Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17
7 Signs You Should Add Gold To Your Portfolio Now - 19th Jun 17
US Bonds and Related Market Indicators - 19th Jun 17
Wireless Wars: The Billion Dollar Tech Boom No One Is Talking About - 19th Jun 17
Amey Playing Cat and Mouse Game with Sheffield Residents and Tree Campaigners - 19th Jun 17
Positive Stock Market Expectations, But Will Uptrend Continue? - 19th Jun 17
Gold Proprietary Cycle Indicator Remains Down - 19th Jun 17
Stock Market Higher Highs Still Likely - 18th Jun 17
The US Government Clamps Down on Ability of Americans To Purchase Bitcoin - 18th Jun 17
NDX/NAZ Continue downward pressure on the US Stock Market - 18th Jun 17
Return of the Gold Bear? - 18th Jun 17
Are Sheffield's High Rise Tower Blocks Safe? Grenfell Cladding Fire Disaster! - 18th Jun 17
Globalist Takeover Of The Internet Moves Into Overdrive - 17th Jun 17
Crazy Charging Stocks Bull Market Random Thoughts - 17th Jun 17
Reflation, Deflation and Gold - 17th Jun 17
Here’s The Case For An Upside Risk In The Global Economy - 17th Jun 17
Gold Bullish on Fed Interest Rate Hike - 16th Jun 17
Drones Upending Business Models and Reshaping Industry Landscapes - 16th Jun 17
Grenfell Tower Cladding Fire Disaster, 4,000 Ticking Time Bombs, Sheffield Council Flats Panic! - 16th Jun 17
Heating Oil Bottom Is In.(probably) - 16th Jun 17
Here’s the Investing Reason Active Funds Can’t Beat Passive Funds—and It Worries Me a Lot - 16th Jun 17
Is There Gold “Hype” and is Gold an Emotional Trade? - 16th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

British Election Sends Shockwaves Felt Here and Abroad

Politics / UK Politics Jun 16, 2017 - 03:05 PM GMT

By: John_Browne

Politics

Last week's General Election in the United Kingdom was a disaster for the new conservative government of Prime Minster Theresa May. Having called the unnecessary "snap" elections in order to strengthen her political hand, the result actually reduced the number of seats held by the conservatives and delivered large gains to the opposition Labour party, which had seemed in disarray just a few months ago. Although she has announced no plans to step down, her position has been severely weakened, possibly fatally. More pointedly, the UK's hand in negotiating favorable Brexit terms has eroded substantially. Besides creating significant ramifications for the European and global economy, the election also provides important lessons for the potential state of American politics.


In my mind, four main reasons explain the election. The first and most important was May's crucial misreading of British voter sentiment. Like the surprise election of President Trump in November, last year's Brexit Referendum revealed how deep anti-establishment sentiment has become. May failed to sense that this sentiment had shifted to her government which was seen, rightly or wrongly, as responsible for the country's current malaise including low economic growth, mass immigration and local terrorism.

Second, May displayed additional misjudgment when she suggested that health benefits for the elderly should be subjected to a 'means test' that would withdraw benefits from those who were considered well off financially. (5/17/17, The Guardian, R. Mason, H. Stewart & D. Campbell) This policy struck squarely at an important voting block at precisely the wrong time. Bumbled communications around the issue between the Prime Minister and Conservative Party allowed Labour leader Jeremy Corbyn to successfully label it a tax increase. May's eventual reversal on the issue made her look weak. Combined with her previously stating that she would not call a snap election, this lent credence to the rap song, 'Liar, liar' which went viral on social media.

Third, May underestimated how the youth vote had become a bigger factor in politics in the months since the Brexit referendum. Younger voters, who have been long cultivated by pro-EU propaganda, had nonetheless largely sat out last year's referendum, assuming that the "remain" camp would achieve an easy victory. (A similar dynamic depressed younger turnout in the U.S. when an easy Clinton win was assumed). The surprise outcome seems to have shocked that voting bloc out of its complacency. Young voters were further energized by Corbyn's promise of free education.

On a more tactical level May proved to be a weak retail candidate. She declined to participate in a televised debate with other party leaders and instead appeared as a remote and strict schoolmistress. By adopting such a profile, she was clearly hoping to emulate Margaret Thatcher. But unlike the Iron Lady, May could not run on a record of stunning domestic and international achievements. On the other hand, Jerry Corbyn, who I knew in the House, is a natural 'people contact' campaigner. On this occasion he excelled.

