Actual economic effects cont...

[ManonLescaut]

Telegraph: Britain could be up to 70 billion worse off if it leaves the single market IFS warns

The respected economic think tank said that Britain could enjoy an extra 4 per cent in national income if it remains in the single market, equivalent to two years worth of growth.

The report claims that while leaving the EU will free the UK from an estimated £8 billion a year of budget contributions, the loss of trade from Brexit could hit tax receipts by a larger amount.

It found new trade deals would be unlikely to make up for lost EU trade, which accounts for 44 per cent of British exports and 39 per cent of service exports.

Telegraph: Treasury looks at quitting the single market

Officials say the talks have revealed a willingness among some top figures to scrap passporting despite early calls to stay in the single market from some quarters...

Mr Boleat cast doubt over the UK’s ability to secure a Norway-style deal to remain in the single market. He said accepting free movement of people and paying large sums to Brussels while accepting its rules would not be politically acceptable.

The BBA wants the UK to leave the single market but retain unimpeded access to EU markets.

How about this detailed sector by sector impact breakdown topsy? The names Oliver, btw.

It would be interesting to understand how the pound continuing to fall is affecting currency hedging availability and costs for importers and for financial services. I imagine not positively but will see what I can find out..

Quick analysis of the situation.

Pound haa been extremely low since June, hedged oil futures will keep our supply at lower cost for some months but the petrol dollar price will be high for futures now so cost push inflation will start to push through in December or January. Further the cost of imports from the EU will drive up food costs at the same time, I'd expect it to be slow to.start with but it is reasonable to expect to see travel, food and energy costs increase between 5 and 8 percent over te next year

""fat finger" trader error or trading algorithm"

An error of this magnitude would sink a financial institution.

I don't think so.

All the FT has is speculation on the cause, but looks like the thin liquidity overnight means those are plausible scenarios.

That's interesting small, and echos the BoE report from last month (I think) where importers are just starting to think about passing the cost increases on.

Its worrying Night, because you can be damned sure that employers won't have wage rises accordingly.

People are about to see their standards of living drop. There is also likely to be a corresponding fall in consumption and most likely a fall in economic growth.

Yup yup. I do wonder how much of the recent boost in consumer purchasing is rational "there may be inflation soon" purchasing.

It is not a good outlook, and I say that as someone with a company which wants to sell to consumers. My confidence is certainly suffering...

I don't know why everyone is suprised about the consumer spending? A fairly nice summer, with a depressed pound, an olympics and a euro championship. Increased domestic spending, increased tourism from the EU etc etc? It would all lead to a lift in consumption.

It isn't exactly a consumer boom either, just above where it was before the vote.

Well, I'm sure the overwhelming majority of people (as we keep being told) who are so approving of TM's captaincy of HMS New Britain will be absolutely delighted to do their national duty - they'll all be falling over themselves to put their money where their mouth is and Spend Spend Spend, and not be at all concerned about any price rises, and (of course they'll be expecting wages to rise once that we've got rid of those nasty immigrants who've been forcing wages down) meanwhile, they're going to be buoyed along by patriotic pride and won't mind tightening their belts. Right? Right?

blogs.lse.ac.uk/brexit/2016/10/05/hard-brexit-only-if-its-free/

Right!

And I cannot fact check this right now, but Jo Maugham is usually reliable and has noted on twitter that:

"£/€ exchange rate changes means Brexit vote will increase our contributions to EU by 15%. £402.5m per week for the NHS? (ht @MayfairCynic)."

Those are fair points smallfox, I guess I find it striking as consumers are clearly not tightening their belts in anticipation of turmoil ahead. Yet, anyway.

Night

Shit a brick - the pounds off again and is now at 1.2275 against the dollar, down 2.7% in a day

"This suggests that investors are shifting away from the view that the overnight slump can be written off as a technical blunder."
www.ft.com/content/26b5bac5-14ea-3cc7-9372-01745e8154fd

Gilt yields are up as people are dumping them on fear of what will happen yet.

I'm wondering if I should get a market ticker installed here to watch the pound, might be a nice conversation piece.

*pound's

tut

Just for you all to reflect on:
Luke Temple ‏@la_temple 2h
If the £ 'flash-crash' was caused by a glitch, this is worth a read:
blogs.lse.ac.uk/politicsandpolicy/betting-on-the-future-with-social-media/

There was also speculation that it was triggered by something that Hollande said relating to Brexit which was published in the FT.

When they looked at the times, the crash started at 7m and 3 secs past the hour. The FT article was published at 7m and 13seconds past the hour.

What does this tell you?

The fact that this was even speculated as an idea relating to Brexit, suggests that the moment a50 is triggered those computer systems are programmed to sell £s.

We have a BIG crash to come when it does.

I think OK Cupid used to have a question for potential dating matches which ..is (thnks google)

Q: In a certain light, wouldn't nuclear war be exciting?

There is a certain compulsive horror to this slow lurch (and potential apocalypse) in the £, along with a collapse in many of the social norms we hold dear. I am starting to think "gosh, in a certain light, this is fascinating"

I am almost certain you are right though - if I was programming an algorithm to trade GBP, I would want to know the exact moment that article 50 was triggered and take some kind of action.

"the moment a50 is triggered those computer systems are programmed to sell £s"

Actually no. That news is already factored into the price. That is what we are selling right now.

News are capitalized as soon as they are known in the financial markets. There's no such thing as waiting a few months to sell.

You might have inside knowledge cote, or a greater faith in the rationality of markets.

There is good reason still to think that art 50 might not be triggered (slim chance, but still a chance) at all, also to assume that it will be triggered at the end of March (rather than January or February), and that when it is triggered, the type of brexit we will get might still be a soft, well managed one.

However, tm could easily pull the trigger in Feb (or december, or hell, tomorrow) with no clarity on wherever are going but a good reason to suspect a chaotic, extreme version if Brexit. I would certainly want to react to that possibly by hiding under the bedclothes forever

Increases in shorting on the pound, may be more fun ahead www.ft.com/content/ea399bae-8cdb-11e6-8cb7-e7ada1d123b1

Neither.

Whatever slim chance you think Article 50 might never be triggered, PM committing to March 2017 deadline means that the probability of it happening in the next 6 months is suddenly very high.

The market started factoring this information into exchange rates as soon as it became available. That is what always happens. Never does the market wait until the date of an event to buy/sell according to its news.

"The market started factoring this information into exchange rates as soon as it became available"

Which means that the current historic low is here to stay, and demonstrates exactly what the market thinks about brexit.

Unicorns for all.

An update to my last post - the £ has now dropped by c17% against the $, meaning that the average family income is now worth £4369 less in global terms than before the referendum. I.e. the £4300 figure that there was so much wailing about as a major lie by the Remain campaign, has already been surpassed.

Fun times...

Fortunately most family (ex the jet setters) expenses are priced in £, not $.

There will be some pass through inflation and I look forward to seeing BoE fight that rigorously

"I look forward to seeing BoE fight that rigorously"

And that's funny because? How much of our reserves have they already given to Arron Banks and the like wasted trying to shore up our economy? It seems bizarre to find that humorous...

The BoE will not be raising interest rates as the inflation will be externally driven cost push, rather than demand pull.

It will not tolerate cost driven deflation, however.

Actual, personal economic affects for my family so far:

-mortgage payment fell
-decided to holiday in UK rather than Europe or abroad due to low pound
-my SIPP went up
-my Latin American father sent a cheque to put into my children's savings which bought a lot more pounds than it would have done before the summer; then we invested it in shares in children's ISAs and watched those fly up again after further pound falls

Everything is just ducky, until we have to replace the car or visit relatives overseas.