The Trans-Atlantic Financial System Is Set To Blow, and Britain’s ‘Hard Brexit’ May Light the Fuse
July 30, 2019(EIRNS)—Britain’s new Prime Minister Boris Johnson and the European Commission are playing a high-stakes chicken game, as the Oct. 31 Brexit deadline approaches. At issue is control over the unpayable $1.5 quadrillion global derivatives bubble, which is currently dominated by the City of London, and the showdown could well end up with the world financial system going down in flames in the last months of 2019 or the first quarter of 2020—given its underlying bankruptcy.
Already the pound sterling is being hammered this week, Reuters noted, “as investors bet Prime Minister Boris Johnson’s Brexit brinksmanship with the European Union could trigger a messy divorce that would sow chaos through the world economy and financial markets.”
Johnson, or BoJo as he is known, came out with guns blazing, giving the EU an ultimatum that he won’t even meet with them unless they are willing to renegotiate the separation deal they had worked out with his predecessor Theresa May. “Chairing his first cabinet meeting, he demanded and received in front of the assembled cameras, in Trump style, a loyalty oath to Brexit by 31 October, do or die, from the members of his ruthlessly selected government. He then gave a bravado performance at the dispatch box in the House of Commons,” wrote Dr. Robin Niblett of RIIA/Chatham House on July 26.
However, the EU is not about to fold, as Niblett explained, “the EU 27 are refusing to yield and are all the less likely to do so for a person many of them regard as an opportunist populist, precisely the type of leader they do not want to encourage across continental Europe.” Instead, the European Commission just issued their own shot across the bow, by announcing, according to the Financial Times,
“that Brussels will this week strip five countries of some market access rights, in a move set to heighten British fears that the system the City of London will rely on to serve EU customers after Brexit, fails to offer a stable and permanent regime because it can be withdrawn. According to a document seen by the Financial Times, the European Commission will deem that Canada, Brazil, Singapore, Argentina and Australia no longer regulate credit rating agencies as rigorously as the EU does, removing a status that made it possible for European banks to rely on those ratings.... Brussels has insisted the U.K. will have to rely on equivalence for market access after Brexit, when the financial sector will lose the right to seamlessly offer services across the single market.”
The Express explained clearly just how much is at stake:
“The Brussels-based executive can withdraw access to its financial markets with as little as 30 days’ notice. Britain’s financial services hub fear that they could suffer the same fate after Brexit without a permanent regime being negotiated.... Brussels has already said it will grant temporary equivalence for the London Stock Exchange’s clearing house LCH until March next year if there is a no-deal Brexit in October. That has helped the capital retain the bulk of its euro clearing services, which is the market EU politicians said they most wanted to move back to the Continent after Brexit. The EU is the City of London’s biggest customer, with financial services exports worth £26 billion in 2017.”
That is, of course, just the tip of the iceberg; the real issue is that the control of the world derivatives bubble of some $1.5 quadrillion is currently located in the City of London, and Brexit threatens to sink that arrangement.
