sorted before moving. They loved Australia and also loved France (where their baby was born) but said the bureaucracy in France drove them nearly mad.

            The key thing in Ireland is getting a short term job – its fairly easy here to get citizenship if – and this is the big if – you can get a job to allow you to stay for five years or more. After that, its rare to refuse citizenship or long term residency. The problem of course is that its an uncertain route and rules can change arbitrarily.

            The big issue for UKers (or anyone else) moving to Ireland is accommodation if they want to live in Dublin – there is little shortage now of jobs for qualified people (especially in anything related to finance, construction or IT), but renting or buying property has become nearly impossible. I know of quite a few well qualified East Europeans with good jobs who left after a few months for this reason alone.

          3. Clive

            Only NYC!

            But the expat turnover rate in our branch office is chronically bad, most Brits are unprepared for the cultural differences and few seem to be able to make the required adjustments which are needed to hack it there. The stipend for accommodation is stingy so trying to get anything nice in even vague proximity to that part of town (the office is between Bryant and Central Park South) without putting in your own money is hard. Which means a commute and probably not a good one. So add in the notorious US long hours work eithic and burn out is a real risk. And you’re expected too to be human glue between the US and U.K. so the time difference kills your social life.

            On the side, everyone will always need US$ clearing so if you can make a go of it, it’s pretty secure.

            So, a parachute of a kind. But perhaps just into another sort of minefield.

            1. Ignacio

              I wouldn’t say I recommend or not recommend coming to live in Spain where many british fellows came to retire in the warm mediterranean climate. I have seen examples of britons enjoying their living here and examples of the opposite. What I think is that leaving forced by the political situation is not the best way to initiate a new life anywhere abroad. I think one must feel really attracted by the chosen destination specially if one plans to retire.

              And hey, if I was on my own, I would consider positively Sweden and even Denmark hahahahahah! Just kidding, I would love to have a nordic experience for a couple of years and come back to Spain to become indignant on how poorly we manage our country hahahahahahaha!

              1. c_heale

                Spain is great, if you have a job with any kind of reasonable salary. However, there are major cultural differences, you will need to learn Spanish, and the bureaucracy is very slow. When I was there 2001-2012, it took a long time and a lot of queuing to get anything done. And Madrid and the North of Spain is hot in summer but cold in winter. Not everywhere is Andalucia! It suited me (I only left since my significant other was from another country), but agreeing with the poster above, I know people who found it difficult to adapt.

                But it may be too late anyway. Although Spain has guaranteed current British residents that they can stay after Brexit, I don’t know how well that would hold up for people now fleeing a possible no deal. The current UK government has done its level best to annoy other European countries, and I think a no deal might be the straw that breaks the camel’s back.

                1. PlutoniumKun

                  The complication with Spains promise to ‘current residents’ is that a very large number of UK retirees and others never actually formally registered as permanent residents (for tax reasons I believe). So some who have lived there for a long time might get a rude awakening.

                  The big issue is the value of sterling (and related to that, rental income, which funds a lot of British retirees) and arrangements for healthcare. The health system in the south of Spain does very well from charging the NHS and north European healtcare systems for looking after their citizens. This is, of course, all under EU rules. If the British government stops paying, then these retirees will be a huge liability for Spain and they will not be willing to turn a blind eye.

              2. fajensen

                I would love to have a nordic experience for a couple of years and come back to Spain to become indignant on how poorly we manage our country

                Learning enough Danish to understand the serious newspapers will cure you of that!

        4. Anders K

          If you can bear with the climate and the long winters, Sweden merely requires 200 000 SEK (around 17000 GBP at the time of this writing) for you personally (about 100k extra for spouse and 50k per child, more info here) and that you have some sort of business in Sweden (there does not seem to be any requirements on the numbers of the business, but the business plan will be evaluated). You would probably have to act rather fast to get a business started and get over here, but it should be possible.

          The good sides are pretty good healthcare, access to EU wide investments and no problems managing using English, with the downsides of climate/winter and living in an export-oriented small-sized nation inside the EU. On both and minus sides are not being a member of the Euro. Also – some political turmoil in the future, but will likely not affect you that much.

