Generational Dynamics World View

[John J. Xenakis]

*** 27-Jun-16 World View -- Israel and Turkey announcing a reconciliation agreement on Monday

This morning's key headlines from GenerationalDynamics.com

• Nationalistic tensions increase as UK and EU drift towards Brexit
  
• Japan's government calls emergency meeting as yen surges after Brexit
  
• Israel and Turkey announcing a reconciliation agreement on Monday
  

****
**** Nationalistic tensions increase as UK and EU drift towards Brexit
****


Nationalistic tensions grow in the UK and EU (AFP)

The successful Brexit referendum vote, calling for the United Kingdom
of Great Britain and Northern Island to leave the European Union, has
unleashed powerful nationalistic forces in both the UK and the EU, as
we've been describing for years in nations around the world in a
generational Crisis era. Furthermore, it's torn wide open new
political fault lines within both the UK and EU, making resolution of
the issues less likely and chaos more likely, and making both unions
considerably weaker.

The latest developments are as follows:

• There is massive "buyer's remorse" in the UK, with millions of
  people signing a petition for a do-over on the referendum. Everyone
  is saying that's impossible, but one wonders if there's an opening
  there.
  
  
• Jeremy Corbyn, the far left-wing leader of Britain's opposition
  Labor party, who has previously been an opponent of the European
  Union, is being widely blamed by members of his own party for his
  half-hearted opposition to the Brexit referendum. Most labor unions
  want Britain to stay in the European Union, because they like the EU's
  liberal labor laws. On Sunday, Corbyn's leadership melted down, as
  twelve members of Corbyn's "shadow cabinet" were pushed out or
  resigned, saying that they have no faith in Corbyn as a leader.
  (Since it's possible for the British government to change hands
  overnight on a failing vote of confidence, an opposition leader will
  have a "shadow cabinet" that can immediately step in and become the
  real cabinet.)
  
  
• Prime minister David Cameron, leader of the "Tory" Conservative
  Party, who had strongly campaigned against Brexit said he would step
  down:
  
  [indent]<QUOTE>PRIME MINISTER DAVID CAMERON: "The British people have
  made a very clear decision to take a different path. And as such,
  I think the country requires fresh leadership to take it in this
  direction. I will do everything I can as prime minister to steady
  the ship over the coming weeks and months, but I do not think it
  would be right for me to try to be the captain that steers our
  country to its next destination. This is not a decision I’ve taken
  lightly, but I do believe it’s in the national interest to have a
  period of stability and then the new leadership required. In my
  view, we should aim to have a new prime minister in place by the
  start of the Conservative Party Conference in October. And I will
  do everything I can to help. I love this country, and I feel
  honored to have served it. And I will do everything I can in
  future to help this great country succeed."<END QUOTE>[/indent]
  
  The impact of Cameron's statement is that he will step down by
  October, and leave it to his successor to invoke the EU Lisbon Treaty
  Article 50, which starts the clock on the two-year process for Britain
  to leave the EU. Like the Labor party, the Conservative party is in
  chaos.
  
  
• What was unprecedented about the referendum is that the British
  people were badly split, but not along the usual Labor-Conservative
  lines. Instead, it was split geographically (England and Wales were
  pro-Brexit, Scotland and Northern Ireland were anti-Brexit), and it
  was split by generation ( "26-Jun-16 World View -- Britain's Millennials are furious at Boomers for Brexit vote"
  )
  
  
• It's pretty clear that the pro-Brexit leaders did not expect to
  win the referendum, and have no idea how to proceed next. Pro-Brexit
  leader Boris Johnson, who was on TV constantly before the vote, and
  who is the favorite to be the next prime minister, has been almost
  completely invisible since then, except to say that there's no hurry
  in invoking Lisbon Treaty Article 50.
  
  
• This is driving EU leaders crazy, and stoking anti-British
  nationalism. Some of them are saying "Good riddance!" and want
  Britain not only to invoke article 50 right away, but actually to
  leave the EU right away. Others are urging caution, and some are
  saying that even two years are not enough to figure out the terms of
  the divorce.
  
  
• Scotland officials are negotiating independently with EU leaders
  to figure out how Scotland can stay in the EU even when the UK leaves.
  There may be a new Scottish independence referendum.

David Cameron will be traveling to Brussels on Tuesday for a
long-planned meeting of leaders of the 28 EU countries. But on
Wednesday, he will be excluded from an all-day meeting of leaders of
the other 27 EU countries, as they try to figure out what to do next.
Guardian (London) and Democracy Now (London) and Breitbart News (London)

****
**** Japan's government calls emergency meeting as yen surges after Brexit
****

The unexpected success of the Brexit referendum caught many investors
by surprise, and has shocked the markets. ( "25-Jun-16 World View -- Fallout from Brexit: Impact on geopolitics, economics, and stock markets"
)

Investors quickly moved into "safe havens," including
dollar-denominated investments and, even more, into yen-denominated
investments. This created a new global demand for yen, pushing the
value of the currency higher, exacerbating Japan's deflationary
spiral.

