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British Pound Volatility Surges Most Since 2008 As Scottish Referendum "Yes" Vote Looms
As we explained previously, the market appeared woefully under-priced for the potential risk of a Scottish "yes" vote. However, this weekend saw the margin between 'yes' and 'no' voters narrowed dramatically (53% "No" vs 47% "Yes" - a 6-point spread now versus a 14 point spread just 2 weeks ago). UK Gilt yields are higher, GBP is falling (its lowest since March) and implied volatility has spiked by the most since 2008 as hedgers pile in, now suddenly fearful.
GBP vol spikes on narrowing "Yes" vote...
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As we concluded previously,
Some Possible Implications Of a “Yes” Vote
Nevertheless, even if a ”yes” vote looks unlikely at present, it is not impossible. In our view, a “yes” vote would have several key implications:
Bad for UK growth. Uncertainties over the economic prospects, policies and currency arrangements of an independent Scotland probably would hit growth in both Scotland and the rest of the UK (rUK), raising the incentive for firms to “wait and see” or to expand elsewhere. Exports to Scotland account for roughly 4% of GDP for the rUK and Scotland would immediately be the rUK’s second biggest trading partner, slightly behind the US and slightly above Germany. Moreover, many banks and businesses have sizeable cross-border exposures between Scotland and rUK, and some firms may seek to limit such exposure as a hedge against the possible breakup of sterlingisation (if that is the policy adopted).
Bad for mainstream UK political parties, good for the anti-EU vote. Once independence happens, Scottish MPs would no longer attend or vote at the Westminster parliament. This would disproportionately hurt both Labour and the Lib Dems: Scotland accounts for 9% of seats at the Westminster parliament (59 out of 650 seats in 2010), but accounts for 16% of Labour seats, and 19% of Lib Dem seats. Conversely, only one out of the 306 Conservative MPs elected in 2010 is from a Scottish seat. However, although the maths of a postindependence Parliament would favour the Conservatives, we believe a “yes” vote would also badly hurt the personal position of PM Cameron, by making him the PM “who lost the UK”. The key winner in UK political terms would probably be UKIP: this reflects the damage to the three main Westminster parties, the evidence that voters are prepared to reject the establishment and vote for radical change, and also the extent to which the themes in the Scottish referendum debate — a choice between membership of a larger bloc or independence — are likely to have echoes in any future EU referendum. A secondary winner might be London Mayor Boris Johnson, who seems to be positioning himself as the radical outsider as candidate to succeed Cameron as Conservative party leader.
Uncertainties are likely to drag on for a while. The Scottish government has said that in the event of a “yes” vote, it would aim to complete negotiations quickly and for Scotland to become independent in March 201611, ahead of the Scottish parliament elections scheduled for May 2016. In practice, the process might well take longer, especially given the interruption of the UK general election in May 2015 and possibility that the election might change the UK government. Indeed, given that Labour has now moved slightly ahead of the SNP in voting intentions for the Scottish parliament in recent YouGov polls, one can imagine scenarios under which negotiations on Scottish independence have to be completed after May 2016 under a Labour-led Scottish government (which opposed independence), a Labour-led rUK government and with a Johnson-led Conservative party in opposition that is moving towards advocating EU exit.
BoE on the alert: BoE Governor Carney noted in his Inflation Report press conference that the BoE would be ready to act if Scotland-related uncertainties escalate: “we also have responsibilities, as you know, for financial stability in the United Kingdom and we will continue to discharge those responsibilities until they change... Uncertainty about the currency arrangements could raise financial stability issues. We will, as you would expect us to have contingency plans for various possibilities”.
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With a “no” vote, the UK would still face rising political uncertainties. The UK political landscape is in a state of extreme flux, with the enduring Scottish independence movement, the rise of UKIP as a political force and resultant change in UK party political dynamics, the moderate-to-high probability of a change of government in the 2015 elections and uncertainties over post-election fiscal policy, plus the non-negligible risk of a referendum on UK exit from the EU in 2017-18 or so. Even if the “no” camp prevails in September, we do not foresee a return to the pre-referendum political status quo in the UK. In our view, the outlook for UK political risks will remain elevated well beyond the referendum, and we suspect these UK political risks are underpriced in markets.
More broadly, "Referendum Risk" is one of the more powerful manifestations of what we have termed Vox Populi risk, the Crimea being a particularly powerful, if extreme, example. In particular, what happens in Scotland will be particularly closely watched in Spain, which is facing a referendum on Catalan independence. Latent independence movements elsewhere, such as Belgium, could also be influenced by the outcome in Scotland. We regard the revival of local/national concerns, from Scotland to Spain and beyond, as part of continuing anti-establishment sentiment and a backlash against globalisation. And the UK experience (with growing support for UKIP alongside faster economic growth) raises the issue that economic recovery alone may not be enough to reverse the rise in anti-elite, anti-establishment sentiment.
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Scotland wants control of their offshore resources. Smart move when bringing BP and Shell (British firms) in to do the extraction.
Yes they do - unfortunately most of their preexisting fossil fuel resources are long since gone. The North Sea fields are in rapid decline, and there are no major new discoveries. Their independence vote may be far too late.
...to finance their welfare programme.
I live in Scotland. No mention of what currency will be used if independance is declared. I think this is a stealth move to introduce the euro into the UK personally. Plus I don't trust anyone who seeks political power so won't be voting for anyone, it only encourages them.
BP is American owned mostly and Shell is Dutch. I also work in the oil industry.
So this is why Cameron wants more power against the "terrorists" and "extremists".
"New powers are needed to seize terrorist suspects' passports and stop British-born extremists from returning to the UK, David Cameron has said."
http://www.bbc.com/news/uk-29008316
If you want liberty, you are "extreme".
No eed to worry. It's not the vote that counts, it's the ones who count the vote that count.
...Scottish "Yes" vote could be the False Flag event that brings on W W #3.
Only if we let Mel Gibson back in town!
The Scottie!
Come ON man.....use yer head!
https://www.google.com/search?q=scottish+currency&client=firefox-a&hs=qj...
The Scottie would soften the blow
"I think this is a stealth move to introduce the euro into the UK personally."
of course it is. though you have forgotten that if Scotland says Yes, it won't be "the" UK anymore... :-O
now, seriously, Scotland could just print any kind of money it wants. Like Hong Kong. Though in this currency wars environment, the reasons for pegging it to another, bigger currency would become... preponderant
and the obvious choices for Scotland would be, in this order: GBP, EUR, USD. Of course, if London would be... unfriendly to the first choice, then yes, a Scottish Pound pegged to the EUR would be likely. Which is the same situation of several minor currencies in Europe, at the moment, including the Danish and Swiss ones
I see a future where Russia seeks to invite you to BRICS, properly completing the acronym. Britain seem to be rather vocal in its views that Russia is the aggressor. Lets not forget their role in the suppression of MH17 flight data recorders. Russia will seek to draw Scotland away from the $'s sphere of influence.
IMHO.
Russian Navy has same flag as Scotland, ideal for those naval bases
Just think, if Scotland, Hungary, Indonesia and Turkey can be convinced to join the BRICS, it'll be the
SHIT BRICS
Or built like a BRIC SHIT house if we lose South Africa
except that oil is abiotic, as ptb knows (but not you otherwise they'd have to bring oil price down); so just like it already happened for supposedly dry wells in north america, those will refill.
oil is a never ending resource (remember what thney were saying in the 70's, 80's ? that they would not be any more of it by today, yet...)
"It is often forgotten that the world's first commercial oil refinery was established near Bathgate in 1851, by James "Paraffin" Young. He built a global export industry extracting petroleum from shale found beneath West Lothian. At the height of the original shale oil industry in 1912, Scotland accounted for 2 per cent of the world oil production.
Scotland and the UK have substantial shale gas reserves, though the first serious estimates will not be published till next month when a detailed report is expected from the British Geological Survey, commissioned by the Department of Energy. Likely reserves could be worth more than those in North Sea.
In Scotland there are potential shale formations across the Central Belt and Fife. As well as shale gas, Scotland also has reserves of what is known as coal bed methane, or CBM. Shale gas is trapped in sandstone while CBM is found in traditional coal seams. Shale gas is usually found at twice the depth of CBM. Hydraulic fracking can be used to extract CBM, but in European conditions it is more common simply to drill multiple wells into the coal seams, releasing trapped water to allow the methane to escape.