          1. Yves Smith Post author

            Another person suggested Sweden. I’ve only been briefly to Stockholm, which seemed very nice (many bicyclists, but not quite as many as in Amsterdam and I had the impression public transportation was good) and Gotland , which is lovely but a bit remote. But both of course in the summer and thus totally not representative.

            But is the drift of the gist that the business has to generate employment (as in hire locals) or is it OK for it to support the owner/operator, obviously have to hire some local services, and contribute by paying some not stated but deemed to be sufficient level of taxes? I would assume the latter would not be sufficient.

            1. Anders K

              Actually, I don’t see why the latter would not be OK going from the letter of what is written – I could certainly see preference for “big company coming who will employ loads of local people” but no firm requirement.

              I will reprint the requirement for self-employed people wanting a residence permit (which, like any other residence permit, will allow for Swedish citizenship after 5 years; I highly doubt Brexit would cause you to be turned out on your ear if you are established in Sweden prior to it, no-deal Brexit or no):

              Requirements for obtaining a residence permit as a self-employed
              In order to obtain a residence permit, you must

              * have a valid passport
              * show that you have significant experience in your field and previous experience of running your own business
              * have documented and relevant knowledge in Swedish and/or English
              * show that you are running the business, that you have the ultimate responsibility for it and that you own at least half of the business
              * show that the business’ services or goods are sold and/or produced in Sweden
              * show that you have sufficient funds to support you and, if applicable, your family during the first two years (equivalent to SEK 200,000 for you, SEK 100,000 for your spouse and SEK 50,000 for each accompanying child)
              * show reliable source documentation for your budget
              * show that you have established customer s and/or a network in Sweden
              * show that your company, following a 2-year probationary period, will have its finances in balance and you have the ability to support yourself and, if applicable, your family (income support is calculated according to the Swedish national standard for income support housing costs).

              All from the source page.

                1. Anders K

                  Maybe, but one could establish s over the ‘net and use them to prove it.

                  Still, just means that the immigrant would need to move now, using the 6 months EU free movement thing to establish themselves.

          2. fajensen

            If one settles in Skåne, Kastrup Airport and Copenhagen is not so far away when one needs to take a break away from the weirdness. The north of Sweden, starting with Stockholm, can become very Swedish. And it gets Dark there!

            There are some aspects of swedish thinking, behaviour and culture that makes one think that Sweden is not really a part of Europe :p

            1. PlutoniumKun

              I’m glad you said that! On my visits to Sweden I’ve enjoyed it very much, but there were times sitting having a coffee somewhere that I felt more like an ‘alien’ than I have sitting in somewhere equivelent in Japan, Tibet or Thailand. Sometimes the closer culturally you are to a country, the more the seemingly small differences become insurmountable.

          3. vlade

            Similar requirements work for quite a few of the new arrivals (Visegrad 4, Baltics). With something like that, you could actually say work weekdays in Bratislava (Slovak capital), and spend you weekends in Viena (commuting distance away).

        5. fajensen

          As for the rest of the EU27, if there is to be an acrimonious parting of the ways, you’re hardly going to want to try and make your way there, are you?

          Why not? We don’t exactly agree with, f.ex., Iran and yet we still take in immigrants and refugees from there. Possibly, it would be a good move in any case to relocate some assets to within the EU markets and also get an EU-based bank account with an EU-based credit card, I see that Norwegian is pushing their credit card a lot here :).

          I used to work with a Sikh colleague who had been driven out of three countries before settling in the UK; he used to advise the “throw away wallet” principle in personal finance: Never keeping the majority of ones assets in the same place where one is resident, because “they” will eventually come for ones assets.

          Some of the smaller EU states, Possibly Latvia and certainly Denmark are cheap places to set up a privately owned limited company as tax efficient wrapper around ones investments. And, I think banks in Belgium still offer discretion options also at low-level accounts (one still has to go there and prove one is not laundering money).

          Work, taxes, where to live, etiquette, always suck & confuse. Even within ones own country.