The Bank of Japan and other government officials are holding an
emergency meeting on Monday to evaluate the situation and to decide
whether to "print money" and pour more liquidity into the banking
system in order to prevent the vicious cycle that we described two days ago.

The European Central Bank would also like "print money" by buying
bonds (quantitative easing), but according to one analyst, the ECB
will have a problem doing this. The reason is that there are $8
trillion in bonds in the market at negative yields (interest rates),
and the ECB is running out of bonds to buy. ( "15-Jun-16 World View -- German 10 year bund yield goes negative, as deflationary spiral continues"
)

The People's Bank of China (PBOC) also announced a substantial
weakening of the renminbi (yuan) currency, though they did it a
different way. The yuan currency is pegged to a fixed exchange
rate with the US dollar, and on Monday morning the PBOC
weakened the yuan currency by 0.9%, its weakest fixing level
since December 2010.

Meanwhile the favorite topic of all the tv financial talk shows has
suddenly taken a dramatic twist. For months this year, these shows
would debate for hours and hours each day whether the Fed would
increase interest rates three times or two times or one time this
year. Increasing interest rates would strengthen the US dollar,
causing more deflation. So over the weekend sentiment has changed,
and now analysts are expecting the Fed to lower interest rates, not
raise them.

During the 1930s Great Depression, there was a "race to the bottom,"
as countries kept devaluing their currencies in order to gain a
competitive advantage against other countries. Ever since the
"financial crisis" of 2007-8, it's been widely feared that it could
happen again, and the current situation is raising those concerns
again. Dow Jones and Japan Today and Business Insider (Australia)

****
**** Israel and Turkey announcing a reconciliation agreement on Monday
****

Multiple media sources are saying that Israel and Turkey are
announcing a reconciliation agreement on Monday, bringing to an end
the deterioration in relations that followed the Mavi Marmara
confrontation in 2010. (See "23-Jun-16 World View -- Turkey drops lifting of Gaza blockade demand for normalization with Israel"
)

According to press reports, the details of the agreement are as
follows:

• Turkey had previously demanded that Israel eliminate the
  blockade of Gaza. The compromise is that Turkey will be allowed to
  transfer to the Gaza Strip humanitarian aid without limitation through
  the Ashdod port, and will be allowed to build both power and a
  desalination plants, and a hospital, inside Gaza.
  
  
• Israel had previously demanded that Turkey stop hosting Hamas
  officials in Turkey. The compromise is that Turkey will not allow
  Hamas to plan or carry out attacks against Israel from its
  territory.
  
  
• Turkey had previously demanded that Israel admit responsibility
  for the deaths of the Turks in the Mavi Marmara confrontation in 2010,
  apologize, and pay compensation to the families of the victims. The
  compromise is that Israel won't admit responsibility, but will
  apologize only for "operational mistakes." Israel will pay $20
  million to a special fund set up for the families, but this money will
  not be paid until Turkey's parliament passes a law making it
  impossible for further Mavi Marmara claims to be made against Israeli
  officers or soldiers.

These have been difficult compromises for both sides.

According to a former minister to prime minister Benjamin Netanyahu:

[indent]<QUOTE>"Israel will pay Turkey reparations for the Marmara?
I hope the reports are untrue. If they are true, this would be
national humiliation and an invitation for further flotillas and
libels by haters of Israel."<END QUOTE>[/indent]

Turkish Foreign Minister Mevlüt ÇavuSoglu said the following:

[indent]<QUOTE>"Saying that Turkey has given up one of its two
remaining conditions, which is lifting the embargo and blockade on
Gaza, would mean humiliating the people’s intelligence. If Turkey
had given up these [conditions], then relations would have been
normalized by now."<END QUOTE>[/indent]

The deal will be announced on Monday, and the agreement will be signed
in July, according to reports. Jerusalem Post and Hurriyet (Ankara) and Al-Jazeera (Doha)


KEYS: Generational Dynamics, Britain, Brexit, European Union,
Jeremy Corbyn, Labor Party, David Cameron, Tory, Conservative Party,
Lisbon Treaty Article 50, Scotland, Northern Ireland,
Boris Johnson, Bank of Japan, BOJ, yen, European Central Bank, ECB,
People's Bank of China, PBOC, yuan, renminbi,
Israel, Turkey, Mavi Marmara, Gaza, Mevlüt ÇavuSoglu

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John J. Xenakis
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