The Conservatives in the UK are known for ruthless infighting, and clearly the knives have come out. May's former Cameron cabinet colleague, George Osborne, who she had previously discarded from her own administration, said last week that, "Theresa May is a dead woman walking."

However, in view of the party turmoil and the increased uncertainty surrounding the Brexit negotiations, due to start next week, it may be thought unwise to use these sharpened knives in the short term. On the other hand, a possible majority of anti-Brexit or Remainer backbench MPs could force a leadership challenge in the hopes of scuttling Brexit at birth.

To counter this, May should consider enlisting the talents of the highly popular Nigel Farage by putting him in the House of Lords. As a leading Member of the European Parliament and the former head of UK Independence Party, which triggered and won the Brexit referendum, Farage knows the EU establishment better than almost anyone. He could assist greatly in the Brexit negotiations and help gain their acceptance in the Lords.

But it cannot be denied that Great Britain's hand in the Brexit negotiations has been weakened severely. The trump card of walking away that May described as "No deal is better than a bad deal" in the event of continued outrageous EU demands to punish the UK is unlikely now to be approved by Parliament. This weakened hand likely will result in a so-called 'Soft Brexit' with terms that keep the UK more firmly in the orbit of the EU.

The "Remainers", who opposed Brexit from the start, are now emboldened in their efforts to delay Brexit, in the hope that something will come along to defeat it. Already, they are talking of the UK remaining in the European Economic Area (EEA), a halfway membership of the EU.

To retain a ruling majority, the Conservatives have had to make an alliance with the Northern Irish Democratic Unionist Party (DUP), which is known for its hard line against abortion and gay marriage, positions that the Conservatives have begun to moderate on in recent years. The DUP also favors a 'soft' UK/EU border between Northern and Southern Ireland, a policy that is not supported by the Conservatives. On paper, the DUP might look like firm allies, but when May meets their MPs on June 13th, she is likely to have a mind-bending time. Retaining their vote throughout the, now, far more difficult Brexit negotiations will not be easy. Even when she succeeds, her overall majority will be only two!

That the election disaster should occur just before President Trump's planned State Visit to the UK is another gift to Remainers. Doubtless, May had calculated that Trump's support for a Canada-plus trade agreement would strengthen greatly her Brexit negotiating hand. With the possibility that his personal rapport with May might end, Trump may prove less generous.

During the election campaign, May complained of EU intervention. In this respect, on May 3, Business Insider reported that May had accused European Union officials of trying to influence the British elections, saying, "All of these acts have been deliberately timed to affect the result of the UK general election ... ."(5/3/17, Business Insider, Adam Bienkov) Last Sunday, the Observer released a report, citing an EU source, saying, "It is understood that [EU Commission President, Jean-Claude] Juncker had advised May to call an early general election ... ." (6/11/17, Business Insider, Will Martin)What did he know that May did not?

This all portends a period of great uncertainty that can create difficult conditions for businesses and financial markets. In the short-term, a weakened Pound Sterling likely will shield a potential fall in exports and keep financial markets relatively calm. On the other hand, there is growing evidence that the fall in the currency in recent months has done little on that front. In the medium term, the Brexit negotiations, likely amplified by pro-EU leaks, are likely to cause heightened volatility in which the Remainers and their allies in the media are likely to incite further damage to May's negotiating hand. Parliamentary support was always going to be difficult, especially from the House of Lords, which is dominated by Remainer Life Peers. This potential parliamentary hurdle was perhaps the main factor that tempted May to call the snap election in the first place.

Long-term implications will depend upon the final Brexit result. If the negotiations go badly for May, it will mean that the UK will be forced to maintain relatively open borders and will not be freed from EU funding obligations. Potentially closer bi-lateral trade agreements between the US and the UK will be that much harder to achieve.

Most importantly, the result shows how quickly political pendulums can swing. Republicans should take notice that unless better communication and coordination is achieved with the White House, then midterm elections in 2018 could deliver one, or both, chambers of Congress to Democrats. Proceed with caution.

Read the original article at Euro Pacific Capital

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, Michael Pento, and John Browne delivered to your inbox every Monday.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife