The EU will inevitably concede to keep the UK happy

In the aftermath of Brexit, financial markets seemed to have recovered relatively well considering the shock that was afforded to them after the referendum vote drew a heavy blow on many British politicians reputations after exuding confidence in the public accepting revised policies with the European Union that had been markedly improved during negotiations between prime minister David Cameron and EU leaders in February.

Needless to say the reform the electorate were looking for wasn't enough to satisfy their approval which they expressingly shown in last week's referendum that has place the proverbial cat amongst the pigeons leaving British politicians baffled over the results.

The empty void that's filling the political space in Britain at the moment will have a devastating effect on economic policies going forward with much of the attention being placed on finding resolution with the EU in terms of the UK's departure from the common market if and when it happens. As a result the likelihood of the economy falling into recession has become almost certain.

Not only will it fell down the economic fibre's that provide for a steady flow of activity but it will also impair the outlook of the Pound as many will expect the weak footing the British economy now finds itself in exacerbated by the possibilities of severed trade relations with the EU.  

ICYMI from @jsadinolfi: How the pound could hit history-making dollar parity by year's end #Brexit $GBPUSD https://t.co/w6Sx19JM4X

— Victor Reklaitis (@vicrek) June 29, 2016

Belief is siding with the conviction that politicians aren't willing to allow Britain to exit from the EU but rather use the vote to hold the European parliament ransom in an effort to obtain further concessions. If this happens to turn out the way it does it may become either a defining moment for the trade bloc or another disaster to add to the list of expanding mishaps that are wreaking havoc with their resurrections.

And as much as the EU attempts to stand in solidarity to show a brave face to the public and preventing to showcase some seriousness in their commitment to go along with the decision, they know fully well that the consequences of such a move has the power to unravel years of construction.

German Chancellor Angela Merkel's comments that there is no way back for the UK is flawed if we were to judge the EU's action when it came to enforcing penalties against Greece for failing to service its debt on the prescribed date and then dangled defiantly in front of its fellow members the protestation over austerity measures.

Although short term positive outcome was found, it was simply another let off from years of the same action that only serves to prolong the outrageousness of it all. Nothing makes the situation of Brexit any different from the rest of the other discretions made by members which is why we'll see the EU come to the party and give to Britons what is wanted, a control of immigration and the free movement of labour.

Political bamboozling is leaving the market confused

As the fallout over Brexit continues the British Pound fell to its lowest rate in over 31 years highlighting the extent of fear lurking in world markets at present. Politicians have come out in their droves after a weekend of crisis talks in an attempt to pour cold water on speculation that the UK leaving the EU would cause shockwaves for years to come while others warned the stability of the British economy has been compromised because of the vote.

Chancellor of Exchequer George Osborne failed to convince market participants of certainty going forward stressing the point that the "new"government to be announced after the Conservative Party conference will need to find ways of protecting the fiscal shape of the UK's budget policy.

There were also rumours afloat that Osborne was considering his political position at this current time knowing fully well that his administration of government's crucial ministry's affords him a large degree of political credibility should he wish to pursue the position of prime minister, something his remained tight lipped about.

Yet the political infighting isn't immune to the Tories only with the Labour Party using the event as an attempt to oust recently installed leader Jeremy Corbyn who's been in the firing line from members of his own party for not being vocal enough in his campaign for the "Remain" camp. A number of Labour MP's have resigned their position in an effort to shore up support against Corbyn.

One would've thought the Labour Party would've use the vulnerability of the Conservative's as a platform to work towards in eroding the strength of the ruling party however top leadership has left a lot to be desired.    

British Pound drops below $1.32, lowest levels vs Dollar since 1985. pic.twitter.com/oxrCoZo1CT

— Holger Zschaepitz (@Schuldensuehner) June 27, 2016

The fate of Bank of England governor Mark Carney now hangs in the balance as critics have taken a swing at his ability to manage the financial system by saying his commentary during the build up of the referendum was largely skewed in favour of "Remain"putting him at odds with situation that's turn itself on its head.

