4 Mar 2016
Acrobatics of consensus: Brexit as an antiglocal event – Deutsche Bank
Aleksandar Kocic, Research Analyst at Deutsche Bank, suggests that the ability to make political decisions is local, while forces that shape our economic lives are global.
Key Quotes
“Global and local stand in opposition to each other. Their underlying antagonism can be resolved through two modes. Either local becomes an image of global and loses its identity (glocal), or it becomes so different that it cannot be tolerated and triggers the right to intervene. In both cases global dominates local.
Brexit is the reverse of these two modes, an attempt to assert the sovereignty and reinstate the borders; it is the play of local politics that is threatening to disrupt the functioning of the global. Most of the pros for exit are social or legal in nature driven by local politics, and amplified by recent geopolitical developments, but with relatively few economic reasons behind them.
Apart from its impact on the UK economy, the Brexit risk is associated with the perception that it would outline the contours of fracture of the Union and potentially expose its fragility. Exit implies currency weakness, which is inflationary and bearish for the long end of the curve.
Most likely, it is also bearish for the currency of the remaining Union and erosive for sovereign risk. In the near term market response would develop risk off overtones with UST as a safe haven. The mode is defined by lower GBP and EUR, bear steepening of the UK curve, sell off in FTSE and STOXX50 (possibly in S&P), bearish for peripherals and bullish for US yields.”
Key Quotes
“Global and local stand in opposition to each other. Their underlying antagonism can be resolved through two modes. Either local becomes an image of global and loses its identity (glocal), or it becomes so different that it cannot be tolerated and triggers the right to intervene. In both cases global dominates local.
Brexit is the reverse of these two modes, an attempt to assert the sovereignty and reinstate the borders; it is the play of local politics that is threatening to disrupt the functioning of the global. Most of the pros for exit are social or legal in nature driven by local politics, and amplified by recent geopolitical developments, but with relatively few economic reasons behind them.
Apart from its impact on the UK economy, the Brexit risk is associated with the perception that it would outline the contours of fracture of the Union and potentially expose its fragility. Exit implies currency weakness, which is inflationary and bearish for the long end of the curve.
Most likely, it is also bearish for the currency of the remaining Union and erosive for sovereign risk. In the near term market response would develop risk off overtones with UST as a safe haven. The mode is defined by lower GBP and EUR, bear steepening of the UK curve, sell off in FTSE and STOXX50 (possibly in S&P), bearish for peripherals and bullish for US yields.”