Was listening to your market commentary and re GBP specifically… don’t think it I s fair to draw comparisons between Brexit and the Catalunya independence attempts… the 2 things are different: 

• Catalunya is a region within a national state, the UK is a sovereign state part of a supranational union… so for example the EU has no taxing power on citizens of the member states, there is no conscription in a EU military service, and generally speaking the bare minimum for having a functioning Economic Union is agreed between member states via the Council and the Parliament;

• If looking for a parallel, the situation in Spain is similar to that in Scotland, the Basques region, Sardinia, Corsica, some part of Northern Italy (by the way there is a referendum coming in a few days there)… it is significant that all these regions seek immediate shelter from and within the EU;

• The movement for the independence of Catalunya has a long history, and various degrees of independence have been negotiated between Madrid and Barcelona over the years after a lengthy period of violent repression; 

Also I disagree on the argument of Brexit being a success because there are more young people in the UK: it has been shows several times the young were overwhelmingly in favor of remaining in the EU; it was the old who voted out.

As for the so called “Brexit bill” that you also mention: this is an obligation the UK has towards the EU whatever the local politicians feed to the public (i.e. it is not a matter of what the EU “feels”, there is no ambiguity regarding its nature). Not paying this obligation is equivalent to defaulting on debt, which I doubt any government would do. The current narrative is the result of the government trying to leverage whatever it can to obtain concessions on access to the EU market.

Eoin Treacy's view

Thank you for this email which gives me the opportunity to clarify some of my thoughts. 

I believe it is a measure of just how dysfunctional the status quo has become that we are getting revolutions in the political make up of Europe, led by older people. Throughout history revolution has been a young person’s endeavour and the lack of food or its high price is usually the catalyst. The dawn of the Arab Spring in Tunisia is a classic example of this. 
Spain, or Greece and Italy for that matter, have some of the oldest populations in the world and referenda are reflective of the failure of successive administrations to deliver higher standards of living for millions of people who now feel disenfranchised. I am reminded of the point Steven Levitt makes in Freakonomics about the reason crime declined so precipitously during the 1990s in the USA is because abortion laws were passed in the 1970s. The disenfranchised youth population was, in effect, excised from the records. 

I agree Scotland’s independence vote bears closer resemblance to Catalonia’s condition and it is true the majority of young people in the UK voted to stay in the EU. They also voted for Jeremy Corbyn in the recent election. That is its own form of rebellion, or perhaps desperation, don’t you think? 

The UK is finding out just how difficult it is to leave the EU. One can only imagine how much more of a challenge it would be if the UK had adopted the Euro; if not impossible.  

The point I was trying to make is that the very nature of the discussion we’re having about what we have to lose and how much we have to gain is reflective of who is having the discussion. This is an old person’s reasoned weighing of arguments. With a surfeit of young firebrands, the condition would likely be very different. A young population’s solution would be to walk away, devalue the currency, introduce private banking laws on par with Switzerland, reduce corporate taxes and deregulate. The EU’s response would be draconian and competition would be fierce. However, the reality is that we do not have large young populations, rather the opposite. We have lots of people worried about their pensions and that points towards a negotiated settlement.   

Sovereign nations are being relegated to states within an increasingly federal EU. The fact newly “independent countries” feel they have no choice but to seek shelter under the EUs umbrella is further testament to that fact. If the EU did not have the power to tax states we wouldn’t be talking about what the UK owes. The EU is heading towards federal taxes, the trend is clear. Axel Weber (former head of the Bundesbank) today said “I can see the storm clouds gathering. I am warning against complacency,” and is urging quicker integration. Therefore, it does not make a great deal of sense to argue about the differences between regions and sovereign countries since the whole European enterprise to aimed at reducing the sovereignty of all in service to an emerging super state. This a very big question and if the EU is going to survive on its current trajectory it is going to have to deliver a vision of improving standards of living for more people or it will eventually fail.  

I’m afraid I do not agree reneging on the UK’s previously agreed future commitments to the EU budget would amount to a default in the classic sense. However, I believe the simple solution will follow a “No taxation without representation” model so that the UK will end up paying the majority of what it previously agreed to and in return will receive access to the EU’s market. That transition model as I wrote yesterday has the potential to last considerably longer than is currently envisaged in the media. 

An additional point I would to clear up is that the ongoing recovery in the Pound is a reflection of the market’s conclusion the world is not ending for the UK.