Brexit 2019: the Good, Bad and could-turn-Ugly options

[Curious Cdn]

They can only do that for so long before it pushes the relative value of the pound down. The market will rectify itself. After all, we don't export to the UK for charity, we do so for British pounds, and a British pound is not worth much unless we then use it for something. We could buy UK stocks or property with it, UK services, food at a Uk restaurant, or even a manufactured product from the UK. We could even sell our pound for another currency to someone else who inteds to buy it. But at the end of the day, we don't export to the UK for nothing, so if the UK imports more than it sells, then that means there are many pounds floating around waiting to be used. The owners will presumably want to use them sooner or later, no?

There was a time when Canada exported to the UK for charity but it was a national emergency when we did (1939-1945). The Brits paid for some of it and we forgave $4 billion of it (in 1945 $$) ... that would add up to something like a half trillion in 2019 $$ of aid of various types.

The Yanks made them pay up every penny with interest, btw. Canada forgave a lot of the loans. There's that "special relationship" with the USA, again.

 

[White_Unifier]

You'll find that the proportions of Canada's economy which are services and which are manufacturing are very similar to Britain's.
Like the UK, Canada is a services economy with little manufacturing.

Fair enough. But I would never propose that Canada adopt a policy aimed at restricting our imports just to increase our balance of trade surplus as that can only backfire in the end. Look at the UK. If the UK imports more from the EU and exports more elsewhere, then the question becomes, where is the UK getting the Euros from? I presume the EU isn't sending stuff off to the UK for charity's sake, is it? My guess is, keeping things somewhat simple here, other states sell to the EU for Euros, exchange Euros for UK pounds, and then use the UK pounds to buy UK goods and services, which the UK then uses to buy euros which it then uses to buy EU goods and services. So, if the UK raises tariffs against the EU, then suddenly, UK consumers will want more Euros in exchange for their UK pounds to compensate for the tariffs. This would lower the relative value of the Euro to the pound which creates a chain reaction relative to other currencies too. Result? UK products just become too expensive all around. The good news? As people stop buying UK pounds, the UK pound will drop in value until it becomes attractive again, but with UK residents paying the additional tax for any EU import.

Alternatively, the UK can choose to not raise tariffs against the EU. Result? UK consumers won't ask for as many Euros in exchange for their pounds. That in turn keeps the UK pound down and so helps UK exports elsewhere.

Now let's support that the EU raises tariffs against the UK and the UK does not reciprocate. Suddenly, while UK buyers are happy to trade their pounds for fewer Euros, EU buyers want more pounds in exchange for their Euros to make the tariffs worthwhile. This inflates the value of the Euro and reduces the value of the pound.

Suddenly, UK buyers aren't interested in buying EU products anymore because the Euro would be too strong. As a result, The UK starts to buy lower-priced products elsewhere. The more it sells off UK pounds in exchange for foreign currencies to buy other products, the more it lowers the pound which in turn increase exports in exchange for UK pounds. In the end, the EU tariffs against the UK would just backfire on the EU itself.

 

[Blackleaf]

Fair enough. But I would never propose that Canada adopt a policy aimed at restricting our imports just to increase our balance of trade surplus as that can only backfire in the end. Look at the UK. If the UK imports more from the EU and exports more elsewhere, then the question becomes, where is the UK getting the Euros from? I presume the EU isn't sending stuff off to the UK for charity's sake, is it? My guess is, keeping things somewhat simple here, other states sell to the EU for Euros, exchange Euros for UK pounds, and then use the UK pounds to buy UK goods and services, which the UK then uses to buy euros which it then uses to buy EU goods and services. So, if the UK raises tariffs against the EU, then suddenly, UK consumers will want more Euros in exchange for their UK pounds to compensate for the tariffs. This would lower the relative value of the Euro to the pound which creates a chain reaction relative to other currencies too. Result? UK products just become too expensive all around. The good news? As people stop buying UK pounds, the UK pound will drop in value until it becomes attractive again, but with UK residents paying the additional tax for any EU import.
Alternatively, the UK can choose to not raise tariffs against the EU. Result? UK consumers won't ask for as many Euros in exchange for their pounds. That in turn keeps the UK pound down and so helps UK exports elsewhere.
Now let's support that the EU raises tariffs against the UK and the UK does not reciprocate. Suddenly, while UK buyers are happy to trade their pounds for fewer Euros, EU buyers want more pounds in exchange for their Euros to make the tariffs worthwhile. This inflates the value of the Euro and reduces the value of the pound.
Suddenly, UK buyers aren't interested in buying EU products anymore because the Euro would be too strong. As a result, The UK starts to buy lower-priced products elsewhere. The more it sells off UK pounds in exchange for foreign currencies to buy other products, the more it lowers the pound which in turn increase exports in exchange for UK pounds. In the end, the EU tariffs against the UK would just backfire on the EU itself.

https://www.spiked-online.com/2019/02/08/tariffs-are-a-distraction/

 

[Curious Cdn]

You'll find that the proportions of Canada's economy which are services and which are manufacturing are very similar to Britain's.
Like the UK, Canada is a services economy with little manufacturing.

