Prophecies of the Doom Fairy, pt. XIV

More than a year has passed since I discussed the Scottish Referendum as an absolute certainty.  Back then the idea of a Yes vote seemed unlikely to me but it was always going to be close, had to be close to accomplish what I felt were the underlying necessities that propelled it.  My point of reference for that analysis was my own experience as a Canadian with the Quebec referendum of 1995.  There remain all the similarities I originally discussed but there are also some distinctions which have made the possibility of a Yes vote in Scotland seem increasingly possible to me as I have been watching the drama unfold over the last couple weeks.

When Quebec went to vote Canada had perhaps its most charismatic Prime Minister since Pierre Trudeau (under whom he had served as a cabinet minister), a Frenchman by the name of Jean Chretien.  An astute Liberal who had salvaged and renegotiated Canada’s place in NAFTA averting an economic disaster orchestrated by the previous Conservative leader, Brian Mulroney.  He had also implemented a federal budget which significantly reduced national debt, so much so that the budget of 95 is often held up as a model for national deficit reduction.  These are important juxtapositions to the current state of affairs in the UK, currently lead by a deeply unpopular and charmless Tory almost universally reviled in Scotland who has led the UK into a very nearly unmanageable deficit which currently accounts for almost the entirety of the unions GDP.

These are important differences.  When Quebec said it would seek a currency union with the rest of Canada, Chretien could say it wouldn’t happen and actually be convincing.  With a manageable debt load, he held all the cards at the bargaining table.  Scotland on the other hand can leverage the runaway debt in the UK in its pursuit of a currency union.  In the event of a Yes vote, and a further weakening of the Pound, England would be hard pressed to avoid default especially with the loss of the tax revenue generated by the oil and natural gas operations in the Scottish North Sea’s.  If England wants an independent Scotland to assume responsibility for a portion of that debt it would have to give Scotland the currency union it seeks.  In fact, a currency union would necessitate Scotland’s assumption of a portion of that debt.  A third factor is that Scotland generates most of its revenue internally, whereas England relies mostly on foreign holdings.  I say this is a factor because it means that a weakened Pound would hurt England considerably more than it would Scotland.  It is hard to sell your shit when no one can afford it because of the exchange rate.  To illustrate, have any of you in the America’s ever purchased anything from the UK and realized it was going to cost twice what you expected?  England casually imports while Scotland struggles to export.

So when the British Prime Minister Fishlips Pastyface (that’s his real actual name) says a currency union is out of the question, he is frankly full of shit.  Scotland actually has an unusually strong bargaining position for a nation undertaking independence.

Finally, the 2 factors I consider most pivotal, the movements of the heavens and the not-so-secret architect of your fates Mark Carney.  If you will recall it wasn’t politics or media excitement that lead to my certainty that the referendum would come to pass, it was the establishment of Carney as the governor of the Bank of England.  Carney has recently intimated that he already has a notion of the political concessions he would require from Scotland in the event of a currency union.  I find that telling.  Also, the referendum is expected to elicit a 10% devaluation in the Pound Sterling while parity with the Euro would require roughly 20%.  At 10%, every billion to leave the EU would lose 100 million to the exchange rate.  It needs to be closer than that.  If it was to drop farther than 20%, even if only very briefly while the new rules of the union (Carney is right when he says that a currency union is not true political independence, this would be a new set of rules for the union and not the birth of an autonomous state) were being established an enormous profit could be turned in the exchange.

There will be a very loose grand cross hanging over Scotland when it comes time to vote and if there is an astrological marker for an event that would lead to economic turmoil it’s a fucking grand cross with two generational influences in it, especially one that has Uranus in Aries square the  Moon in Cancer.  That is some emotional decision making.  (Did I mention you can vote in this if your 16? You can vote in this if you're 16.)  Pluto in Capricorn will inspire a desire for both independence and a longing for old cultural identity, Scotland has never been a contented member of the UK and has attempted rebellion or referendum repeatedly since the Redcoats defeated them.