Exploring for shale gas and CBM has been slow to develop in Scotland, partly because of opposition from environmental groups, partly because mineral rights are owned and licensed by the Crown, and partly because the Scottish Government has focused its energy policy on renewables, particularly offshore wind."
Scotland could have its own 'Crimea' moment if the Orkney and Shetland islands off the north coast decide that they would rather remain with England, for a greater share of the oil/gas wealth than they get now, much of which is in their territorial waters.
The paras could be there in a few hours!
Will William Wallace get betrayed again?
Go for it Scotland.....
HOOT MAN, HOOT MAN!
We should sent russian deputy to give them cookiez and invite Scotland to customs Union ^_^
Just Got My ZH account approved after waiting about 2 weeks , been lurking on this site last 2 / 3 years and really appreciate a lot of the regular posters .... I started my awakening young something I learned from my dad and step dad but really accelerated after 9/11 it's a shame neither one of my father figures are around still because I'd love to just sit and talk with them ... anyway what started with Alex Jones and loose change then evolved into Celente , zerohedge and a curiosity to seek the truth .... love the articles on this site and excited to hopefully add a small piece to the discussion
"after waiting about 2 weeks"
So you NSA-Clearance went through OK ?
;-)
Anglophobe? That nick desperately needs some clarification. Afraid of the English language, English humour or just it's cuisine?
Same as that , 3 years of reading but I am on my 4th account now. As soon as you start swearing at the ZH Flat Earth Society about bitcoin they shut you down. Be warned , there are genuinely a few idiots on here who actually beleive the government is going to shut down the internet and the grid to stop bitcoin.
Bienvenue...
Aye and we should be able to wear our skirts free from the sparkle in an Englishman's eye.
I always heard that underwear was optional if you wear kilts...
Amazing how the Yea vote is increasing at the same pace as Cameron's Ukraine rhetoric!
Scotland won't choose independence, in my opinion. People now want to scare government, but in the end they vote "NO".
Angus McDiebold will make sure of that!
Scottish women will vote YES because they think it means MOAR free shit.
Here's hoping the Scots gain independence.
The centralisation of power is never a good thing and Brussels is its culmination. Still like the idea as well as the emotional and historical context of a unified Europe, but in practice it has become a bureaucrat's paradise that has undermined fundamental democratic principles. The smaller a political unit is, the closer it is to its people and the better its accountability. Also, the more likely it is to represent the people and not lobbyists or other special interest groups.
The smaller a political unit is, the closer to it's people and the better it's accountability... and it's influence on EU affairs becomes qualitatively better, too. Meanwhile, the smaller a political unit is... the more it will engage in some kind of supranational cooperation. It's a question of costs and competition, in a world arena where you find giants the size of China, the US, India or even Russia
the EU has one practical advantage: it can be shut down or left out quite quickly. compared to other supranational cooperation schemes - particularly the more top-down hegemonic dominance-game ones... it still has some shine to it, imho
though I'd be curious to read from you if you think it's possible to achieve more democracy to the EU org without making it by that less subservient to the nation states that contribute to it and are it's members. the Paradox of Confederation, I call it
Good point. And a dilemma that I can't see solved easily. Providing more direct democratic access takes away administrative control and effectiveness. That Europe needs to offer some sort of unified front politically and economically to to the other large powers on the global arena is a no-brainer, but finding that balance between effective administration and democratic access is a really hard nut to crack.
FREEDOM......its not free though....
"More broadly, "Referendum Risk" is one of the more powerful manifestations of what we have termed Vox Populi risk, the Crimea being a particularly powerful, if extreme, example. In particular, what happens in Scotland will be particularly closely watched in Spain, which is facing a referendum on Catalan independence. Latent independence movements elsewhere, such as Belgium, could also be influenced by the outcome in Scotland. We regard the revival of local/national concerns, from Scotland to Spain and beyond, as part of continuing anti-establishment sentiment and a backlash against globalisation."
