Daniel Lacalle | What Will Happen to the EU after BREXIT?

France Elections, A Risk to the Euro?

DANIEL LACALLE: France is such a socialist country that, in the polls, the four candidates appear each with 20% vote intention. The voter has a “wide” variety of choice: the Socialist, the Social-Democrat, the Communist and the National Socialist.

However, what should amaze anyone is the fact that nearly 40% of the voters are choosing an anti-Euro option.

The rise of anti-Euro populism is not due to “austerity”. And populism is not defeated with more interventionism. France is the proof.

In France there has been no austerity, as the Natixis shows in “A big misunderstanding: The French think that there has been austerity”. Not only has public spending and the state intervention increased to 57% of GDP, with the government controlling major companies and nearly 70% of the economy, France has carried out for years a wrongly-called “expansive” Keynesian policy, despite two decades of stagnation. France is the example of a failure of central planning statism that some blame on the fact that there was not enough of it.

In the face of a misdiagnosis (“populism is due to the -ineexistent- budget cuts”), politicians propose the erroneous solution (“populism must be fought with more interventionism”), and what this does is legitimate the wrong message of magical solutions that lead the voter to prefer the most radical ideas.

Among those magical solutions, there are few things more ridiculous than the populist promise that everything will be great if France gets out of the euro and defaults.

In a delirious interview with Melenchon, the populist ultra-left candidate, he said that he counted on the “atomic bomb”. Stop paying the debt. A genius. “If we stop paying the debt, the economy does not suffer, only bankers suffer,” he said. On the other side of economic schizophrenia, at the far right, LePen’s party claimed that “70% of the French debt is issued before the monetary union, so it can be redenominated in French francs.” And they didn’t blink.

They forgot that their country runs a structural deficit and that it cannot finance that huge amount of expenses if it defaults.

They forgot that more than 40% of the French debt is in the pension plans, social security and savings of its citizens, which would sink their beloved welfare state.

They forgot that, in order to finance public expenditures of more than 1.2 trillion euros (57% of GDP), France needs a secondary market that supports the monetary policy of the Central Bank and a currency that is accepted globally as a reserve.

They forgot that, if France defaults on public debt, the risk premium of SMEs and families in their country soars and credit dries.

They forgot that their local financial system is three times the GDP of France and that, if a default sends it to bankruptcy, they can say farewell to citizens’ deposits.

Every populist always comes up with the brilliant idea of doing what has never worked and thinking that this time will be different. Melenchon and LePen, like the rest, look at Venezuela or Zimbabwe and think that it has not worked because they were not in charge.

They forget that such a destruction is not solved by printing French francs, because it ignores the history and the disaster that inflationary policies were for Europe, always with the same result. Sink the economy, blame the external enemy, inflationism, war and back again.

The fallacy that a country will solve structural problems devaluing the currency is more than dismantled by reality. As if the ECB had not carried a massively expansive monetary policy, within the euro, they believe that the problem is that it is not devalued enough. France has spent ten years with an expansive fiscal and monetary policy, as shown by Natixis, and they think the problem is that it was not enough. That it did not work because the populists were not in power.

Default and devaluation destroy the average citizen, businesses and families, wiping out savings and deposits, cost of imports soar and the ability to finance their beloved State, collapses.

Lessons from the economic history of France:

Between 1790 and 1793, 3,500 million notes were issued in France, the so-called Assignats, which soon lost 95% of the value artificially decided by politicians. Of course, food prices soared with the loss of value of the currency. Finance Minister Claviere blamed the shopkeepers and the “merchants” and promised to force the machines and print more money.

Prices continued to rise inexorably. Money was worth less and less, and therefore, goods and services cost more and more.

And what did the French government do to make up for the mistake? Print more money, raise taxes and confiscate properties, destroying real investment and trade in the face of lack of legal certainty. The Jacobins introduced the “Law of Maximums” prohibiting price increases. Like Kirchner, Maduro … At the same time, they punished with jail and the guillotine anyone who rejected payment with paper money. This just got the shops closed, because owners just did not want those colored papers that were no longer worth anything.

Of course, now it is different. At that time, the state was not in debt more than 100% of its GDP, with more than 40% of that debt in the hands of families, with a structural deficit and a public expenditure of almost 60% of GDP.

But it is what populists want to repeat, with the argument that “this time is different”.