          Those tribulations are not (that much) worse in a European foreign country, except for Italy and Spain and Greece, where the rules on buying property are arcane and not well-enforced – until Suddenly they are!! It comes down to personal requirements and ressources to pick a good place.

          PS –
          If you want to top Monaco in desolation, I dare you to go for Andorra. It is basically a skiing area with a motorway to the tax-free shopping malls, nobody wealthy lives there at all, they all have a mail box to be resident for tax purposes. One could, back in the 1990’s at least, hire flats in Andorra which were just a door, a mailbox and a bit of floor for the mail to land on, and nothing else!!

          1. Andrew

            Sounds like a bit of extremism there fajensen. I’m actually in Andorra right now visiting some friends who live here and it’s not as you describe.

            They (wealthy people who you claim don’t live here) enjoy hiking, biking, the natural lakes, and yes, skiing along with far more sunshine that home in Britain.

            They shared with me this much more objective list of pros and cons about living here. It’s not perfect (nowhere is), but I’m very tempted to make the move here after what I’ve seen!

          1. Yves Smith Post author

            Hah, Clive could live there with his Japanese, but the Japanese are exceedingly polite to foreigners (even more so than to each other) but keep them at a remove. Speaking the language well helps a lot, but you are still ever and always a gaijin.

            1. Plissken

              I lived there for four years. Spoke fluent Japanese. I had great difficulty in getting somebody to rent me an apartment.

              1. Clive

                Not untypical, unfortunately. If you go for one of the more internationally-flavoured districts like Roppongi, not so much of a problem. The price, literally, is eye-watering rents. But outside of a company placement you would be lucky to not encounter this at some point.

                As Yves says above, politeness to foreigners — at a certain superficial level — is de rigeur. But once you know enough of the language, customs and culture to sort-of pass for a native Japanese, you get the “benefits” in the unfortunately unavoidable intra-societal microagressions, passive aggression and even bad manners. I recall still the first time a shop assistant was rude (ish) to me. I felt like I’d finally arrived and was one of the locals!

            2. PlutoniumKun

              It can’t be as bad as Cork in Ireland. I know non-Cork Irish people who’ve moved to villages there and 40 years later are still referred to as the ‘blow-ins’!

      2. Colonel Smithers

        Thank you.

        Last year, I tried to get a French passport, but my ancestry goes to far back.

        I am in / writing from Zurich, meeting headhunters. I was on a similar mission in Paris in April and hope to visit Geneva or the Gulf before the end of year or the arrival of spring.

        I was told yesterday of an up tick from September onwards in the number of London based “financial services timewasters” (copyright Clive) seeking employment in Zurich.

        As per an agreement between Switzerland and the EU, firms seeking recruits must first advertise in Switzerland. If there no expressions of interest or anyone suitable found, which must be evidenced and made ready for inspection by the Labour Office, vacancies can be advertised in the EU. If there are no expressions of interest or anyone suitable found within a year, the vacancies can be advertised in third countries. One UK bank’s Geneva wealth arm has just taken over a year to recruit someone. That recruit was a Brit. After Brexit, the UK becomes a third country.

        Swiss regulators have said that they expect newcomers to speak German in Zurich and French in Geneva etc. Swiss firms are increasingly of that view, but make allowances for recruits who speak Spanish, Russian and Arabic as there’s so much money coming from those markets. Therefore, monoglot Brits need not apply.

        Headhunters have suggested that internal moves are easier to negotiate. Once in Switzerland and after a decent interval, one can move on. They stress the need for flexibility.

        1. vidimi

          you can check out luxembourg as well. geneva is very nice, though, and we’re thinking of moving there as well, after we get our french citizenships, that is.

          1. Irrational

            Quite a few Brexit-related jobs moving here, mainly for insurers and fund managers. Residency requirement of 5 years + most learn Luxembourgish (Moselfrankish dialect) to get nationality. Happy to provide more info if you write to propqlux gmail account.
            Making a trip to London this weekend for a university reunion, probably the last in a while until it’s clear how many hours you have to queue for to get through passport control after 29 March (which btw – thanks, Theresa – is my birthday and no major historical disasters associated with that one before!).