So yeah, I am less convinced that a No vote is inevitable.  If Carney has a plan for Scottish Independence then it is entirely within the realm of possibilities. 

Prophecies of the Doom Fairy, pt. XIII

So Mark Carney, the Great White Shark has moved to the Bank of England.  Here is what is going to happen next.  First he is going to freeze the interest rate at the Bank of England, ostensibly this is to encourage borrowing in general.  I point this out because it is not what the last Governor of the Bank of England would have done.  Usually in times of economic turmoil the central bank will raise interest rates to secure the necessary capital which falters due to high unemployment and capital flight. 

In continental Europe things will seem to rally a little over the summer, economically speaking but the simmering political tensions will continue boil up.  In concert with this a strange phenomenon will take place in the UK.  Although there will be no real significant changes in the level of overall unemployment, overall borrowing will increase and real estate values will rally.  All this will appear to happen under Carney’s loving guidance while Parliament is summering wherever it is British politicians go to polish their evil. 

Then the fucking unthinkable, it will turn out the Scots are semi-serious about their whole separatist movement.  Over the course of the coming winter this will become a hot debate both in Parliament and within the British media.  The rules of a separatist referendum will be itemized and indexed and catalogued and fluffed and spanked and called sexy names all right out in the public eye.  Murdoch will use the holiday break of Parliament at the end of December/beginning of January to talk a lot about the economic doom of a fractured UK and the faltering romance of the British aristocracy.  By the time 2014 is really up and running the British as a whole will have entirely forgotten about the Canadian running their central bank. 

The longer this dialogue takes place the worse it will affect the British Pound as a stable trade currency, causing its value against the Euro and the other Western currencies to fall towards parity.  The only event that could bring the Pound to meaningful parity with the Euro would be a referendum on Scottish soviergnty, it is an obscenely valuable currency.  Referendum talk and playing fast and loose with interest rates will definitely cause a drop in the trade value of the Pound but it will take some real national instability to move it, even temporarily, towards parity with the other western currencies. 

By this time next year I suspect the Scots will have committed themselves to a referendum, most likely before Parliament summers in 2014.  They will set the date for the vote sometime in 2015.  In the period between British Parliament setting a date for a referendum vote on Scottish separation and the actual vote itself the economic alliance behind the Euro on the Continent will begin to truly fail.  Some member state will abandon the Euro. 

During this period continental European wealth will flow invisibly into Britain (I say invisibly because Britain has some very opaque and nefarious banking channels, just like Canada), the depressed value of the Pound allowing the transfer to take place painlessly without substantial losses in currency exchange. 

Held up against the failed EU the Scottish push for independence will falter, overall political instability throughout the rest of Europe will inspire the UK to ’Keep Calm and Carry On’ as it has before.  Once the failed referendum is over the Pound will quickly rally.  Possibly less than a year to retake its original trade values if the chaos is bad enough on the Continent, which I think it is safe to assume it will be.  I am looking at 2016-2017 for the rally of the British Pound following a failed Scottish referendum.  

Parity between the Euro and the Pound is what you want to watch for because that is the most meaningful marker for the collapse of the Union.  The referendum will ultimately be a false flag, so if the talk is enough to drive the Pound to parity alone then I doubt the vote itself will ever materialize.  The over-arching necessity is the temporary parity between the two currencies. 

When the Pound rallies the European elite will turn vast profits off of the collapse of the Euro, 25% gains just off the appreciated value of the trade currency (based on current exchange rates, so in actuality probably much higher than 25%).  Conversely, the Euro (anyone still using it at this point anyway) and whatever break away currencies are left in Europe will be massively depreciated by the collapse, allowing those same wealthy elites to buy back European holdings for a fraction of their original value, basically the profit they turned collapsing the European economic structure can then be used to buy back the destroyed industrial and civil infrastructure.

Then Mark Carney will laugh maniacally because ALL UR BASE ARE BELONG TO ME.