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Submitted by Michael Every of Rabobank

Markets have finally woken up to the threats being presented by COVID-19, which comes on top of what was hardly a healthy global economy. Yesterday saw the S&P down a further 3% to 3,128 and the Dow down 3.1% to leave us close to the “27,000!” base-ball cap level. At the same time we hit new record lows in US Treasury yields. The 10-year touched 1.31%, although this morning we have seen yields backing up again to 1.37%, while the 30-year hit 1.79% and is now at 1.85%. FX markets were somewhat less phased, for once, with EUR/USD still over 1.0860, AUD/USD holding over 0.66, GBP/USD around 1.30, USD/CNY around 7.03, and even USD/JPY around 110.50.

Not waking up so much is the White House. “All is well!” is the tweeted message from the president, when he isn’t busy talking about the US justice system in what can be seen as worrying detail given that little thing called separation of powers. White House economic advisor Larry Kudlow went even further: “We have contained this. I won’t say airtight, but it’s pretty close to airtight,” he said, adding while the outbreak is a “human tragedy” it will likely not be an “economic tragedy” and “At the moment…there’s no supply disruptions out there yet.” Markets seem to disagree. So does the US Centre for Disease Control (CDC), which has stated that it is when and not if COVID-19 hits the States. Of course, if you aren’t testing people you aren’t going to be finding any cases – and there is not a whole lot of testing going on in the US right now.

Indeed, the WHO–who still won’t call it a pandemic, which would be a major ‘event’ trigger–are saying that the globe is “simply not ready”. And they are right: imagine the strain on health services even in developed countries if COVID019 were to sweep in, especially with up to 20% of the population aged over 65 and hence most vulnerable based on the observed mortality pattern so far. We simply don’t have enough hospitals or ICU units anywhere.

Yet at time of writing there were further signs that the virus continues to spread, even if within China the data is pointing in the right direction (this being the one the data-providers want to see: note that Caixin is today saying that in one sample 14% of recovered virus patients in Guangdong tested positive when checked up again, and hence may still be infectious). Elsewhere, we have many more cases and a few more deaths in Italy; a case in Germany near the Dutch border linked to Italy; a case in Austria, and in Croatia; 1,000 people quarantined in a hotel in Spain, again linked to Italy; 169 new cases in South Korea, even despite a draconian lockdown; a US solder in South Korea testing positive, risking infection within the US army; a Korean airline stewardess who may have spread the virus in many locations; suspicions of infections stemming from Bali, where there is also not a lot of testing going on; and cases right across the Middle East, including the Iranian deputy health minister, who could recently be seen sweating profusely–maskless–in a televised public health announcement telling the public “All is well!“; and what looks like a case in Brazil, the first recorded in Latin America.

Economically, the “anti-Kudlow” argument, or the “Kud-LOW” argument is even clearer: Guangdong is keeping schools closed until 2 March, and Hong Kong until 20 April (ouch!); Virgin has cancelled all flights from Australia to Hong Kong; Kuwait has cancelled all flights to Singapore and South Korea; China is freezing some flights to South Korea too; and other global-connectivity threads are being snipped away one by one. There is even muttering that the Olympics is under threat as Japan closes down major public events “for the next two weeks”.

This is all as the WHO and the EU keep insisting that nothing and nobody should interfere with free movement of goods and people across borders, presumably for fear of setting a precedent for anti-globalization forces…who will equally naturally be making political hay from the establishment’s inability to apply standards consistently, this time on quarantine: within national borders completely draconian measures are laudable – with reports on social media alleging that some Chinese firms are even micromanaging where and when workers go during the day, for example. Expect that inconsistency to change in just one direction. The clamour will be for international lockdowns as well as local in the same way that while it was fine to provide unlimited liquidity to banks and nothing at all to the public a few years ago, the current trend is now to provide unlimited liquidity to banks and public money to the public too.

