Learning by Proxy | Brexit

Britain is just working hard to make things a little harder for itself in 2020, applause! In the meantime, all rich people are changing their citizenship; China's interesting bail-out program

The fibres of what constitutes our societies are coming apart. I think a huge part of it is because of social media and polarisation. I also think an even greater part is because we do not know our history. There are 195 countries in the world today. This is a result of a long march of consolidation that has taken place over the last 1000 years. 

Think about history. Do you think there were 7800 nations back in 1000 BC? 

No. 

But then it splintered to become many before it went back to a few. The divisions that are being sown today are setting us on a path to be many again. I will dive into some of that in the edition next week. For now, let us look at a tiny group of islands north of mainland Europe.

United Kingdom Marching Band

Brexit

In 1527, Henry VIII wanted to annul his marriage. At the time he was needed to request the Pope in Rome for the annulment. The political differences between Rome and England resulted in a parliamentary declaration in 1532 naming Henry the Supreme Head on earth of the Church of England. This started the process of English Reformation and the move of the state away from Roman Catholicism. 

The Irish, devout Catholics pushed back; and were put down with a heavy hand. So typically English! This also caused the first of the mass migration of Catholics from England which led to the population of land across the Atlantic Ocean which we know today as the United States of America. 

Ironic, the first migrants came to America seeking religious freedom!

The United Kingdom OR the United Kingdom of Great Britain is a group of countries which are part of the British Isles which include England, Scotland, Whales and Northern Ireland. These four countries have their laws created at the Parliament in London and are ruled by the Monarchy. 

Ireland finally freed itself from the clutches of England in 1921 through the Anglo-Irish Treaty. But before that treaty was signed, in typical English fashion, the parliament, through the government of Ireland Act of 1920 created Northern Ireland which already self-governing was a part of the United Kingdom. Just like everywhere else in the world where a British man drew a map (India, Isreal, etc.) much strife was created for 30 years due to this separation. The Good Friday Agreement gave Northern Ireland self-governance. Ireland and the UK being a part of the EU eliminated borders between Northern Ireland and The Republic of Ireland.

The Republic of Ireland continues to be a part of the European Union, while the UK and by extension Northern Ireland will no longer be part of the EU. 

Hence...

Enter Brexit

Through a referendum conducted in 2016, the year that will forever remain synonymous with voter manipulation through social media - Britain voted to exit the EU. Three Prime Ministers and 3 years later the UK agreed upon a trade deal with the EU which can potentially create hard borders between Ireland and Northern Ireland.

In that context

The overall aim of the Northern Ireland protocol was to avoid the return of a "hard" land border between Northern Ireland, in the UK, and the Republic of Ireland, in the EU.

All sides agreed they did not want the return of border checks - or other physical infrastructure - which could become a target.

One of the solutions in the treaty was to keep Northern Ireland in the EU single market for goods, unlike the rest of the United Kingdom.

[…]

The way these measures are implemented on the ground is still being negotiated by UK and EU officials - who meet in a joint committee.

But if they cannot reach an agreement by the end of the transition period, on 31 December 2020, and there is no free-trade deal, that is when parts of this new proposed legislation could come into play.

For example, the protocol states companies moving goods from Northern Ireland to Great Britain (England, Scotland and Wales) would have to fill out export declaration forms.

But the Internal Market Bill would give ministers the right to overrule or ignore this part of EU customs law.

Source: BBC

The EU officials are none too pleased about this and are threatening to trash the agreement that is in place and move the UK towards a hard Brexit. One of the articles in the Brexit agreement states that the clauses of the EU agreement will take precedence over any UK domestic law. The UK attempting to pass this legislation is being seen as an attempt to break international law.

The EU says Johnson’s bill would collapse trade talks and propel the United Kingdom towards a messy Brexit while former British leaders have warned that breaking the law is a step too far that undermines the country’s image.

Johnson, though, said it was essential to counter “absurd” threats from Brussels including that London put up trade barriers between Britain and Northern Ireland and impose a food blockade - steps he said threatened the United Kingdom’s unity.

Source: Reuters

It does not help that there is a power vacuum in Northern Ireland and nobody is there to represent its people and their will.

But in January this delicate arrangement was upended when Sinn Fein, which hopes for a united Ireland one day, withdrew from a coalition with the Democratic Unionist Party, which wants Northern Ireland to remain part of the United Kingdom.

The government stopped working and the assembly stopped meeting. A major overhaul of the region’s ailing health system was postponed, and all long-term decisions about government spending were put on hold.

[…]

As the standoff drags on, and polarization increases, people find it harder to envisage Northern Ireland as an autonomous entity. “We’re back to this binary situation where people either see it as a problematic part of the U.K. or as a part of united Ireland,” said Graham Walker, a politics professor at Queen’s University, Belfast.

Source: New York Times

The politicians in London are playing with fire without the slightest regard for what the consequence could be.

Rachel Powell grew up in South Armagh, where during the Troubles a hard border between Northern Ireland and the Republic of Ireland was patrolled by British troops, often attacked by Irish republican militants. She said she’s deeply concerned about what will happen next.