A campaign to rid the Bank of its governor is placing additional risk into the equation making it difficult for any market participant to find any type of optimism in the midst of chaos.

And who can forget the frontrunner to become the next prime minister of Britain Boris Johnson who's been singing like a canary bird in his response to questions about the manner in which he envisions the process of Brexit unfolding in the coming years as well as the type of policy needed to make the market feel certain of a stronger Britain again.

When asked about his concern about the current market volatility over the saga Johnson shrugged off any concern saying he felt the markets were pretty calm by his account, an ignorant and worrisome statement to make in the face of danger.

He went on to say that he would strive for the free trade agreement between the UK and EU to remain but said the free movement of labour would certainly become restricted to protect British jobs. If anyone wanted some sort of clue to the direction the UK could be headed in they would do well following Mr Johnson's comments closely.

In saying this it cannot be said enough that the current political whirlwind throwing the British economy into disarray has direct influence from the very policymakers who tried desperately to twist the arm of the electorate into believing whatever propaganda they thought would've appealed to them. The vote day is over, the results are in yet the politicians haven't the slightest idea on the next plan of action.

It seems as if the majority of British politicians aren't satisfied with the way polling has gone leading many to believe their could be a plot twist to a dramatic political play. What will it be?

We aren't certain of it yet which stokes the fires of fear even more at a time when politicians should be concentrated on finding a long term solution that doesn't hinder the outlook of the economy.  

Boris Johnson says UK will continue to have access to European Union's single market https://t.co/bbSub0AExp pic.twitter.com/DeRNoDoqAZ

— Reuters Top News (@Reuters) June 26, 2016

Brexit; What's the state of play right now?

One of the crucial lessons you'll ever learn when participating in financial markets is complacency is often caught on the wrong side of expectation. This is what many woke up to find this morning after the British public elected to leave the EU sending shockwaves throughout world markets who up until yesterday believed the "Remain" camp had done enough to secure a victory.

I'll be the first to admit that my intuition told me the possibilities of the UK leaving the EU was largely unlikely but I do believe that my opinion wasn't far off from the markets expectation in the midst of a global selloff felt today.

If financial market participants believed that they fully understood the psyche of the British voter or even that of a European voter this morning's shock decision has reminded them they're very wrong. It's as if there's a disconnect between what politicians in the EU are saying and what's really happening on the ground with the latter proving more serious in their convictions than the former.  

Nightmare Coming True for Stock Bulls Blindsided in Brexit Shock https://t.co/zctjqPDiWC @ALJax7 @JoeCiolli pic.twitter.com/XcuV9EYrRI

— Emerging Markets (@BloombergEM) June 24, 2016

Where to from here?

David Cameron's campaign to convince the British public of staying with the EU has irrevocably failed along with his reputation to lead the country forward forcing him to make a decision to step down from his role as prime minister that'll happen in October with no mentions of who might take over. The obvious candidate would be the current chancellor of exchequer George Osborne however this won't be a firm certainty with the Conservative Party reeling from split lines in support of Cameron's campaign.

One critic that stood out boldly was former Mayor of London Boris Johnson who added weight to the "Leave"camp that's successfully resulted in the desired outcome for their campaign but not without longer term implications for UK's leading political party.

Cameron's decision to stay on until the Conservative Party Conference was strategically link with saving the image of the party who did itself no favours holding such a vote that's ended up dividing the party instead of uniting it. It could also suggest that Osborne might not fancy himself sitting in Number 10 lamenting the defeat whilst preparing the UK for life after the EU considering he strongly favoured "Remain".

This all but guarantees Boris Johnson an open door to take over as prime minister should he want to which would be confirmed in his own decision to stand down as Mayor of London to concentrate his attention of campaigning for the "Leave" vote that's given him incredible momentum to snatch up Britain's highest political position.

