Brexistential Crisis

[Denzil_DC]

Repost: Brexistential Crisis – what would Cassandra say?

In January Colin Hay, SPERI’s co-director, predicted that Britain would vote to leave the European Union in 2016. Today as that prediction (in the manner of Cassandra) comes to pass we’re reposting Colin’s article which goes on to make two further predictions about the break-up of Britain and a second financial crisis.

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Prediction 1: Britain will vote to leave the European Union in 2016

I never thought I would write, type or say these words (and I have now done all three). But the brutal reality, at least for the sooth-saying political economist, is that Cameron’s Conservative administration may prove to be the last of a Britain in Europe. Until recently, that did not seem very likely. When the spectre of an in/out referendum on EU membership was first unveiled, there seemed little prospect of Brexit. Indeed, it was presumably precisely because there was so little prospect of Brexit that such a referendum could be contemplated as a means of lancing the simmering boil on the question of Europe in the Conservative Party.

...

Prediction 2: Brexit will lead to break-up

But that, of course, would not be the end of it. Far from it. For, as we all know, Brexit would be, and is, simply unacceptable to Scotland. It is in fact quite difficult to imagine how Brexit would not lead to a second Scottish independence referendum; and scarcely less difficult to imagine how a second Scottish independence referendum under such conditions would not lead to a massive majority, in effect, for the break-up of Britain.

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Prediction 3: The second crisis is on its way

A final prediction is certainly no less bleak. In a sense, it is independent of the others in that it takes neither Brexit nor break-up for it to come true – though either and certainly both together could well be precipitating factors or accelerants. The brutal reality, once again, is that the British economy is more fragile today than it was in 2007 on the eve of the crisis. A second crisis looks extremely likely, if not perhaps immanent. Despite the rhetoric of deficit reduction and rebalancing, the economy is more polarised and distorted than ever before; Britain is more reliant than it has ever been on consumption-driven growth; private debt is at near-record levels and even more responsible than in 2007 for the modest growth Britain now enjoys; Britain’s balance of trade position has deteriorated further since the crisis and there is essentially no productive investment in the economy; Britain’s infrastructure is dilapidated and decaying, with austerity in effect committing the government to an indefinite public investment strike; and, above all, the housing market (which has been primed, pumped and stoked more vigorously and frenetically since 2011 than ever before) is now massively over-valued and exhibits all the signs of a bubble on the verge of bursting. What makes this worse is that any such second crisis would take place in a context of massive public debt, interest rates already at an historically unprecedented low and with the world economy on the verge of a deflationary stagnation. It is not at all clear what could or would be done.

Full article: http://speri.dept.shef.ac.uk/2016/06/24/repost-brexistential-crisis-what-would-cassandra-say/

[libdem4life]

1. I'd say Good Read, but it isn't...at least the subject matter.

One wonders how this could potentially affect the US...particularly in such a still-volatile state of election year drama. So much of this seems eerily parallel to our situation, in a number of ways.

[Denzil_DC]

3. We don't have a Damn Scary Read forum, so it had to go here!

I don't know how it might affect the US.

His third prediction was obviously made before the financial unrest provoked by the Brexit vote.

I've felt a housing bubble collapse coming for quite a while - so obvious that all the same signs are there as last time, and nothing's been learned except making it slightly harder for folks to borrow at all, let alone to excess. The bulk of those likely to be affected were already on the housing ladder before the new regs came in. The high finance aspects I don't have enough direct everyday contact with or experience of to express an opinion about what might be coming down the pike.

Fun summer, eh?

[libdem4life]

4. Yeah, sounds like a Forum that would get a lot of posts.

Just the words Housing Bubble exhaust me emotionally. The first one was really bad. I don't think Europe can bail us out again. In fact, their current disaster may hasten ours.

We need to know what our Presumptive Nominee promised the Corporate Bankers. Lord knows it wasn't to Cut it Out.

[scarletwoman]

2. Excellent read! Interesting organization, too (SPERI).

Thank you for posting this.