“The British government has not got a clue about what it is like to live on the border, and it is again using it as a political football,” said Powell, a lobbyist with the Women’s Resource and Development Agency in Belfast.

Source: Washington Post

Given the work-from-home world that we today live in; is immigration such a big deal even?

Around a quarter-million people from the EU have left the UK economy since the start of the year, according to Britain’s Office for National Statistics, as the number of EU nationals who were employed, unemployed, or economically inactive declined substantially. “The UK labour market has seen a pretty dramatic change over the last couple of months,” Sanjay Raja, an economist at Deutsche Bank, said in an email. The drop in labour participation from EU nationals suggests many workers went home during the pandemic, perhaps because of travel restrictions, Raja said.

Source: Quartz

Given how kind 2020 has been, I do not expect a resolution. A hard Brexit would be catastrophic to the economy on both sides of the channel. Countries are suffering some of the worst economic downturns in recent memory and the cases are expected to spike again in winter. The last thing that they need, is to enter 2021 with supply chains disrupted. The UK has been the financial capital of Europe for decades and this will cause financial disruption as well. 

JPMorgan Chase & Co. is moving about 200 billion euros ($230 billion) from the U.K. to Frankfurt as a result of Britain’s exit from the European Union, a shift that will make it one of the largest banks in Germany.

Source: Bloomberg

Scotland had voted to remain a part of the EU. Northern Ireland also does not want this exit. England has decided to jump headlong into this. There are murmurs in Scotland to seek independence from the UK. 

Best of luck Kingdom - United or not remains to be seen.

When your country is a dumpster fire

The premise of Brexit has been immigration. Citizenship is a commodity bought and sold. In most countries, you can throw in a bunch of cash as an investment and buy their citizenship - including Britain. The business is a called Citizenship and Residence by Investment (CRBI) and there is a thriving industry. With the current pandemic situation countries that have great healthcare and low infection rates are finding themselves in great demand. 

London-based CRBI advisory firm Henley & Partners saw a 49% increase in enquiries in the first two quarters of 2020 compared to the same period last year. A competing advisory firm, Arton Capital, saw a dip in interest in the first quarter of the year as the pandemic spread in Asia. But enquiries rebounded and have increased 25% since April according to founder Armand Arton.

Source: Quartz

It would come as no surprise that a large number of British and Americans High Net-worth Individuals (HNIs) are opting to move themselves to other countries. 

Bailing them out

When a company is in trouble, it often seeks buyers whose capital can bail the company out. At times it is hard to find the right capital. In times like the ones we are faced with today, there is little capital available for troubled companies. In China, the government has found novel ways to source capital. A government-owned highway development company was in crisis.

Fiery grain liquor and highway maintenance are strange bedfellows. But the unusual matchup is precisely what the Chinese government has orchestrated by tapping booze maker Kweichow Moutai to rescue a state-owned highway operator through a massive bond issuance.

The state-owned parent of China’s most valuable listed company, which is based in the impoverished southwestern province of Guizhou, plans to issue up to 15 billion yuan ($2.2 billion) in bonds to help Guizhou Expressway pay off its debts, with proceeds from the bond sale going towards buying a stake in the highway operator. The company’s shares plunged by almost 7% this week after the company filed documents to the bourse for approval.

Source: Quartz

What are moves like these going to mean for privately owned enterprises in China? Kweichow Moutai is no small fry, it is the largest liquor manufacturer in the world, surpassing AB InBev.

One man's loss…

To protect the data privacy of Indians and to a certain extent retaliate against the Chinese, India banned a whole host of apps. One of them, a game, PUBG was published by one of the largest Chinese Internet companies - Tencent. It emerged once the ban went into effect that the game was being run by Tencent under license from the South Korean owner!

Guess who plans to distribute it in India?

According to a Business Line report, citing multiple sources, after severing ties with Tencent, PUBG is eyeing the Indian market with a long-term view. “The talks are in an early stage, which began just after the government’s second round of bans. Officials from both sides are working out the contours of how to structure various aspects of the deal.”

“Legal experts from both sides are exploring possibilities on how revenues should be split, whether it would be 50:50 or Jio guaranteeing PUBG revenues based on a fixed number of users every month,” sources told Business Line.

Source: Inc42

It is amazing how this conveniently played into the hands of Jio.

Also

How the smoke from the US fires spread. Read the whole thread

Since I had written about the catastrophe that electric power is unleashing on the world, last edition; it made me happy to see this. Airbus is developing a hydrogen-powered aeroplane. [link in French] Don’t get excited, they plan to launch it in 2035 after the end of the human civilisation as we know it!

Another concept from Embraer.

After deploying such technology on Mars, finally tyres that cannot be punctured! Coming near you.

I had mentioned Belarus in the edition titled Anger. When the people are against the regime…

And the questioning of the PM Cares fund in the parliament

Songbirds had to change their tune thanks to the noise that we have been making. With the lockdown in place and decreased human activity. Their call is transforming again.


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