But it won't be without its own problems with the party divided, the prospects of the future uncertain and the opposition rearing to take full advantage of the vulnerable state of the ruling party's woes.

Boris Johnson is probably going to be the next Prime Minister https://t.co/QjCf6NE145 pic.twitter.com/EhAQdJI06U

— The Independent (@Independent) June 24, 2016

Reconsidering Investment

Businesses in the UK will definitely be reconsidering their geographical location now that all ties between Britain and the EU are to be severed. The district served as an entry into Europe together with the benefit of operating in Pounds rather than Euros, producing a currency advantage if the Pound was weak.

They've come to rely on a significant amount of demand stemming from the EU region that'll now be subject to tighter border controls, import tariffs as well as delays in delivery all making matters complicated when they should be easier.

Needless to say the British public have come to recognise the grave risks becoming apparent in the EU with issues such as Greece austerity not being properly addressed, the Syrian refugee crisis benignly out of control and an insurgence of ISIS terrorism threatening to national safety.

Possibly the biggest risk of the Britain staying was the implosion of the Eurozone which seems to be drawing closer with every fresh unattended economic calamity. You could say perhaps Britons have voted to shield themselves from an inevitable crash when it does occur, a view that's not distant but possibly a huge risk to bank on given the importance of it's relevance and relations with the EU.  

More than 1,280 business leaders sign letter backing UK's EU membership https://t.co/e5XD51hpvD #EUref pic.twitter.com/60IaB70Wca

— BBC News (UK) (@BBCNews) June 22, 2016

Is the real risk to the UK Brexit?

A bumper filled month of uncertain events plus heightened fear of a Brexit leading up to the anticipated referendum vote in the UK in deciding whether to remain or leave the Eurozone all weighed down heavily on global markets at the opening of the weeks trade sending a strong signal that the volatility storm that gripped markets earlier in the year could be heading back into the fray.

Admittedly I haven't spent much time passing my thoughts on the possibility of a Brexit due to the unlikely nature of it happening, although that's what I thought. The British media are infamous for its sensationalist journalism in a bid to stir up the emotion of the public with outlandish tabloid headlines aimed at unraveling, discrediting and demoralising the person under siege.

One needs not be reminded of the shocking revelations that came to light when police investigated the now defunct News of the World and found brazenly unethical practices used by journalists to get a story which funny enough proved to be largely negative press for Prime Minister David Cameron whose links to editor Rebekah Brooks drew sharp criticism of his close associates.

Revealing the inner workings of the British media may have led to the demise of one of Britain's most read newspaper it didn't stop the many that escaped the spotlight and continue to operate in their provocative ways.

Surely this sets the tone for fear mongering polls suggesting a larger than expectant possibility of a Brexit  and thus fuelling the flames of uncertainty. The outcome is markets have fallen prey to the mischievous ways of the British press at a time when the vulnerability of the global economic outlook is far from its best.

Is a Brexit possible?

If you based your opinion on polls then maybe yes however if you drew attention to news items that matter most such as the recent local elections that failed to move the dial of fear or the resounding pleas of support for the "Remain" camp from world leaders including US president Barack Obama, German Chancellor Angela Merkel, Fed president Janet Yellen and many more all culminating into a conclusive view that a vote to leave would unhinge the progress made in the UK economy in recent years, then it would seem as if the choice to exit the agreement with the EU may be unfounded and unwise.

Britain's decision to remain, which I still believe to be the likely outcome, will go down to as the biggest shortsightedness of risk in present times with the focal point far off from the real risks, the perpetual economic and debt crisis that evolves in Europe.      

Pound tumbles on Brexit fears as speculators double down on drop https://t.co/YZDus2eXC2 via @anoojad @NettyIsmail pic.twitter.com/OfzYzG6x3U

— Bloomberg Markets (@markets) June 13, 2016

Panama Papers is a ticking time bomb for politicians

Following in the wake of the leaked transcript of an IMF conversation regarding Greece, an even bigger scandal has found its way into mainstream media after 11 million documents belonging to Panamanian law firm, Mossack Fonseca revealed a list of politicians, celebrities and businesses who have been caught up in a backlash of harsh criticism after using the services of the law firm to funnel away billions of dollars in wealth to tax haven countries in a bid to avoid paying tax.

Although it's been a well documented fact that Panama plays a part in a global network of tax havens that's been in use for decades to hide wealth from tax authorities, the naming and shaming of prominent individuals who go through a lengthy exercise in protecting their wealth from tax erosion adds more realism to the matter than perhaps the average 9-5 working, tax-paying compliant citizen would've understood in relative measure up until now.

Timing of the release couldn't have been chosen at a better moment as the global economy and more so developed nations flirt with the prospects of grave economic consequences after efforts to fuel growth into the world economy with debt has taken a nasty turn with the resultant outcome being the absence of much needed growth.

The implications of such revelations take a heightened stand when you weigh up the considerations mentioned above coupled with a consistent demand for a greater proportion of the middle class incomes to be taken to fund the incompetency of wasteful governments whilst the stench of hypocrisy hangs over disingenuous politicians campaigning for restrictive fiscal policies while seeking out tax avoidance avenues for protection of their own wealth.

#MossackFonseca: the go-to firm facilitating corruption https://t.co/ws77Zmz6Nr #panamapapers

— Dejban Law (@dejbanlaw) April 6, 2016

Government leaders are going to find themselves in an awkward position in their attempts to apply a degree of austerity if found named in the leaked documents as it would immediately be casted as contradictory and most likely cause mass protests which would dramatically reduce their level of political persuasion in trying to navigate their countries through the necessary procedure to get on the right path again.

We've seen the first victim of the so-called Panama Papers being the Icelandic Prime Minister Sigmundur David Gunnlaugsson after his name appeared in the leaked documents with pressure from the Icelandic public calling for his resignation as it emerged that he and his wife had used Mossack Fonseca to purchase an offshore shell company where money inherited by his wife was place into. Parliamentary rules stipulate that all members needed to disclose their interests in companies for which Gunnlaugsson didn't.

Icelandic citizens would've been reminded of the dire economic circumstances they had to endure through during the height of the Financial Crisis 2008 and such an action taken by Gunnlaugsson could be seen as not being patriotic by avoiding paying his fair share of the tax burden during those dark days.

Although Gunnlaugsson may be considered small fry bigger political players have been named in the scandal with British Prime Minister David Cameron being the focal point after it was revealed his late father had also acquired the services of the law firm to help prevent his investment fund from paying taxes.

Having announced the date of the referendum to vote whether to stay in the European Union, Cameron has faced an uphill battle so far convincing the UK public of coming into the "Yes" camp following a number of big name politicians from his own Conservative Party campaigning against him for the "No" vote dealing a crippling blow to his chances of success and possibly out of favour with his fellow Tories.

However these latest developments add further woes to Cameron's image within the party having implemented tightened budgetary measures during his tenure which would fly in the face of the Conservative policies. The short duration between damaging political outcomes puts Cameron under pressure in the coming months in avoid losing his position at No. 10 Downing Street.

It's evident that the extent to which these revelations could have a ripple effect on politics may well alter the course of the political environment especially in Europe where debate is beginning to rage on over solutions to the inherent problem of delaying austerity until the economy of the region is strong enough to withstand it. As time runs out and the clock keeps ticking, leaders will inevitably be forced to implement strong measures but with Panama Papers now lying in the minds of citizens, how much longer can these frought governments continue to veil the problematic situation their countries find themselves in?

Iceland's PM has resigned over #PanamaPapers leaks; whose heads may roll next? https://t.co/Y8HbhBLeV1 pic.twitter.com/4I5ymYRNmR

— CNN International (@cnni) April 6, 2016