All populist inflationists always talk about the United States and the dollar to justify their monetary mirage and forget to be a global reserve currency, have a functioning secondary market and an attractive and dynamic market-based economy. The US dollar is not the global reserve currency because it is decided by a committee. It is so because the world trusts its economy.

I remember an episode of Game of Thrones in which a character said “he would not mind burning down the kingdom as long as he is appointed the king of the ashes”. That’s the populist strategy. To destroy the economy and proclaim themselves as the only savior, as the solution to their own sabotage. Poor France. | Dr. Daniel Lacalle | First published on Wednesday, April 19, 2017 | © Daniel Lacalle | All Rights Reserved

Daniel Lacalle is a PhD in Economics, fund manager and author of Escape from the Central Bank Trap (BEP), Life In The Financial Markets, and The Energy World Is Flat (Wiley).

This article has been published with the express permission of the author; and I would like to express my sincere thanks to him for giving me permission to re-publish it. It is an excellent article.

Daniel Lacalle PhD is a prolific author. You can check out his books on Amazon here

Theresa May Rejects Brussels's Hardline Brexit Demands

THE TELEGRAPH: Theresa May has dismissed a series of hardline Brexit demands from Brussels as politicians on both sides of the Channel warned that the talks could turn nasty.

The Prime Minister said requests formally agreed by EU leaders were simply a negotiating position.

Mrs May insisted she was sticking to her own demands outlined in a speech earlier this year which included tariff-free trade, ending the jurisdiction of European courts and stopping free movement of migrants.

When asked about mounting fears the UK could be “bullied by Brussels” she claimed that voters re-electing her was the best way to secure a good deal. » | Ben Riley-Smith, Assistant Political Editor; Peter Foster, Europe Editor and Auslan Cramb | Saturday, April 29, 2017

Is $60 Million Really Not Enough for the Obamas?

THE WASHINGTON POST: In collecting $400,000 from a Wall Street investment firm to make a single speech, Barack Obama is following in the Gucci-clad footsteps of past presidents. Ronald Reagan landed a $2 million speaking gig in Japan. George W. Bush, on his way out, announced it was time to “replenish the ol’ coffers.” Bill and Hillary Clinton reported making more than $235 million after leaving the White House.

But to acknowledge that Obama has plenty of precedent on his side is not to say that his choice is wise. Indeed, it’s unfortunate.

Obama’s propulsion onto the lecture circuit arrives at a moment of populist disgust with Wall Street greed and the Washington swamp (can doors revolve in swamps?). It comes after a campaign in which Hillary Clinton’s Goldman Sachs speaking fees became a symbol of entitled elitism. So imagine the powerful message Obama would have sent — the reverse precedent — had he chosen to renounce this road to riches. » | Ruth Marcus, Columnist | Friday, April 28, 2017

Trump Could Save Tens of Millions of Dollars in One Year Under His Proposed Tax Plan

THE NEW YORK TIMES: President Trump could save tens of millions of dollars in a single year under his proposed changes to the tax code, a New York Times analysis has found.

On Wednesday, the White House announced a sweeping plan to cut a variety of taxes that would overwhelmingly benefit the wealthy. The estimated savings for Mr. Trump rely on his income and other information from his 2005 federal tax return and compare what his tax burden would be under the proposal to current law. Mr. Trump’s 2005 return is the most recent available publicly and was released in March by the former New York Times reporter David Cay Johnston. » | Audrey Carlsen, Jesse Drucker, Stuart A. Thompson and Nadja Popovich | APRIL 28, 2017

Weak Pound Melts the British Dream of a Place in the Sun

THE GUARDIAN: Demand from Britons for holiday homes in Spain and Greece has fallen sharply as Brexit uncertainty and the fall in sterling drive house hunters away

Brits abroad? Not so many, it seems. Uncertainty about the future of Britain in Europe and the fall in the value of the pound are taking their toll on the number of UK buyers investing in a little place in the Mediterranean sun.

A report by Spain’s Association of Land and Commercial Registrars last week revealed British demand for second homes in Spain was down nearly 30% on last year’s pre-referendum levels.

In Greece, where property taxes have soared amid the debt-stricken economy and there are lingering fears that the country could yet be ejected from the eurozone, estate agents on some of the more popular Greek islands are reporting an even bigger plunge in the number of Britons looking for homes since the Brexit vote. » | Stephen Burgen in Barcelona and Helena Smith in Athens | Friday, April 28, 2017

Brexit Could Trigger Worse Crash Than 2008, Says Vince Cable

THE GUARDIAN: Liberal Democrat former business secretary launches election bid with warning of dire consequences of leaving EU without a good deal

Quitting the EU could could trigger an economic crisis even greater than the 2008 financial crash, former business secretary Vince Cable has said. Cable predicted that job losses, inflation and falling consumer confidence could send the UK economy into a recession even harsher than the credit crunch if Theresa May presses ahead with a hard Brexit.

