Nick O’Connor – Capital and Conflict (Great Britain) –
Problems created by economists and financiers have a way of morphing into mortal threats to the political establishment.
Just look at Brexit.
Take much of the mainstream press at its word, and the only narrative that explains last June’s vote involves immigration. I think that’s wrong. The idea that people who voted for Brexit did so because they’re worried about immigrants threatening their jobs just doesn’t stack up.
Consider the numbers. 61% of over 65s voted to leave the European Union. 56% of people in the 50-64 bracket also voted to leave (according to a YouGov poll). These are people who are either retired or about to retire. Fear of people “taking their jobs” isn’t really a logical motivating factor.
A far more logical explanation for people in those demographics voting against the establishment in large numbers would be financial. As global strategist Jim Walker put it last week at our closed-door roundtable discussion with Alan Greenspan, these are people who have been hardest hit by low interest rates and quantitative easing (QE). Those policies have seen traditional sources of investment income dry up and annuity rates collapse.
Which is all a rather long-winded way of proving my point: financial crises can morph very quickly into political crises capable of overturning the established order.
Which, of course, brings us back to yesterday’s topic: Europe. Specifically, how financial problems within the European banking system create the perfect backdrop for a political crisis that could threaten the entire European political elite.
The EU Crisis Calendar
As I showed you yesterday, there are plenty of financial problems to contend with in Europe. A fundamentally unsound monetary-but-non-fiscal union. Bad debts within the banking system in Italy. Systemically important banks in Germany suffering. Capital shortfalls in French banks. Low growth all round. Negative rates on savings just to make doubly sure the saving populace know they’re being utterly shafted.
Well, get ready. Because 2017 will be the year those problems manifest themselves at the polls.
That’s because, this year more than any other, there are several clear-cut opportunities for the people of Europe to send a message – or a shockwave – through the heart of the European political establishment.
As former US Treasury secretary Lawrence Summers put it, “If [Marine] Le Pen comes to power in France, if an anti-euro party comes to power in Italy, this could be the beginning of the end of Europe and the eurozone”.
Our own Tim Price put it more bluntly in a recent letter on the topic:
As we looked at yesterday, Italy is perhaps the country with the biggest financial problems. Its banking system is suffering with an eye-watering number of non-performing loans. It had to bail out its oldest bank, Monte dei Paschi di Siena, just before Christmas. And on top of that, the entire nation has already experienced a decade of virtually zero growth (on top of virtually zero interest rates!).
Tim quotes economist Roger Bootle, who agrees with that assessment. Here’s what Bootle had to say on an imminent Italian departure.
Those three major threats to the European political establishment – votes in France, Germany and Italy (potentially) – aren’t the only opportunities for anti-establishment movements to take root in Europe. But they’re certainly the biggest.
Any major change to the political landscape in those “core” nations would vaporise the glue that holds the European project together. It would only take one unexpected negative result (from the perspective of the mainstream media and the political elite) to make 2017 the year of europocalypse.
But it’s not just a case of those three nations. There are more votes on the horizon in the “periphery” nations. Tim explains:
So what do you do, as a British saver and investor, to keep your wealth safe during such a time?
My first piece of advice is: don’t assume this won’t affect Britain – or you personally.
Let’s take the national level first. Britain is about to start negotiating on our exit from the European Union. The internal politics of the people we’re negotiating with matter greatly in those talks.