France Bosses the UK But Eurozone is the Flawed Organization

 This article was first published to my personal blog at Talkmarkets:

If anyone had any doubts regarding the real position of the Eurozone versus the UK and how that would have played out had Brexit failed, one only has to turn to the behavior of France as an example. With Brexit succeeding,  France ordered the UK to quickly choose the new Prime Minister after David Cameron had resigned. That is quite rude behavior. Now we find out that more than half of French voters want a referendum on Frexit!

France could have taken the high road, the dignified road. But it showed its true colors even though as I show later, it should get out of the Eurozone yesterday. The Eurozone would have eventually shown its true colors, maximum austerity and settling for negative interest rates, had the UK experienced any financial shock that could have changed its fortune. And if the UK had prospered, it would have teamed with Germany to control the entire block. But the concept of nations held hostage to negative rates may run against the grain of UK economics, which rejects negativity in most corners.

It looks like France was a loser in Brexit. The French CAC was down 8.04 percent. The FTSE was only down 3.15 percent. Spain was another loser in the market. The UK does not export goods and services that are important to maintaining a union. But Spain, which may benefit from free trade, is facing massive, horrendous unemployment by staying in the Eurozone.

Growth seems to be fleeting in Italy, Spain and most of the Eurozone, especially opportunity for the young. An entire generation is at risk. This was true before the Euro, but the hopes from adopting the Euro as a solution to this problem have evaporated. A chart listed below proves this to be the case.

Attributed to Sodacan, Wikipedia
Spain needs a cheaper currency, but Spain will only get that if it follows the lead of the UK. The amazingly shrinking Eurozone economic system shows us that Italy should come out too. What good is it to have massive youth unemployment and a smaller economy than Italy possessed in 2000? It makes no sense.

Investors are fleeing the markets that will be hurt the most by rumblings of discontent. The UK FTSE is not one such market. The UK maintained its sovereignty, remember?

The British have a natural separation from the rest of Europe. It is called the English Channel. It is a natural course of things that this separation be maintained. It as a symbol, translates into the need for sovereignty in governmental affairs as well.

Perhaps some of you remember the cry, "no taxation without representation", that guided the fathers of America. Certainly when it comes to the Eurozone, we could be crying for "no regulations without representation." This is what the Eurozone has become, essentially a fraudulent organization imposing it's will on lesser nations. This great source explains it in a nutshell:

Concepts of "shared sovereignty,"  "pooled sovereignty" and "joint national sovereignties" are covers for having one's laws and policies decided by European Union bodies one does not elect, that are not responsible to one's own people and that can have significantly different interests from them. As EU members countries can no longer decide their own laws over a wide range of public policy. In practice countries and peoples that surrender their sovereignty to the EU become ever more subject to laws and policies that serve the interests of others, in particular the bigger EU states. The claim that if a nation or state surrenders its sovereignty to the EU, it merely exchanges the sovereignty of a small state for participation in decision-making in a larger supranational EU, is simply untrue. The reality is different. The EU continually reduces the influence of smaller states in decision-making by abolishing or limiting national veto powers. Even if bigger states divest themselves similarly of formal veto power, their political and economic weight ensures that they can get their way in matters decisive to them.

There is no doubt that the UK and Germany would ultimately gang up on France and the periphery nations like and Spain. So, one wonders how it could be that France would want to weaken it's position within the Eurozone by seeking to admit the UK. Truth is, France has better reasons to leave the Eurozone than the UK does! France has many members who want out. For France, staying in gives little benefit, only order. France cares about order, not so much about prosperity.

Cameron wanted austerity, and ultimately power to direct the Eurozone as part of an economic mafia of sorts, in order to avoid disorder that would result from the overspending poorer nations in the zone. Germany and the UK would have comprised a formidable financial mafia against the periphery nations, formerly known as PIIGS. Even the FT is aware that France wants out, and that the Eurozone is showing signs of decay. What other signs could a failed concept show? There may even be a plot to use investors to finance government of the chosen among the Eurozone nations through getting these investors to pay interest for selected Eurobonds.

As for America, let's get real. We have our own currency. We are not in a zone. We are sovereign as to our currency. Like the UK can still do, we can issue helicopter money. We can revive off the negative interest rate floor in a way that the Eurozone may not ever be able to do. We can devalue our currency if we have to. It appears the Eurozone has settled for negative rates even for long bonds and seek to end cash in some instances.

And the Eurozone has settled for massive youth unemployment, from almost 50 percent of the youth workforce in Greece to a horrendous 19.4 percent average in all of the Eurozone. Yet Germany's youth unemployment stands at 6.9 percent! I hope the US and UK do not go down that road of a shared currency with certain destruction of opportunity for the youth, unless you are the lead nation.  As we see by the FRED chart, the hope of the Euro in reducing youth unemployment in France has evaporated and an extension of the chart would show that the rate has leveled off but not declined even into 2016.

Click to Enlarge

As for investing, lots of caution in the air is being floated by pundits. No one really knows how much the Eurozone can do to make the UK "look like it made a bad decision".  But the EU clearly had more to lose than the UK in this vote, over the long run. How that plays out in the markets for the next couple of years should prove interesting.

See also:

Westfalia Lost


Personal Thoughts on Brexit Politics


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