I somewhat disagree on the last (bold) part
broadly speaking, all european sentiment toward "The Regions" movements is based on previous nation statehood. This is a sideproduct of a long history
Scotland is an old nation that "just happened" to become united to England... by a dynastic happenstance. Similarly, Flanders, Catalonia and several other likely candidates including Venice or the French Bretagne all boast an "old story". And while globalisation has many critics in Europe, both those independentists and the Europe of the Regions movements are mostly driven by two main groups: local elites and pro-EU enthusiasts. So the question is about which establishment and how
A paradox, yes. Scotland voting yes would become more pro-EU while rUK would become more anti-EU. Regions becoming more independent from their previous national unions need more supernational interaction/affiliation just to reduce the pro-capita costs of "full independence"... and the EU is for them a vehicle
Interestingly, the size of the possible "new kids in the block" is roughly around that of the other smaller participants, which are also the more engaged ones in EU "affairs"
----
meanwhile, UKIP has finally gained one MP, by defection, and is poised to gain another through a by-election. Cameron can try to appease his "backbenchers", but their stance is not changing, if not even hardening around a rejection to the freedom of EU citizens to work wherever they want. Too bad the Tory Party refuses to have a frank discussion with their base about the realities and numbers around British immigration. There you find a serious problem between the established conservative elite and a rising anti-establishment sentiment
As the referendum gets closer to a Yes, watch the fear mongering get more intense. Only Cameron can save you from the ISIS he helped create.
307 yrs of post-bankruptcy funding and us Scots have never said 'thank you'.
At present we receive an extra £2,000 per person compared to our English 'oppressors'. Yet some of you across the pond are whopping it up for us. You Don't Have a Clue.
Which ever way it goes, the relationship will never be the same again, and all thanks to the Fat Controller who is both an MP in England and an MSP in Scotland. Plus he has six pensions, the mendacious, slimey, slob.
Yeah, I doubt Salmond can carry a majority YES vote. He's just another stinking, self-serving politician.
It's a shame, really, because I have my fingers crossed for the YES campaign.
I'm from England but I'd still like to see a majority for the YES camp - not because I think it would make things better (no way to tell whether things would be better or worse), but because it would seriously stir the shit :)
If the YES vote wins, the politicians will be running around like chickens with their heads cut off and it's worth it just for that.
One thing they'll never allow is for the UK to vote on independence from London. I think that would yield hilarious results.
Referendum is not binding on Westminster....they will simply delay and order a new vote.
sorry - double post
Scotland break free from the London warmongers.
i wish, unfortunately, even if they all want to be independent (that's what they say there) i'm afraid that at the last minute they'll shit in their pants (and stay with uk)
FREEEDOM!
Shame they still want to keep the Parasites (aka the Royal Family)
That can change later. When Ireland became independent they had to swear fiellty to the British Crown as a "Free State" then two decades later the Irish Republic came into existance.
Personally speaking, in view of Scotland's history, I just can't understand why a Scot would want to vote to stay in the UK except for the scare tactics used by the English. Maybe the No voters are just conservative despite their Labour Party affiliations (not too many Tories there) . Highland clearances come to mind and the brutal suppression of the Gaelic language in the Highalds was a result of "Union". To be fair, the ruling class in Scotland had long been speaking a particular form of English before the Act of Union but the English did stamp out Scottishness to a large degree in many little ways.
I openly wonder whether Scotland would have been richer outside of the Empire and whether the North Sea oil that went to fund Maggie's England and various British/English wars would have turned Scotland into a kind of Norway. Who can say? In any case, I hope the Scots can flip the bird to the bloody Sassenach and kick them out. Hopefully, the Welsh will follow suit. Long live Scotland the Brave!!!!!!!!! No to war, no to nukes, no to Tridents! Let the English carry with their wars in association with their US masters, but minus the Scots!
See above occam the spouter
Does Scotland have an immigration regime as Ireland whereas native sons about 5 generations removed can repatriate? If not now, will they when they leave (yes, leave, if not now, soon) the UK, can I go back? Pretty please?
To 'occam'
There were far more clearances in England of the "the English", than of Scots in Scotland.
It is the height of ignorance (& convenience) to not distinguish between the English peasant & the English establishment.
Like most of my inadequate chip-ridden brethren, you spout forth without knowing your history
Vote will be NO... Obumer already said so.