      3. PlutoniumKun

        Lots of UK citizens have been seeking Irish passports (the easiest ones to get for anyone with some Irish background). The problem of course for many is that their assets are in sterling (i.e. their home) and there is a danger of getting stranded if, say, they decide to move to France or Spain. A lot of retirees in Spain/Portugal are already in difficulty because of the fall of sterling relative to the euro. If there was a housing crash this would be much worse since so many are dependent on rental income.

        There is a real problem for UK citizens now seeking jobs in Europe due to the ambiguity about visa status after the exit. As one small example, I know most organisations here in Ireland have stopped inviting tenders for consultancy jobs to UK based companies, simply because they fear contractual issues and legal challenges from losing EU based companies.

        If I lived in the UK, I’d stockpile at least a months food. Even here in Ireland I think thats sensible as there could be a major disruption to supply chains. Annoyingly, the food co-op I belong to has chosen this time to shift premises so they aren’t taking bulk orders. Hope I can get plenty of tins in before New Year.

        1. Colonel Smithers

          Merci, PK. Bienvenu a la francophonie :-).

          Thank you and well said, PK.

          Your second paragraph applies to me at my German TBTF and other potential EEA employers.

          With regard to your final paragraph, I recommend liquid cash too.

          1. JW

            After Brexit, liquid cash in the UK will be Irish whisky, American Bourbon, Russian vodka…seriously I would stockpile this if I were staying in the UK. Likely to appreciate in value and valuable even in a barter economy. Possibly also cigarettes.

      4. vlade

        I’ve got more passports you can share a stick at (well, not, but I do have an EU one, and an antipodean one), my main problem is that I’m a generalist, and most of the places want specialists now (“We want you to have 20 years of X!” “But X only came out three years ago? And anyone with three brain cells can learn it quickly?” “We don’t want three brain cells, we want 20 years of X!”).

        Technically, I already live in the EU, but work in the UK (even if I spend not a huge amount of time there), but given the above + the areas where I could claim to be specialist my claim would be based on the fact that maybe 20 people in whole of Europe does it (including the UK). So UK is where, at the moment, my clients are most likely to be.

    2. Colonel Smithers

      Thank you.

      I used to work for the Investment (Management) Association and still have friends there. The unofficial view until late July was that a deal would be achieved by the festive break, but since then they have baked in a hard Brexit. The trade body and much of the membership are now in panic mode and beginning to prepare for EU passports (i.e. an EU authorised entity) and how to get around restrictions on delegated authority.

      The IA, in tandem with the Treasury and Bank of England, are looking beyond Brexit and, a week ago in Zurich, held discussions with Swiss, Hong Kong and Singapore equivalents. The plan is to have a counterweight against the EU and USA.

      I am not surprised by what you say of colleagues. I had always wondered about the buy side’s sleepiness.

      1. Redlife2017

        Colonel Smithers –

        As an adult immigrant to the UK, I believe the sleepiness you see is from two things:
        1) Most of the senior execs either come from VERY similar backgrounds or are totally uncreative “smart” people who are very good at sucking up to power,
        2) Buy-side makes good, but much less money at the top end, than sell-side, so the activity is therefore a little more “I’d like to go home and see my kids”.

        Interesting to hear that you used to work at the IMA (pre-IA) – presumably for Helena Morrissey? I’ve been concerned about their very easy-going approach for sometime (I get their daily emails).

        But then again in August I had one of our senior managers take me aside to tell me to stop worrying so much because there was a “secret” memorandum in place between the Irish and UK for the ability to do fund management delegation. Even at the time I knew the person was missing the point (and suffering from nativist Tory delusions)…Naturally it was ESMA (and other regulators) who had the memorandum of understanding and everyone is now dealing with the fact that trying to delegate anything OTHER than specific fund management activities is going to be VERY complex. You know, operations – the not sexy part of any firm.

        I’m staring at negotiating with our new European entity how they will delegate regulatory reporting (EMIR & MiFIR trade reporting, AIFMD Annex IV, etc.) back to London and how they have to monitor a 3rd country entity doing that sort of work. Also to make sure the governance (SLAs, KPIs, etc.) so they don’t look like (and aren’t) a post box entity!