On which note, battered Hong Kong has just announced it will be electronically handing over HKD10,000 (USD1,274) to each of its adult permanent residents in an attempt to try to juice the collapsing economy. Yes, the special administrative region sits on vast fiscal reserves that it usually does nothing useful with other than white elephants and tax rebates. No, this won’t help an economy much when nobody is going out or coming to visit. Yes, it’s ironic that the first location to go the helicopter money route doesn’t even have an endogenous sovereign currency given HKD is pegged to the USD. Imagine how fiscally creative a country that CAN run MMT policies could get in the face of the virus threat. Indeed, recall China has in many ways been doing this quasi-MMT thing for years if you consider the IMF’s estimate of a consolidated fiscal deficit of 12% of GDP even before this crisis started. This is why it cannot afford to run a trade deficit, exposing its currency to the downside of such an ‘MMT-like’ policy. Yet a flood of foreign firms leaving the country due to this virus is going to make that more, not less, likely ahead – as is the fear that Beijing will increase central control over the economy once the dust has finally settled. As mentioned earlier, USD/CNY is still not that Kud-LOW at around 7.03. Think how low global bond yields will go when this hits home and it’s trading nearer to 8.

The 2020 Trump campaign has sued the New York Times for libel over a March 2019 opinion piece by former executive editor Max Frankel which peddled “as fact a conspiracy with Russia.”

The lawsuit asserts that the article, “The Real Trump-Russia Quid Pro Quo,” describes how there didn’t need to be direct evidence of collusion between Trump and the Kremlin – as benefits to Russia from Trump’s election would be an obvious shift in foreign policy from a potential Hillary Clinton presidency.

“Today the President’s re-election campaign filed suit against the New York Times for falsely stating the campaign had an ‘overarching deal’ with ‘Vladimir Putin’s oligarchy’ to ‘help the campaign against Hillary Clinton’ in exchange for ‘a new pro-Russian foreign policy, starting with relief from … economic sanctions,'” said Jenna Ellis, Senior Legal Adviser to Donald J. Trump for President.

“The statements were and are 100 percent false and defamatory,” said Ellis, adding “The complaint alleges The Times was aware of the falsity at the time it published them, but did so for the intentional purpose of hurting the campaign, while misleading its own readers in the process.”

Read the complaint below:

 

Authored by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

“I got my toes in the water, ass in the sand

Not a worry in the world, a cold beer in my hand

Life is good today, life is good today” 

– Toes, Zac Brown Band

The economic and social instabilities in the U.S. are numerous and growing despite the fact that many of these factors have been in place and observable for years.   

• Overvaluation of equity markets

• Weak GDP Growth

• High Debt to GDP levels

• BBB Corporate Debt at Record Levels

• High Leverage and Margin Debt

• Weak Productivity

• Growing Fiscal Deficits

• Geopolitical uncertainty

• Acute Domestic Political Divisiveness

• Rising Populism

• Trade Wars

• Coronavirus

As we know, this list could be extended for pages, however, the one thing that will never show up on this list is…? 

Inflation.

Inflation

As reported by the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA), inflation has been running above 2% for the better part of the last few years. Despite CPI being greater than their 2% target, the Federal Reserve (Fed) has been wringing their hands about the lack of inflation. They insist that inflation, as currently measured, is too low. We must disclaim, this all assumes we should have confidence in these measurements.

At his January 29, 2020 press conference, Chairman Powell stated:

“…inflation that runs persistently below our objective can lead longer-term inflation expectations to drift down, pulling actual inflation even lower. In turn, interest rates would be lower, as well, closer to their effective lower bound.

As a result, we would have less room to reduce interest rates to support the economy in a future downturn to the detriment of American families and businesses. We have seen this dynamic play out in other economies around the world and we’re determined to avoid it here in the United States.”

Contradictions

There are a couple of inconsistencies in Powell’s comments from the most recent January 2020 post-FOMC press conference. These are issues we have become increasingly interested in exploring because of the seeming incoherence of Fed policy. Further, as investors, high valuations and PE multiple expansion appear predicated upon “favorable” monetary policy. If investors are to rely on the Fed, they would be well-advised to understand them and properly judge their coherence.

