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Saturday 9th December 2017
Hi Friend,
Schrödinger's Cat Offers Nine Lives to May ...
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| There is no escape from Boolean logic. True and False are represented in algebraic form by the values 1 and 0 respectively. The simple methodology offers great comfort for business, not necessarily so for politics and certainly not for EU negotiations.
Enter the world of Schrödinger's cat. Scrödinger's cat is a thought experiment developed in 1935 by the eponymous physicist Erwin Schrödinger. It is a world in which duality pertains to truth and falsehood simultaneously.
In the experiment, a cat, a flask of poison, and a radioactive source are placed in a sealed box. If an internal monitor
detects radioactivity, as with a single atom decaying, the flask is
shattered, releasing the poison, which kills the cat. The Copenhagen
interpretation of quantum mechanics implies that after a while, the cat
is simultaneously alive and dead. Without looking inside the box, the cat is alive and dead. Look inside the box and the cat is alive or dead. This poses the question for physicists, of when exactly quantum superposition ends and reality collapses into one possibility or the other. Confused ...?
The trick is, of course, to make sure no one looks inside the box. Impact assessments can exist and not exist according to David Davis. The agreement to move on to talks about trade is not an agreement but a statement of intent. A firm date has been set for "Exit Day", the day we will leave the EU on March 29th 2019 at 11:00pm. However, MPs will be given the “power to amend the definition of ‘exit day’” at a later date. The exit day exists and it does not exist. Get the idea?
Exit day will then be followed by a transition period in which nothing will change for a further period of at least two years. Brexit will therefore exist and not exist. We will be suspended in Scrödinger's cat box. Truly global Britain neither dead or alive. A vassal of the EU subject to ECJ mandate without any say or representation on changes in regulation.
The EU has now made things difficult by asking the rather tortuous question of what exactly we want as an outcome. Government has three months to come up with a proposal. Don't be confused by the pan world options. Finland Flash, Canada Dry or Swiss Horn will offer no solution to the schism on the Tory back benches. Our deal will be bespoke, tailored for the UK with off cuts for Northern Ireland and Scotland perhaps.
We want to leave the free market for goods without losing full access. We want to be outside of the customs union yet conforming to established tariff structures and rules of origin. The UK will be leaving the EU and the customs union. However, the UK will ensure full alignment with the rules of the customs union and the single market. We will of course continue to pay into the pot, subject to ECJ legislation, guaranteeing the rights of EU citizens in the process, allowing more into the country to meet the job needs of the UK economy in due course. We will conform to the wishes of the British people, if only we and they knew what they were.
To be or not to be is the Shakespearean solution in Boolean form. To be AND not to be is the ask in negotiation for EU engagement. In the many strands of negotiation, Schrödinger's cat logic offers nine lives to the Prime Minister. May the talks begin and they will ... don't ask to look inside the box just yet ...
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Economics news this week ...
The Fed hiked rates again this week. It is the Janet Yellen swan song. The Chairman of the Governors will retire in February having completed a four year term. Three further Fed rate hikes are outlined in 2018 but probably not before March. The US economy is set to grow by 2.5% in 2018 with inflation averaging just over 2% this year and next. The $1.5 trillion tax cuts will add to inflationary pressure without much impact on growth or the Republican vote.
In the UK, the Bank of England voted to keep rates on hold. Two further 25 basis points rate hikes are outlined for 2018. Rates are expected to rise to 1% by the end of the year. Growth is expected to be around 1.5% with inflation slowing to 2.5% by the final quarter.
According to the ONS, headline CPI inflation increased to 3.1% in November, from 3% prior month. Governor Carney has written to the Chancellor to explain the drift from the 2% target. Airline fares fell but computer game prices increased! Goods inflation held steady at 3.3%. Service sector inflation increased to 2.8% from 2.7%. Food prices increased by 4.4%, transport services are up by over 7%. Producer prices edged up to 3% as input costs increased to over 7%.
So what can we make of it all? Inflation will not return to target any time soon. UK rates are set to rise. We are leaving Planet ZIRP as the Fed and the Bank of England will seek to normalize rates. Markets are soaring but this may well be the time to average out over the next three years.
The Vera Lynn School of Economics will begin to sing again "Recession again, don't know where, don't know when". Well it won't be here or in the US for a few years yet.
Interesting set of job stats for the UK this week. Unemployment fell slightly, vacancies increased to a further record level and wages increased to 2.5% on the latest three month average. Retail sales increased by almost 5% in value terms in the month of November. This is not an economy which is slowing ahead of Brexit uncertainty. Growth is expected to be just 1.6% this year but don't be too surprised if upward revisions follow for growth in the current year and forecasts for the year ahead.
Consumer spending is resilient. Investment will follow as businesses take comfort from the direction of travel in the EU deal. It is far too early for the Vera Lynn refrain ...
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| West Wing WTF ...
In the White House the wagons are circling. The Mueller investigation is closing in. Time to continue the attack on "Fake News" and the assault on the FBI. "The reputation of the FBI is in tatters" claimed the President this week in a sort of "Come and get me, you know where I live" attitude. Challenging the FBI cannot really be a smart move ... there is historical precedent after all.
Huge upset in Alabama. Trump had won the state by 28 points in his election. It should have been a Republican shoe in. Bannon and Trump had supported Mr Moore the Republican candidate. The GOP machine had been more wary. Several women had accused Moore of offences ranging
from sexual misconduct to assault. Most were teenagers at the time of
the alleged incidents. Richard Shelby, Alabama’s senior senator was unrelenting. Two days
before the election he went on a prominent talk show just to say, “I
wouldn’t vote for Roy Moore…The state of Alabama deserves better."
Black voters turned out in droves. According to the Economist, they usually
comprise around one-quarter of Alabama’s electorate, on Tuesday they
made up 28%. Jones the Democratic candidate won 96% of their votes and 49.9% of the vote overall to Mr Moore’s 48.4%. It was a narrow victory. Trump shrugged his shoulders. "I said Roy Moore will not be able to win the election and I was right" he tweeted. It was all the fault of Moore and the Republican party. "If last night's election proved anything, it proved that we need to put up GREAT candidates to increased margins in the House and the Senate." Yep I told you so and it was nothing to do with me! The President moved on to an assault on red tape and Senator Gillibrand.
"Lightweight Senator Kirsten Gillibrand, a total flunky for Chuck Schumer and someone who would come to my office 'begging' for campaign contributions not so long ago (and would do anything for them), is now in the ring fighting against me" he tweeted, there was more.
Time to put the record straight " Another false story, this time in the Failing @nytimes, that I watch 4-8 hours of television a day - Wrong! Also, I seldom, if ever, watch CNN or MSNBC, both of which I consider Fake News. I never watch Don Lemon, who I once called the “dumbest man on television!” Bad Reporting."
Claims of Russian collusion or sexual harassment? "Despite thousands of hours wasted and many millions of dollars spent, the Democrats have been unable to show any collusion with Russia - so now they are moving on to the false accusations and fabricated stories of women who I don't know and/or have never met. FAKE NEWS!" ... yep fake news, fake recordings and fake videos. Trump has never been guilty of any form of inappropriate behaviour! TRUE but did you know ...
"Wow, more than 90% of Fake News Media coverage of me is negative, with numerous forced retractions of untrue stories. Hence my use of Social Media, the only way to get the truth out. Much of Mainstream Media has become a joke!" Unlike my presidency, he could have added ...
That's all from the West Wing WTF this week. Much more to follow, let's face it, there is so much material to work on ... Have a great week-end, .
J
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