    3. Ignacio

      I concur with you. Yves coverage on brexit has been superb. The circus will or won’t go on to keep the dream of an agreement alive but it is now time to check one’s contingency plans again. That is my advice to my friends living in the UK.

  3. DaveH

    “As we’ve said, it isn’t clear that failing to pass a budget would force new elections under the Fixed Term Parliaments Act. The Government of course argues not but my sense is that this is an untested question. UK readers are encouraged to pipe up”

    It’s all fairly unprecedented, FTPA or not. A budget being voted down hasn’t happened since 1885, so it would have caused big constitutional questions with or without the FTPA.

    My understanding is that there are two points, firstly would it automatically be considered a vote of no confidence which would trigger a new election, and on that the answer is a pretty clear ‘no’. The second is would the budget vote be the trigger for a motion of no confidence being tabled in the House, and I think the answer is a pretty clear ‘yes’.

    What then happens is anybody’s guess. I wouldn’t put it past the players involved (DUP, ERG) to vote down both the budget and the (likely) motion of no confidence, leaving the Government in even more stasis than it currently finds itself.

    On a separate point, if the DUP do vote against the budget then the parliamentary maths would make that particular vote fascinating.

    It’s so close that you could be talking about the few Labour MPs with the whip removed (Field, O’Mara etc) voting the budget through just so that they aren’t forced into fighting for their seat (and giving us a couple of hundred thousand pounds in wages over the next few years). Still, I’ve no doubt a NC blog post would be quickly forthcoming if we started crossing that bridge.

    1. PlutoniumKun

      That seems a good overview of the situation. I don’t think the DUP would opt to directly take the government down (i.e. vote against in a confidence vote). I think they would prefer to gum up the works and paralyse it. That way they get their harder than hard Brexit by default.

  4. JW

    For me the big mystery has been why did the DUP ever support Brexit in the first place, since of course it means a hard border either with the Republic or GB?

    Did they/do they see it as a backdoor way of killing the Good Friday Agreement? And do they see that as a good thing?

    1. DaveH

      It’s two things, your second paragraph covers the first – anything that puts more friction between the north and the rest of the island, short of reopening hostilities is a good thing as far as they are concerned. Make Northern Ireland more British and less Irish. Bear in mind that they were the only major party who rejected the Belfast Agreement.

      Secondly, and something which can’t be overstated. They are really, really, REALLY stupid.

    2. PlutoniumKun

      The first and obvious reason is because they were bribed to support Brexit.

      However, thats not the whole story. The DUP were never associated with a hard anti-European stance (not least because so many of their constituents have benefied from EU funding), but they have long associated and flirted with the nationalistic far right in England, and so have picked up their prejudices.

      They are also, it must be said, not very bright. They are all tactics (often very successful ones) and no real strategy. It made sense for them to support something they saw as upsetting Dublin (and NI nationalists and Scottish nationalists), but although moderate Unionists repeatedly warned them, they never really forsaw that Brexit would lead to a demand for closer ties to Dublin to keep EU trade going.

      The latest polling indicates that Brexit has become a very clear divide in NI, not between nationalists and unionists, or catholics and protestants, but between DUP supporters and everyone else.

      Much the same process is now happening in Scotland, with the supposedly ‘moderate’ Scottish Tories allying themselves with the DUP.

      1. paul

        I saw that piece on slugger o toole a few days ago and was quite baffled to see the description of both davidson’s personal qualities and her political significance.

        She was a remainer, now she bangs on about the will of the people (except those in her or arlene’s constituency) and has courted the most regressive sections of scottish society.

        The fact that she ruled herself out of a position she could never attain, let alone carry out ,was an act of false but astute modesty, not personal idealism.

        1. PlutoniumKun

          The fact that Ruth Davidson is doing this is a very ominous sign. I can’t claim deep insights or knowledge about Scottish politics, but I’d always been under the impression that the Scottish Tories were a pretty moderate, pragmatic bunch (relatively speaking), and Davidson seemed one of the few senior Tories to combine sense with competence.

