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The BREXIT vote on June 23rd was part of a growing global
trend in which ordinary people are expressing a desire to retain national
sovereignty regardless of the cost and suffering that may be involved. The
result is rightly seen as a repudiation of the political and financial
elites, and should be viewed as evidence that the economic optimism presented
in the halls of power has found scant credibility on the streets. The same
sentiments can be seen on this side of the Atlantic in the surprising
successes of the Donald Trump presidential campaign.
Having failed to obtain a ‘re-run’ of the vote, the elite
in the UK now appear to be trying to erode BREXIT from within. If successful,
this disregard of the people’s wishes may result in a deepening political
crisis but could affect investments and currencies in the short to medium
term.
The most immediate and apparent result of the Brexit has
been the wholesale change in the leadership of Conservative, Labour and UKIP
(United Kingdom Independence Party) parties. Perhaps the most stunning
development has been the departure of Nigel Farage, the leader of UKIP and
perhaps the most recognizable face of the Brexit movement. With the help of
senior Conservatives such as Boris Johnson, Michael Gove and Andrea Leadsom,
Farage achieved an historic and potentially game changing victory. However,
UKIP, which pulls a majority of Thatcherite votes, has long been a thorn in
the side of Conservatives who treat it in a manner similar to that in which
elite Republicans treat Donald Trump and his supporters. Despite his
preeminent role in the victory, Farage was offered no role in the BREXIT
negotiating team. Feeling he had done all he could, and perhaps exhausted by
the strain, he resigned the UKIP leadership.
The machinations within the Conservative Party, which was
split by the Brexit vote, have rivaled the palace intrigues of the Byzantine
Court. The most immediate casualty was Prime Minister David Cameron, who had
staked his career on the remain vote. His resignation became official today.
Although late into the “Leave” camp, Conservative mayor of London Boris
Johnson played a significant role in the Brexit victory. With some
justification, he felt he should become the next Conservative leader.
However, in a fit of excessive ambition, his main ally, Justice Minister
Michael Gove, decided to knife Johnson in the back and stand himself as the
Conservative leadership candidate. Apparently his disloyalty shocked even
Parliamentarians within his own party. He was struck down rapidly. Last week,
the Conservatives selected Theresa May, the current Home Secretary to become
party leader and Prime Minister. She will be the first female occupant of 10
Downing Street since Margaret Thatcher. Interestingly, May remained largely
quiet in the run-up to the Brexit vote and tepidly backed the “remain” camp.
The Labour party, the main proponent of the “remain”
campaign, is in similar disarray after having lost the most crucial vote in
generations. Many Labourites ascribe the failure to the divisive influence of
Party leader Jeremy Corbyn, who many view as too far left on the political
spectrum to unite the opposition. As a result, there is a strong movement
underway to replace him as the leader. There can be little doubt that this
effort will bear fruit in the coming weeks.
Only Britain’s fourth party, the Pro-EU Liberal party, has
kept very quiet.
The power of the political and financial establishment in
the UK should never be underestimated. While the new Prime Minister has
expressed a strong desire to follow the will of the people and to stridently
pursue dissolution of the union with Europe, her actual policies may be far
more equivocal. It is my belief that Tory grandees have quietly placed a
“remain” supporter in the top seat expressly to frustrate the will of the
people. The implication of this is that most likely the BREXIT will be
watered down and possibly drowned at birth. Such a development is totally in
keeping with the massive EU con of enticing peoples into a free trade area
only to transform it into a superstate to which all member nations will be
subject.
It has become clear increasingly that many powerful EU and
international elite rulers want the UK to stay within the EU. Furthermore,
some 75 percent of Conservative MPs want to remain. It was apparent from the
start that even the most committed BREXIT Prime Minister would have had a
difficult task to steer a successful and complex renegotiation through
Parliament. A Prime Minister of less conviction will find it all to easy to
tell the electorate that, try as they might, they were simply unable to get
the new treaty obligations through Parliament.
Already Theresa May has spoken of ‘controlling’ net
immigration rather than ‘stopping’ it. This portends a very weak treaty
whereby the demands of the EU will be met only by token resistance from a
Conservative cabinet with secret ‘remain’ sympathies. Of course, this will
all be clouded with high sounding, but largely meaningless, achievements by
the UK and painful concessions by the EU.
What will it all mean for investments? The Pound Sterling
could soon appear to be oversold, as will UK government bonds and the shares
of some British companies. The euro also may be seen as undervalued.
Many assume wrongly that the euro is an ‘economic’
currency. In reality, it is a ‘political’ currency, depending on political
will rather than on economic strength. With the recapture of the UK, the EU
will appear stronger, a fact that could be reflected in the euro’s price.
Judging from recent events, it is likely that with the aid
of the UK and international elites, the EU will succeed in recapturing the UK
regardless of the expressed popular will. We may have seen the passing of
Britain’s last peaceful attempt to regain its sovereignty.
John Browne is a Senior Economic Consultant to Euro
Pacific Capital.
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