The Liberal Democrat made the comments as he launched his bid to reclaim his old seat of Twickenham in June’s general election. He has vowed to battle to keep Britain in the single market and the customs union if reelected. » | Tess de la Mere | Saturday, April 29, 2017

The Two Charts That Spell Big Trouble for Britain's Housing Market

THE TELEGRAPH: Nationwide Building Society has provided the latest snapshot of Britain's abruptly slowing housing market, with annual growth now at its lowest in four years.

The building society's economists chose this latest bulletin to touch on a disconcerting trend: the fact that while mortgage rates continue to reduce sharply, the "affordability" of property - as measured by the amount of income borrowers are committing to mortgage repayments - is not improving. In some areas it is deteriorating.

This reflects a period of static wages against rising house prices and a growing willingness of borrowers to stretch themselves, Nationwide's economists suggested. Read on and comment » | Richard Dyson | Friday, April 28, 2017

20/20 Diane Saywer My Reality: A Hidden America

Great New Book: Escape from the Central Bank Trap – Dr. Daniel Lacalle

Central banks do not print growth. The financial crisis was much more than the result of an excess of risk. The same policies that created each subsequent bust are the ones that have been implemented in recent years. This book is about realistic solutions for the threat of zero-interest rates and excessive liquidity. The United States needs to take the first step, defending sound money and a balanced budget, recovering the middle-class by focusing on increasing disposable income. The rest will follow. Our future should not be low growth and high debt. Cheap money becomes very expensive in the long run. There is an escape from the Central Bank Trap.

Check out Dr. Daniel Lacalle’s biography and details here

Ivanka Brought To You By Sweatshop Labor

Ivanka wants you to buy American made products. Guess that rules our her clothing brand then. Cenk Uygur and Ana Kasparian, the hosts of The Young Turks, tell you how much workers are paid to make Ivanka brand clothes.

Trump under Fire over 'Huge Tax Cut for the Rich'

Plan would slash taxes for small and big businesses, including Trump’s, eliminate inheritance taxes, and would be largest overhaul since Reagan era

Read the Guardian article here

Professor Calls to Tax the Rich at 80 Percent

Apr. 18, 2017 - 6:20 - Tucker takes on professor who's an admitted socialist calls for making the rich pay more than their 'fair share' in honor of Tax Day. Does this include Bernie Sanders?

German Startup Makes the Case for Universal Income

The Gap between Rich and Poor Is Only Getting Wider

Richie Rich Gets Richer (2012): As countries like Greece and Spain struggle under massive debts that are impoverishing its people, the financial elite around the world are getting richer and richer. This report explores the ever-widening gap.

The End of the American Dream: The Death of the Middle Class

The End Of The American Dream (2011): With around 120,000 people declared bankrupt each month, many of the squeezed middle-class see the American dream slipping away.

Trichet on Brexit and the Future of UK-EU Relations

Mar.29 -- Former ECB President Jean-Claude Trichet comments on the U.K. formally filing to divorce from the European Union. He speaks with Bloomberg's Joe Weisenthal on "What'd You Miss?"

South Africa's Currency Tumbles On Credit Rating Cut

Eurozone Economy: Gearing Up for Another Greek Drama?

Can Amazon Conquer the Middle East? - Counting the Cost

Internet giant Amazon has snapped up the largest online retailer in the Middle East, Souq.com. This will give Amazon access to customers in Egypt, the United Arab Emirates and Saudi Arabia. Dubai-based Souq.com was started 12 years ago by a Syrian businessman. At the time, Goldman Sachs called it "the biggest-ever technology M&A transaction in the Arab world."

But online retail shopping has yet to truly take off in the Middle East compared to other regions.

Tobacco: Modern Marvels (2010)

With Brexit Looming, Ireland Braces for Its Economic Impact

The IMF and other international financial bodies have warned that leaving the European Union could have negative consequences for Britain's economy. As Prime Minister Theresa May prepares to formally withdraw the United Kingdom from the EU, Britain's closest neighbor, the Republic of Ireland, is already feeling fallout. NewsHour Weekend Special Correspondent Patricia Sabga reports from Ireland.