          There seems a concerted effort to join ‘British’ nationalists (i.e. the Scottish and NI type) with English nationalists, which can only stoke up deep trouble on the streets of Glasgow and Belfast.

  5. Ataraxite

    I think, as this week plays out, that yesterdays nothing-to-say statement to the House of Commons by Theresa May will turn out to be another in a long line of own goals. Although it said nothing of substance, it did two things which will come back to bite the UK.

    Firstly, it committed the UK to a “temporary” backstop. Any reader here can accurately calculate the chances of the EU agreeing to this: zero, nada, none, zilch. It has made any agreement even less possible, and would now require the UK to humiliate itself as it (yet again) is forced to swallow something it has previously rejected.

    The second outcome is more interesting, and comes not from the non-statement itself, but the questions in the Commons afterwards. These will have been closely watched by the Europeans, as well as Brexit tragics like myself. And the overriding impression? That there is scant support for any plan in the House of Commons, let alone what Theresa May and the EU might agree. The result of this is that the EU must be wondering why it continues to generously provide political cover to May, when the outcome is going to be the same.

    For these reasons, I expect the EU position will harden today and tomorrow, and another Salzburg is likely to be the outcome of the Council meeting. There is little to be gained by pretending that a deal is still possible under current circumstances, and the best chance of a deal to me – and I believe the EU would still prefer a deal, but does not fear a No Deal – is some action to change the circumstances.

    We are now firmly in “deus ex machina” territory if a No Deal is to be avoided. And of the various deuses which I can imagine coming ex machina, none seem particularly likely or feasible.

    1. Clive

      Article 50 requires the EU to negotiate. It can’t merely say, although I am sure it is tempted to “you’re an absolute shower and we’re not going to answer the door to you if you dare to call again”.

      It’s even a potentially arguable case that the EU could be deemed to be in breach of the Treaty of Lisbon if it adopts as position of “we can’t compromise on the NI border issue because we can’t end up with a hard border” when the result of that negotiating position is that it ends up with a hard border. It has a suggestion, at the very least, of bad faith dealing.

      That said, the Commission will have a stackload of defences against that, not least the UK government agreed to it, or said it agreed to it at the time.

      My hunch is that the odds-on certainty of a no-deal Brexit is a posh version (as in it would be heard by the International Court of Justice, rather than a rocket-docket at your county court) of Litigation Futures.

      1. Ataraxite

        I didn’t mean that the EU will do anything so bold as suspend negotiations or offer an ultimatum this Wednesday. I suspect it’ll merely be something along the lines of a forceful statement as to what is still required if there is to be a deal.

        Article 50 does indeed require the EU to negotiate, but it doesn’t oblige the EU to agree to any deal.

      2. Yves Smith Post author

        The EU set forth in April 2017 the negotiation timetable and order of battle. The UK didn’t object save being very pissy about the exit tab being put as one of the first two issues to be settled, which then became three as the Irish border was added. That timetable had October being the end of the road for negotiations due to the need to work out final text and get national approvals. The UK has never objected to that. It has only recently started trying to get more time. You can argue allowing for the possibility of a November summit means the EU had conceded that that’s a viable drop dead date, but they have no reason to go beyond it.

        Moreover, May reneging on her Joint Agreement commitment is proof that the UK is not negotiating. You absolutely do not ever try to retrade a settled deal point without 1. groveling and 2. offering a concession in return. The UK has done neither.

      3. Peter

        I think you are confusing “a requirement to negotiate” with “a requirement to accept anything you bring to the table.”

        The EU recognised the undesirability of a hard border, but also realised that this would create another problem, so they created the idea of a backstop to resolve that. Without the backstop, the only alternative is a hard border.

        I wonder why it’s so hard to understand that the idea of the UK wanting to control its own borders, and then stating they don’t want to control their border with Ireland (which is an EU member) is a silly idea.

        1. vlade

          To quote Sir Ivan Rogers (although that was about something, but can be a basic Brexit “why?!?!” response):

          “This is really not too difficult to grasp unless one is determined not to.”

  6. TW2018

    Re Mrs May has been grossly overpromoted and is completely out of her depth.

    Mrs May was already grossly overpromoted as Home Secretary, where she left a devastating trail of desctruction due to her sheer incompetence. That she the climbed further up the greasy pole was testament to a lack of acceptable alternatives. I cant imagine anyone had high hopes of her making a better fist of it than at the Home Office.

    1. vlade

      Indeed. In fact, one can track a lot of the immigration issues all the way back to her, where she failed, monstrously, to put any dent into non-EU immigration, which was pretty much entirely in her gift.

      Having had a run-in with HO at the time (when I was searched every time I landed in the UK, which was weekly, to the point that I knew most of the custom guards there and they were embarassed about it – travelling on a UK passport!), I consider calling her “incompetent” a slight on all the incompetent people around!

  7. Frenchguy

    And the Irish backstop is not the last issue outstanding. I read yesterday, from I don’t remember which journalist, that EU negotiators were incensed when their UK counterparts insisted on linking the future relationship to the “Brexit bill” and that they felt they were going back to a point that was already agreed. It’s amazing how patient Barnier’s team is…

    On another point, Open Europe published a report on the cost of no-deal. I won’t link to it here as it is complete rubbish. Basically, they ignored anything that would make a no-deal a real problem because it’s “too hard to model”. And almost all UK journalists just ate that up. Politico even gave a column to Open Europe to advertise it. The delusion is certainly not limited to the political class.

    1. Yves Smith Post author

      Yes, there is so much news from so many sources that I forgot seeing that re the Brexit tab….somewhere, probably a different source or else I skimmed the story because I don’t recall the part re the EU negotiators being up in arms. But I reacted the same way. This was settled last year in incredibly hard fought and detailed negotiations, with a lot of effort expended on how to compute items that are conditional on future events… and the UK wants to turn that into a trading chip?

      I agree that this is another big issue that hasn’t been properly reported and I was remiss in not including it. Thanks for the reminder.

    2. Colonel Smithers

      Thank you, French Guy, especially for not linking to that rubbish. Well said, too.

      It won’t surprise you that Open Europe is well connected to the Tory Party. Mats Peon advised David Cameron, Raoul Ruparel advised David Davis and Nina Schick is used by the BBC. Peon and Ruparel have had columns in fish and chips wrappers like City AM.

      The trio have ambitions beyond the parish that is Brussels. Unfortunately, their ambitions are not matched by their knowledge. They are also all too typical of this new class of people who live in use the metropolitan elite political, media and think tank bubble.

    3. vlade

      How anyone would give that time of day was beyond me. It was basically “let’s assume all that’s hard and dangerous out. Then make some assumptions on favourable tarriffs, and calculate the impact of those. Show that as the impact of Brexit”.

      The only good thing one can say about it is that they made their assumptions clear – which means it’s even more depressing the press actually picking it up and not picking it apart.

      1. fajensen

        Isn’t that the norm for Economics papers now:

        “Under the given Market Conditions of there existing: A Magic Wand, A Winged Unicorn and a Chicken Jalfrezi … it can be shown that …. blah, blah … then lots of opaque maths … then we safely conclude that whatever we were paid to demonstrate, is indeed thoroughly demonstrated!”

  8. Colonel Smithers

    Further to Brexit, Vlade was prescient a year ago, when the engagement of Harry and Meghan was announced, that the royals would take another one for the team in the spring of 2019. It shall come to pass and from the same couple.

    1. Andrew

      The nation will quit looting shops and fighting each other in the streets to come together and unite behind the birth of another unelected member of the establishment. How cute. On a side note, we’ll have to put up with hearing about this crap on the news for the next nine months. If Brexit’s not enough to make you consider leaving the UK then this most definitely will.

  9. Roquentin

    Just wanted to chime in and say your coverage of the Brexit has been outstanding, just like with most things. Cfdtrade was one of the few sites that actually had decent coverage of the 2016 election too. Keep up the good work.

  10. vlade

    This https://www.theguardian.com/politics/2018/oct/16/mps-urge-jeremy-corbyn-to-table-vote-of-no-confidence-in-theresa-may shows you all that’s bad with the UK’s handling of the negotiations.

    An MP comissions a research into what would happen in case the Parliament votes down May’s proposal.