BTW, I do engineering for a manufacturer who exports to the UK

(... and France, Holland, Germany, Turkey, The USA, Mexico, etc.)

 

[White_Unifier]

BTW, I do engineering for a manufacturer who exports to the UK
(... and France, Holland, Germany, Turkey, The USA, Mexico, etc.)

I assume they pay you in CAD? Where do they get the money from?

 

[Curious Cdn]

I assume they pay you in CAD? Where do they get the money from?

US$ mostly.

 

[White_Unifier]

US$ mostly.

Where do they get the US$ from? They can get them in exchange for GBP, but the GBP is worth soemthing only as long as someone intends to buy Uk goods or services with them.

 

[Curious Cdn]

Where do they get the US$ from? They can get them in exchange for GBP, but the GBP is worth soemthing only as long as someone intends to buy Uk goods or services with them.

Oh, there's a few $ US dollars lying about here and there in the World.

If you are using it as a common unit of exchange, they are essentially buying them at their end and selling them to you whereby you sell them and buy CDN dollars in exchange. No real dollars are killed or hurt in the making of theses transactions.

 

[White_Unifier]

Oh, there's a few $ US dollars lying about here and there in the World.
If you are using it as a common unit of exchange, they are essentially buying them at their end and selling them to you whereby you sell them and buy CDN dollars in exchange. No real dollars are killed or hurt in the making of theses transactions.

With what do the Brits buy USD? I presume with GBP. If so, then that means that someone with USD considers GBP to have some kind of value, and the GBP can have value only to those who want to buy something that the UK produces.

 

[Curious Cdn]

With what do the Brits buy USD? I presume with GBP. If so, then that means that someone with USD considers GBP to have some kind of value, and the GBP can have value only to those who want to buy something that the UK produces.

Actually the Brits pay Sterling. We sell all over the world and we don't want to deal in oddball piecedos, here and there.

BTW, I'm Engineering, not Accounts Receivable. How they pay for the stuff is generally none of my concern.

 

[Ocean Breeze]

Theresa May acknowledges the possibility that Brexit won��t happen next month

The British prime minister said that if Parliament rejects her Brexit deal on March 12, then lawmakers will be offered another vote on whether to request "a short, limited extension" to delay Brexit until at least June.




https://www.washingtonpost.com/

 

[White_Unifier]

Theresa May acknowledges the possibility that Brexit won��t happen next month
The British prime minister said that if Parliament rejects her Brexit deal on March 12, then lawmakers will be offered another vote on whether to request "a short, limited extension" to delay Brexit until at least June.

https://www.washingtonpost.com/

Oh no! Does that mean more whining from Blackleaf for the next little while?

 

[Curious Cdn]

Oh no! Does that mean more whining from Blackleaf for the next little while?

He'll complain after Brexit, too.


The British like their whine.

 

[White_Unifier]

He'll complain after Brexit, too.
The British like their whine.

I don't think it's a British thing. I think it's a Blackleaf thing. He doesn't like it when the will of the people is disrupted every four years.

 

[Blackleaf]

Oh no! Does that mean more whining from Blackleaf for the next little while?

Yep. I fully expect us to be out on 29th March as promised. And don't go thinking I won't be the only one not happy.

Of course, delaying Brexit could backfire spectacularly on Parliament. If we're still in the EU on 23rd May, the day of the EU elections, then that'll likely, as many MPs fear, lead to - in the UK section of the EU elections - a landslide win for Ukip and the destruction of Labour and the Tories.

So go on MPs, delay Brexit beyond 23rd May - I dare you.

 

[Ocean Breeze]

Oh no! Does that mean more whining from Blackleaf for the next little while?

Probably ;-)

 

[Ocean Breeze]

Brexit to be put on ice, but only for a few months: economists

https://www.reuters.com/article/us-...=Feed:+Reuters/worldNews+(Reuters+World+News)

 

[pgs]

Brexit to be put on ice, but only for a few months: economists

https://www.reuters.com/article/us-...=Feed:+Reuters/worldNews+(Reuters+World+News)

The Brits should just get on with it and abandon that sinking ship .

 

[Ocean Breeze]

The Brits should just get on with it and abandon that sinking ship .

Don't think they should ever have boarded that "sinking" ship.

Serious miscalculation from the onset.. er that referendum Has technically put them in limbo.

 

[Blackleaf]

Brexit to be put on ice, but only for a few months: economists

https://www.reuters.com/article/us-...=Feed:+Reuters/worldNews+(Reuters+World+News)

Be interesting to see Ukip deservedly annihilate the Tories and Labour in the EU elections if we're still in the EU on 27th May. Extending Article 50 would be very dangerous for the Remainers.

But, at the end of the day, it's unlikely we will see Brexit delayed. The leaving date of Friday 29th March is enshrined in UK law and it's difficult to see how that could change before 29th March. An extension would also require unanimous backing from ALL remaining 27 EU states - and that's highly unlikely. If May's deal is voted down again, then the most likely scenario is that the British people will get, on 29th March, the Brexit they voted for - a No Deal Brexit.