This MACRO piece tries to analyze why this Thursday’s UK election will result in political indecision.

Why do we believe the election will not be conclusive? The reason lies in recent economic policies which have driven the financial markets to all time highs.

Recent economic policies throughout the western world have taken the form of money printing. Money printing designed to drive the economy, growth, job creation and financial assets. The idea is that as assets rise people will feel happier to spend, borrow and spend even more. It was first championed by Reagan and Thatcher in the 80’s and was even given its own name, “Trickle-down.” Trickle-down is now being pushed by political parties on both the left and the right throughout Europe.

For trickle-down to work money does have to actually trickle down to the man on the street and into his back pocket. This unfortunately has not happened. What has happened is that the excess liquidity created by QE has fueled excess greed and this greed has fueled a boom in asset prices. Who owns these assets? The rich do. The poor do not. Therefore the rich have gotten richer whilst the mass have watched. Until this Thursday when they vote.

The Scottish National Party (SNP).

The SNP is hugely important this coming Thursday. Recent polls suggest that it may win as many as 50 of Scotland’s 59 seats in parliament. If it does it will have to be included formally or otherwise in any government formed by either the Conservatives or Labour.

Whilst the SNP is unique to Scotland its rise has been mirrored across Europe on both the left and right of the political spectrum as disillusionment with the mainstream parties gathers force. Witness the rise of Syriza in Greece, Podeomos in Spain, UKIP in the UK and Front National in France. There are others.

The one message these parties have in common is that they represent the common man. They represent the fight to combat inequality. Their leaders are ‘new’, they do not come from the establishment, they are radical and appeal to nationalism.

What have the mainstream parties, those who currently hold power done to combat these new upstarts? They have relied on the financial markets, asset values and tax cuts. This has made the rich richer and the mass angry.

What about Roosevelt?

What has President Roosevelt got to do with all this? Well for one he was a clever man. He was the only American president to win four terms in office when presidents were allowed more than two. Four terms is a long time and meant he presided over great famine, war and feast. We are not interested in the war, just the feast and famine.

Because Roosevelt was clever he knew that you do not ask the creators of famine to create a solution for a feast. He knew not to ask the bankers for help.

Roosevelt realised that when interest rates are zero (as they are now) and that little private investment is taking place (as now) any government involvement directly into the economy in the form of large infrastructure projects would have a huge, immediate impact. He therefore set up a programme for relief, recovery and reform which he termed The New Deal. The New Deal brought together the government, industry, both urban and rural America and together they went on a massive public work expenditure programme including health care, education, house building and other large scale infrastructure projects. It worked so well that it was copied throughout the western world resulting in much feasting.

Our first conclusion from all this is to ask the question: Why have our current politicians not done likewise? The answer is that they are simply not clever enough and their interests are vested with the establishment from which they hail. They are the rich and they have gotten richer.

Nicola Sturgeon

This brings us nicely back to the SNP and its current leader Nicola Sturgeon in Scotland. The copying of Roosevelt’s New Deal in the UK meant that Scotland witnessed a massive council housing boom to the extent that by the 1970’s approximately 60% of Scotland lived in one of these dwellings. Scotland has the highest public to private housing stock in all of Western Europe.

Nicola Sturgeon grew up in one of these properties. Nicola Sturgeon talks for and on behalf of the common man and they trust her. Why, because she is one of them.

How interesting that Roosevelt’s New Deal designed to combat the ravaging famine of the 1932 Great Depression is today helping shape the political landscape here in the UK and potentially across Europe whilst our erstwhile leaders flounder, over promise and under deliver.

Thursday will be interesting. Markets do not like uncertainty but that is the most likely outcome.

The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Users acknowledge and agree to the fact that, by its very nature, any investment in CFDs and similar and assimilated products is characterized by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.
Any recommendation, opinion or advice contained in such material reflects the views of TFF, andTFF expressly disclaims any responsibility for any decisions or for the suitability of any security or transaction based on it. Specifically, any decisions you may make to buy, sell or hold a security based on such research will be entirely your own and not in any way deemed to be endorsed or influenced by or attributed to TFF.
Past performance should not be seen as an indication of future performance. Market and exchange rate movements may cause the value of your investment to rise or fall and an investor may not get back the amount invested.
Investors considering opening a self-trading account or investing in the TFF Capital Pool, should limit their exposure to maximum 10% of their investment capital.
Eligibility for participation in the capital pool is subject to final determination and acceptance byTFF.
Investments are not obligations of, deposits in, insured or guaranteed by TFF.
About the Author
TFF aims to provide our customers with the best skills and knowledge to achieve their personal financial goals and level the playing field. The senior officials and staff of the TFF Team have more than 80 years experience in financial product trading, sales and fund management. For more information on TFF CLICK HERE.

Related Posts

Leave a Reply