 As discussed in Jerome Powell & the Fed’s Great Betrayal, Powell states that the supply of money that the Fed provides to the system is to be based on the demand for money – not the economic growth rate. That is a major departure from orthodox monetary policy. If investors had been paying attention, the bond market should have melted down on that one sentence. It did not because the market pays attention to the current implications for the Fed’s actions, not the future shock of such a policy. It is a myopic curse that someday could prove costly to investors.

As for Powell’s quote above, the first inconsistency is that the circumstances they have seen “play out in other countries” have not shown itself in the U.S. To front-run something that has not occurred assumes you are correct to anticipate it occurring in the future. It is pure speculation and quite a leap even for those smart PhDs at the Fed.

“Overall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend.”

– Ben Bernanke, Testimony to Senate Banking Committee, July 2007

Although we have not actually seen this “dynamic” play out in the U.S. since the great depression, Fed officials are so concerned about deflation that they have begun telegraphing their intent to allow inflation to overshoot their 2% target. Based on current Fed guidance, periods of lesser inflation would be offset by periods of higher inflation.

Our question is, how do they come to that conclusion and based on what analytical rigor and evidence? There is, by the way, evidence from other countries throughout the history of humanity, that when money is printed to accommodate the spending incontinence of politicians, people lose confidence in the domestic currency. That would be devastatingly inflationary, and it is, without question of measurements, where we are headed.

The next inconsistency is that the Fed’s protracted engagement in quantitative easing (QE) over the past ten years has created precisely the circumstances about which Powell warns here – “less room to reduce interest rates… to the detriment of American families and businesses.”

The Chairman of the U.S. Fed, Jerome Powell, should understand how supply and demand works, but as a reminder, the less available something is, everything else constant, the more it is worth. Mr. Chairman, your predecessors removed $3.5 trillion of bonds from the market, what did you think would happen to bond prices and therefore yields?

Powell stumbled head-first into that self-contradiction, especially after watching the fantastic failure to normalize rates through rate hikes and quantitative tightening (QT) earlier in 2019, which caused him to perform a hasty 180-degree policy reversal in the fall of 2019.

We think this is a workable plan, and it will, as one of my colleagues, President Harker, described it, it will be like watching paint dry, that this will just be something that runs quietly in the background.

– Janet Yellen, Federal Reserve Chairman, June 14, 2017, FOMC Press Conference

Contrary to the reassurances of Janet Yellen and many other Fed members, it (QT) was a lot more exciting than watching paint dry. That too is troubling.

Wise Owl

In a recent interview on RealVision TV, James Grant, publisher of Grants Interest Rate Observer said:

“Is inflation a thing of the past?… are forces in place today that could reproduce [the great inflation of the 1970s? Inflation by definition, represents a loss of confidence in money. How do you lose confidence in money? Well, you create too much of it to subsidize the spending habits of the politicians. That’s one possible cause and are we on the way to something like that? Well, possibly. In this splendid economy, we’re generating a trillion-dollar budget deficit.”

Grant continues:

“Then two, there is the physical structure of the economy. We live in a world of expedited delivery of just in time rather than just in case. We live in a world of ubiquitous information about supply chains, but maybe if push comes to shove in the world of geopolitics, the supply chains might break. Lo and behold, we might be on our own in America for things we now import, and if we are, those prices would not be so low, they would be much higher.”

Again, pointing back to our recent article referenced above, Jerome Powell & the Fed’s Great Betrayal, there are other indicators of inflation that contradict what the Fed believes. In that article, we discussed real-world examples such as M2 growth, and auto and housing prices, to contrast with the BLS and Fed engineered metrics. Despite a plethora of readily available data to the contrary, we are continually reminded by the Fed of the absence of inflation.

As we know, the Fed just began another round of radical policy accommodation to incite higher inflation. If you pre-suppose a confluence of circumstances that begins to constrict global supply chains, then the inflation Grant theorizes might not be so far-fetched. The Fed, as has historically been the case, would be caught looking the wrong way, and given their proclivity toward wanting more inflation, it would almost certainly be too late to respond.

“Moreover, the agencies have made clear that no bank is too-big-too-fail, so that bank management, shareholders, and un-insured debt holders understand that they will not escape the consequences of excessive risk-taking. In short, although vigilance is necessary, I believe the systemic risk inherent in the banking system is well-managed and well-controlled.”

– Benjamin S. Bernanke Fed Chairman confirmation hearing November 15, 2005

“Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.”

– Senator Jim Bunning at Bernanke second confirmation hearing December 3, 2009

In the same way, there were recorded levels of laughter in FOMC meetings at the absurd incentives homebuilders were offering to sell houses in 2004, 2005, and 2006. The Fed is now equally blind, neglect, and arrogant concerning the perceived absence of inflation. The laughter in the Eccles Building boardroom stopped abruptly in mid-2007 as the housing market stalled. The Coronavirus may be a similar wake-up call with serious economic consequences.

Here and Now

The situation that is developing illustrates the one-dimensional nature of Fed thinking. Despite having the latest news on the spread of the Corona Virus at the January 29, 2020 Federal Open Market Committee (FOMC) meeting, the Fed’s concern was for a slowdown in global growth and failed attempts to prime inflation. There was no consideration for possible second and third-order effects of the virus.

What are the possible second and third-order effects? They are the things that follow after the obvious occurs. In this case, there is no question that China’s growth is going to be hurt by the virus and quarantines, the restrictions on flight and travel, and factory shutdowns. That is obvious.

Consider the virus is now spreading rapidly to other suppliers of U.S. goods and services such as Korea, Japan, and Italy. What might not be obvious is that the growing problem will impede global commerce and cause fractures in the extensive and complex network of global supply chains. Goods and services we are accustomed to finding on the shelves of the local Wal-Mart or via the internet may not be available to us, or if they are, they may come at a cost well above the price we paid before the pandemic. If that occurs, those changes in prices will eventually find their way to the BLS inflation data collectors, and then, as the old saying goes, all bets are off.

Summary

There are plenty of uncertainties in the world. Individuals have the decision-making ability to evaluate those uncertainties and the risks they pose. That said, it is difficult to remember a time when the potential turbulence we face has been so broadly ignored by the “market” and so overlooked by the Fed and politicians. It is as though we have been tranquilized by the ever-rising stock market and net worth as an artifact of that fallacious indicator of security.

By all appearances, stock index levels convey not a worry in the world. Indeed, life is good today. We are just not so sure about tomorrow.

Russia says the United States and other UN members are floating the idea of establishing a “truce” with anti-Assad jihadist groups now battling Syrian and Russian forces in Idlib. 

The problem is, as Moscow pointed out, these groups which are also bolstered by thousands of foreign fighters, include internationally designated terrorist organizations —especially the main group occupying the northwest province, Hayat Tahrir al-Sham (or HTS, formerly Nusra Front).

Addressing a press conference at the start of this week alongside Tajik Foreign Minister Sirojiddin Muhriddin, Russian FM Sergey Lavrov said he was “concerned about the attitude of some Western states” toward al-Qaeda groups operating in Syria. He noted these groups “are officially on terrorist organizations’ lists compiled by the U.N. Security Council, they are also on the U.S.’ national list of terrorist organizations.”

But then he lambasted top US envoy for the region James Jeffrey, who was recently in Turkey, for appearing to suggest that al-Qaeda faction HTS should not be recognized as a terrorist organization. 

Newsweek reported of special envoy to Syria Jeffrey’s remarks:

The remarks come after James Jeffrey, the U.S. special representative on Syria and special envoy to the U.S.-led coalition against the Islamic State militant group (ISIS), told a press briefing earlier this month he had not seen Hayat Tahrir al-Sham “planning or carrying out international terrorism attacks.” He made similar comments days earlier.

It follows a years-long pattern of both Washington officials and mainstream US media soft-peddling and even romanticizing terrorist groups in Syria, on the mere basis they are fighting to overthrow America’s enemy Assad. 

And it’s no secret that the CIA and Pentagon were actively funding, arming, and training violent Islamist factions for years, branding them as “moderates” — even helping jihadists take over Idlib in the first place in 2015.

.@SecPompeo on Syria’s #Idlib province: The Assad regime’s brutal new aggression, cynically backed by Moscow and Tehran, imperils more than 3 million displaced persons. The answer is a permanent ceasefire and @UN-led negotiations. pic.twitter.com/efJMokZvU3

— Department of State (@StateDept) February 25, 2020

The main group under the brunt of Syrian-Russian airpower, Hayat Tahrir al-Sham, has since March 2017 been a U.S.-designated terrorist organization. For this reason Lavrov  told a UN Human Rights Council meeting on Tuesday that some UN members are seeking to “justify the atrocities of radical and terrorist groups.”

Lavrov further said that US officials have “repeatedly made statements that mean that they consider Hayat Tahrir al-Sham to not be a terrorist organization as such and that it would be possible under certain circumstances to enter into a dialogue with it.”

The Russian top diplomat added, “this is not the first time we hear such transparent hints, and we consider them completely unacceptable.”

Russia perhaps senses that Washington could ensure pressure on Damascus by preserving Idlib as de facto al-Qaeda territory by backing a truce or ceasefire, similar to current US ceasefire talks with the Afghan Taliban. HTS itself has long been described as “the Syrian Taliban” — given its harsh brand of radical Islam imposed by the sword on the local population wherever it gains a foothold. 

Seemingly in response to Russia’s criticism, the US State Department published a video Tuesday afternoon of Secretary of State Mike Pompeo emphasizing the only way forward is a “permanent ceasefire” in Idlib, also as calls grow from the usual hawkish corners of the beltway for greater US intervention in the conflict.

After trading up over 500 points, the Dow is back in the red as BTFDers have failed once again.

All the majors are in the red!

It’s been a dip-buying-famine…

Traders are unsure of the immediate catalyst (just as many scratched their heads at the rebound), but some are pointing to headlines that 83 people in Nassau County being monitored for possible coronavirus exposure.

This all fits with comments from the infamous Dennis Gartman, who last year ended his daily newsletter after three decades, who appears to be right in his retirement.

Equities are “egregiously” over-valued relative to measures such as sales, profits and the size of the economy. The spread of the coronavirus is threatening global growth, and investors should buy safety assets such as gold and government bonds, he said.

“I’m afraid rallies are to be sold into, not weakness to be bought,” Gartman said in an interview on Bloomberg Radio with John Tucker.

 “I’m amused or dismayed at how many people are still willing to buy the dip, and this dip is far more serious than people want to anticipate at this point.”

Gartman’s view echoes that of Mohamed El-Erian, who wrote on Tuesday that the virus-induced sell-off “isn’t a buy-the-dip opportunity” because there’s little evidence right now supporting the notion of a V-shaped recovery.

Dr.Doom, Nouriel Roubini, is also a skeptic, calling hopes for a quick rebound in China’s economy “delusional.”

It would appear that bond yields agree…

Authored by Bill Blain via MorningPorridge.com,

“Failure is not falling down, but not getting back up again..”

Someone important in the Hong Kong Government reads the Morning Porridge! Last week I was talking about the use of “Helicopter Money” as a policy response; dropping wads of cash direct to consumers to juice the demand side of the economy – and this morning the HK authorities announced a HK$ 10k handout to each and every citizen! 

Back in London, I’ve heard staff were sent home from the London office of a top-rank US investment bank because their spouses had attended the Milan Fashion Week.  They’ve been told to go into self-imposed quarantine.  The Irish govt has called for the cancelation of the Ireland vs Italy game.  Two meetings on one of my deals next week have been switched to less effective conference calls because key staff may be unwilling to travel to Yoorp from the US.  It looks like my annual Lads Ski Trip to the top of the Aosta Valley in 10-days time is unlikely to go ahead.  

Dang.  Covid19 is becoming dashed inconvenient…

The market reality is becoming… fraught.  By the end of this week its entirely likely markets will be down 10% or more from last week’s top (currently 7.5% down and watching!)  That’s serious.  But, what’s scary is that this crash is utterly different to anything that’s gone before… This is outside our normal experience.

Yesterday’s market was like watching Homer Simpson tumbling down a steep slope.  He bounced off a ledge, rose higher for a moment, before gravity inevitably took over.  Doh!  Will the market stop tumbling today?  Probably not – the trend is further economic, virus triggered, reactive slowdown. But, this is not a conventional end-of-the-world-as-we-know it stock death plunge.  This is a slow-motion catastrophe as shocked realisation bites; where the reality of the virus induced snap recession and its consequences will continue to depart from the path of a conventional crash. 

The upside of this slo-mo crisis is it gives market participants more time to think and react – which equally means more opportunity to get it horribly wrong! 

This is going to prove a new experience for everyone.  Most crashes, and this is my 6th or 7th since my first in 1987, see the whole market tumble in lockstep.  This crash is going to be more about unknown coronavirus-driven fundamentals – which sectors and names are most vulnerable to broken supply chains, permanently lost orders, travel lockdown and industrial siege mentality, and which are most likely to benefit from critical sector government support.

It’s also the subject of an exogenous force – the unknowns about the virus.  This will be driven by how governments react to an external pandemic threat rather than the usual internal crisis vectors like stupidly unwise bank lending, or a stock bubble bursting (although it doesn’t help the valuation bubble looked very close to popping!)  The effect is the tempo of the crisis will rise and fall dependant on the non-economic factors – the spread (contagion) and effect (mortality) of the disease. 

Someone will suggest can probably write that as a formula:

P = f{(C*Ci/1/M*(CP)})*G 

Where Panic (P) is a function of Contagion (C ) * the increase in Contagion rate (Ci) / Mortality (M) * 1/Cured Patients (CP) multiplied by the Government (G) factor on whether policy is good/bad .. or something like that… 

Problem is… none of us in markets are experts on pandemics – hence we’re as likely to be wrong as anyone.  Industry talking-heads pretending they understand the virus are likely to be as wrong as anyone. 

Take it for granted that the experts advising governments on lockdown are experts, and while they might not know all about it, they know more than us…  

That’s a reason to be worried.  The crisis, the disease, has only just burst out of China, and as it explodes elsewhere the shock effect on market sentiment has already been massive – perhaps out of all proportion – or so say a number of market pundits. As the pace of cases rises and falls, deaths occur, treatments and cures are found, and we see more reaction from the authorities, then the likelihood for sustained market volatility increases. See my formula above. 

The slo-mo crisis gives time to make investment calls. I’ve said before I’m not so worried about solid names like Apple – if you can’t buy an iPhone today, you will be able to buy one in a few weeks, months, next year. I was tempted to buy Spotify and Netflix, till figuring that if people are bored in quarantine skimming through Spotify, then it actually has to pay more in Royalties if more people are streaming content! (Which might be a good reason to buy Music as Asset (guess what? I’m doing a Music deal at the moment!) 

Maybe sell Italy bonds and banks? A cancelled ski trip means resorts at the head of the Aosta – Courmayer and La Thuile (my favourite ski destination) – will effectively close, with multiplier effects down the Valley. I’ve seen the effects of a bad winter before: the following year there are shuttered restaurants, skimped piste maintenance, and older skis in the hire shop. Cancel the whole season a month early – and you are talking a whole regional economic ecosystem in trouble. 

It’s entirely possible restrictions in global travel will push the more vulnerable airlines into default – although it’s also predictable governments will step into support them. That’s a market call – which airlines have enough government clout and support to sustain them through a lean period? Norwegian will be one to watch. And how much pressure will bailing out a Middle East national carrier create when the underlying economy depends on the oil price – which has been pummelled by uncertainty on virus slowdown, and the strained Saudi/Russian relationship? 

Spread that analysis out over every sector of the whole economy. The Chinese are trying to do it by mandating no layoffs, and telling the banks to lend and assuring them they will be bailed. (That’s a whole can of unintended consequential worms in terms of possible banking behaviour…) Western economies might have to make similar calls. 

The closest parallel I can think of is the organisation and management of a wartime economy. There are some fascinating histories comparing the success of the UK coalition government directing the economy through 1940-1945, compared to the undirected dither, competitive powerplays and wastage within the German Reich – most folk will be entirely unaware how badly the German economy failed to adapt, and why it’s a major and often understated reason they lost the last global conflict. 

Meanwhile… 

While all eyes are focused on where markets are going in response to the Cataclysm of Coronavirus news.. there is plenty else bubbling down below on the front lines of finance:

Another emerging market debacle is unfolding in Lebanon, US company downgrades as unwise leverage and M&A raising the ire of rating agencies are rising, the Democrats self-immolating in the US, and the doubts about politicians eyeing each other to see who might try to garner a boost from the current virus fixated market. (A bit of competitive devaluation anyone?)Or how about story in FT this morning about the rise of hydrogen – which has enormous implications for the hype over electric cars! 

In short, there is plenty to think about out there aside from the darn virus! When you need something to not understand, let’s move on to Europe. 

The big issue is the UK trade agreement.  Yesterday the Yooropeens agreed that Britain must be punished for Brexit. If we want to trade with Europe, it can only be if we accept every rule of the EU. Does anyone outside Brussels understands that’s going to trigger crisis? The UK will not accept it.

Strip it down to the basics, and it feels like we’ve got a continuation of the 1000 year war. It’s not about protecting the Yoorpeen Union from a more nimble and more perfidious Albion undercutting its trade and good standards. It’s about France getting payback time.  The smart economic outcome for Europe would be a good trade deal with the UK, where the damage to the Union is minimised and trade carries on as before. Instead, the French won the argument, together with their salivating Irish poodle. They want to humiliate us, choosing their moment as a distracted and senile Germany snores in the background, to make its play.   

That’s a bad decision. As M. Barnier struts the stage of history demanding Britons submit as slaves to the Franco-Yooropean hegemony… our politicians will not dither or shilly-shally, but make a very clear guesture to Europe in terms of access to British fish, thus stoking a future of on-going trade protectionism.  The default position from angry right-wing Brits will be simple: Europe is very welcome to our fish – they can buy all the fish they want at whatever the market price is from British trawlers. We might be willing to do a few side deals in return for some consideration. If you want the best fish in Europe – it’s going to cost. It will cost more in France.

That won’t be good for anyone. 

Listening to calm reasonable European parliamentarians a few weeks ago it sounded like a negotiation likely to result in a sensible Canada style deal was underway.  

Now, the UK has to circumvent the French dominance of the hollow EU. Boris and his gang need to deliver messages direct to European leaders telling them the UK is not even going entertain France’s demands. Let’s start again and let it be widely known we are willing to sign up to the agreed Canada style deal with Europe, and negotiate from there. If they refuse, as they have been mandated to do, lets break the rules. 

Let it also be know we’re more than willing to strike side deals with each European state –  except for France and Ireland – on everything and anything. The Spanish want our Fish? No problem. The Germans want to sell us their cars? No problem. The Danes want to sell us Bacon? No problem. Let’s chat. 

Now I know that isn’t possible when dealing with the Yoorp trade monolith – where one size fits all, but France better. Its time to let European voters know what a trade block with the UK will cost. Let the national press, farmers, fishermen, the Eurosceptics and the right wing know, and reinforce the message that France’s singular desire to hurt perfidious Albion can only be achieved by crushing German, Dutch, Danish, Swedish and the rest of Yoorp’s exports. 

The French have tried to mount economic blockades of Britain before. Didn’t take rest of Europe long to work out dealing with a merchantile trading economy like the UK beats dealing with the dead hand of French state policy every time.