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    Black Wednesday, or why I am not a utilitarian

    Black Wednesday, or why I am not a utilitarian

    Today in London: 

    Conservative rebels pushing for an in-or-out referendum on Europe are riding the tide of public opinion, according to a Guardian/ICM poll. Some 70% of voters want a vote on Britain’s EU membership, and by a substantial nine-point margin respondents say they would use it to vote for UK withdrawal.

    Forty-nine per cent of voters would vote to get Britain out of Europe, as against just 40% who prefer to stay in.

    Obviously! Why would the Brits want in on that sinking ship?

    In 1990, Britain entered the European Exchange Rate Mechanism (ERM) but left two years later after the GBP came under major pressure from speculators (notably George Soros, who earned nearly $2 bn). Britain’s poor financial system was exacerbated by  their ERM exit, which earned its day the name “Black Wednesday” in the press. Britain lost billions of GBP and fell into a depression that helped propel the Labour party under Blair.

    In 1999, ERM was replaced with ERM II and national membership became part of the convergence criteria to join the Euro currency which debuted shortly after. Today, leaders from Germany and France will attempt to clean up the mess that their solidarity has wrought. (Though, as Ray Dalio noted, no matter what is solved in Europe there will be a de-leveraging.)  While the British aren’t doing too great themselves, they at least have the benefit of being further away from the mess than the other European superpowers.

    Judging by the predictions for the EU, Black Wednesday may be remembered fondly in British history as an extremely close call. Soros move paved the way for the recovery by allowing the pound to depreciate. Financial disasters are almost uniformly unfortunate, but time has a distinct way of changing how history is written and, thus, how we value our actions. Black Wednesday is my favorite example of how imprecise utility calculations can manifest.

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    Subotai Bahadur | October 24, 2011 at 4:29 pm

    It is my understanding that this whole thing is a result of a bit of PR fluff that the Coalition tried, allowing Brits to petition to have something discussed in Parliament. Much to their surprise, the people took it seriously and one of the first things up was the referendum on staying in the EU, which all 3 major parties have promised at different times, and all have reneged on once in office.

    As many as 80 Conservative MP’s may vote for the referendum despite a “Three Line Whip” order not to from the Prime Minister’s office. TLW is the equivalent of saying, if you vote against us, y’all had better resign because we are kicking you out of the party. Labour and the Liberal Democrats have promised enough votes to make sure that the British people are not at risk of having a chance to influence their future.

    So, Kathleen; you were over there recently. What is your take on the results of this defiance? Could it bring down the government eventually? What is your sense about the chances of a significant part of the Brit electorate turning to the BNP or UKIP, and the reaction of the three major parties if either BNP or the UKIP establish a presence in the Parliamentary good old boys club?

    Subotai Bahadur


     
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    GrumpyOne | October 24, 2011 at 10:25 pm

    I’ve been observing the whole European Union scheme for quite some time and I’ll repeat what I’ve said to many others… It is only a matter of time before the whole EU implodes.

    Europeans have never gotten along on a long time basis and there is certainly nothing to cause me to change my thinking this time around.

    I only hope that their implosion occurs before ours…

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