    The research says “it’s not a no-deal veto”. So far so good. But the reasoning behind that is:
    “Even if the government statement does simply propose to accept and prepare for no deal, the mere fact that the Commons can vote on a ‘motion in neutral terms’ does not mean that voting down the motion can, legally and in isolation, prevent a no-deal Brexit.

    The way the Commons responds to the motion may have further political consequences, which may have a bearing on whether and/or when the UK leaves without a deal, but those are a matter for the government and parliament to resolve between them subsequently to any vote on a statement.”

    Hello? Anyone home? How about taking into account the other party in the negotiations, i.e. the EU? UK Parliament can declare whatever, but short of rescinding A50 (and even that relies on the EU to accept it), there’s b-all it can really do. That is, unless the UK is leaving the EU so that the EU can finally run w/o the UK’s Parliament dictating it how to do and when.

    1. Anders K

      Ideally, I would think that if the parliament has a vote that prevents no-deal Brexit and then votes down the proposed deal, the outcome should be A50 revocation (barring A50 extension and no other deal to be voted upon).

      Unfortunately, that will not restore the status quo. The EU-rebate that UK had is gone.

      I am, however, of the firm belief that the EU will not close the A50 revocation door unless the UK tries to negotiate some new, Cameron 2.0-style deal – if nothing else to seem as the reasonable party.

      1. vlade

        Maybe.

        But the point is that it’s in the EU’s gift, not the UK’s. The UK can, at best, ask. But if the EU does nothing, then the UK is out no matter what the UK does. See, this is why triggering A50 was an act of total idiocy.

  11. JW

    Fascinating NYT overview of Brexit preppers, including a FB group called 48 Percent Preppers.

    https://www.nytimes.com/2018/10/16/world/europe/brexit-preppers-united-kingdom.html

  12. ewmayer

    Re. “Things Are Always Darkest Before They Go Completely Black” — I no longer see it available for sale there, but despair.com once had one of their demotivational posters with that sentiment. Also one titled “Economics” featuring a cloudy crystal ball and the sentiment (IIRC) “The art of explaining tomorrow why the predictions you made yesterday didn’t come to pass today”.

    1. Skip Intro

      I found that one by searching the site. The link is in a comment near the top:

      https://cdn.shopify.com/s/files/1/0535/6917/products/despairdemotivator.jpeg?v=1403275969

      Any reader who doesn’t know what demotivators are, or hasn’t seen them in a few years, I highly recommend a look:
      Demotivators

      edit: Lambert just embedded the image! Thank you Lambert, ’tis yet another demonstration that ‘Great Minds Think’

      1. JW

        Oscar Wilde: “Even if I’m lying in the gutter, I’ll be looking up at the stars.”

        …we all know how Britain eventually treated him.

  13. David

    May has a strategy, if you can call it that, which amounts to being conservative prime minister for as long as possible, whatever the consequences for others. Although I’ve been saying for some time that negotiations are effectively over, I should perhaps have added that the pretence of negotiations can be a good political tactic even when nothing is happening. If you further assume that May wants to make sure that the EU, and not her, is holding the ball when the music stops, then there is a coherent strategy to be employed which involves pretending to negotiate up until the last minute, and blaming the EU for the inevitable failure. This could happen in two ways.
    First, May drives the car over the cliff, but between now and next spring keeps on coming up with new initiatives (or repackaged old ones) which she knows the EU can’t accept, but give the impression of activity. This can include the whole armoury of crisis summits and eleventh-hour trips to Brussels to ask them to “be reasonable”. Then, the inevitable catastrophe can be blamed on the EU’s inflexibility (“we thought we had a deal ….”
    Second, at the very last minute, May effectively accepts vassal status with a few cosmetic concessions. It will be too late by then to force her to change course, DUP or no DUP, and the Art 50 date will have passed. She will then calculate that parliament, faced with a choice between vassalage and no deal will choose vassalage.
    In either case, she would present herself as a Churchill-like national saviour, ready to go to the country if needs be, and expecting to win.
    It’s not very attractive, but as a strategy it’s probably the best available.

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