As a public speaker for over 30 years I sort of know most of the questions from an international investment audience ahead of time: The classic is always: “Where is gold headed?” Since 2016 two new ones have appeared: “What do you think about crypto-currencies” and “What is going to happen with Brexit?”
My answers have consistently been: Gold will generally go up, crypto-currencies will ultimately be co-opted by governments to maintain power over the money supply and increased control over tax revenues. But most important for this piece: Brexit. I think Brexit is never really going to happen, it will simply prove a never ending story, with delay upon delay out over the horizon.
This has been my fixed and somewhat disappointing answer for this whole period – now today the UK Parliament is at it again, tabling ‘a riot’ against PM Johnson and his attempt to reserve the No Deal exit option. My answer today to what will happen with Brexit? See above! This will inevitably end up as a lot of noise, resulting in no decision and a kicking of the can via yet another dela, an “outcome” that will leave the UK economy vulnerable and probably move UK very close to recession by Q4-2019 and into 2020.
Nothing will change because the division on Brexit not only cuts the major parties in two, but cuts across age groups as well, across income brackets, across identities and even feelings, and across Britain’s electoral districts. That is to say that there is no decision that satisfies both sides and, leaving any direction or decision impossible. Short of a solution therefore, the whole process will likely lead to a new general election. That election is an enormous risk for the Conservative party, but perhaps the worst risk is that it brings us no close to any decisive outcome on Brexit.
Meanwhile the UK economy goes from bad to worse – but hang on! Consumer are doing fine! Yes for now, but probably more likely hoarding and front-loading spending ahead of the ever threatened dead-line for hard-Brexit.
At Saxo Bank Strategy we have few rules and no religions, except….. We firmly believe that it is the net change of credit – the credit impulse – that drives future economic activity with a varying lag. Indeed, the Credit Impulse sits at the center of our research for our long range views on the coming two to four quarters. And the credit impulse for the UK is bad news indeed for the UK economy, as our Head of Macro Strategy Christopher Dembik wrote in late August: