Search This Blog

Sunday, 16 December 2018

“Dear Theresa… You are in a situation in which you can’t win. You can, however, count your blessings and go for the least bad option”. Open letter to the English Prime Minister Theresa May

Dear Theresa,

I am Ernst Labruyère from The Netherlands and I have some well-meant advice for you.

I closely follow the political and economic situation in your country via the newspapers and news bulletins. What I see is that you are stuck between the proverbial rock and the hard place. You are in a situation in which you simply can’t win. There is hardly a way out in which you keep your dignity and credibility as a political leader, so the best that I can offer is damage control.

In other words: you can count your blessings and go for the least bad option of the options that you have currently. As a matter of fact, you have three options and none of them is easy: 
  • You swallow the enormous lump in your throat and withdraw totally from the Brexit plans, as they sit. As the European Court of Justice informed you last week, you can still withdraw unilaterally from the Article 50 status and become a full member of the EU again. No questions asked!

    It will yield you the eternal hate from the Brexiteers in your Tory party and from a considerable part of the people in your country England. All the other citizens in England (mostly youngsters), as well as strong majorities in Wales and especially Scotland and North-Ireland will put you on a pedestal for such a brave decision.

    Brexit = Brexit = Road to Nowhere.

    It takes a brave person to withdraw from a bad decision! And that the Brexit was a bad decision is becoming more and more clear to me and probably to you too.

    Opinions in the EU will be divided over your possible happy return. My country – The Netherlands – and Germany will probably be very happy and would soon return to business as usual, regarding imports of financial services and exports of goods and agricultural produce.

    Other countries would still have their reserves and think about the lost decade, due to the sheer impossibilty of pushing through new legislation and safety nets for the Eurozone, with you and David Cameron at the helm of the British representation in the European Council.

    And people like me would remember your utterly reckless and ignorant attitude towards the referendum and the Brexit from the EU, as well as the post-Brexit period. The leadership of your country took an enormous gamble and it blew up in your face enormously.

    Whatever will happen in this situation: the times of the special deals for the UK would be over for a long time and the established, structural distrust of the other EU members towards you would be hard to overcome. Nevertheless, it would be perhaps the best option, as you would keep the numerous special privileges that an EU membership offers, against only a few serious drawbacks.

  • You run the gauntlet and go for the No Deal-Brexit. You would be applauded and hailed by the hardliners in your Tory party and numerous, mostly elderly people all over the country. However, a substantial part of the people in your country would probably buy voodoo dolls and try to steal a few of your hairs. In Europe we would all think that the UK had gone berserk!
    I will not predict societal and economic havoc after the choice for this option, as I simply don’t know what will happen. I trust the EU to take care of a soft-ish landing of the UK, as it is in their interest too to let things not get out of hand.

    However, you will probably find out that your country is on its own in a difficult and unknown economic and political situation. New, mutually profitable trade deals are not a walk in the park, when it comes to negotiations with countries like the United States and China, as well as your new partners of the EU.

    That you will have lost influence on future EU legislation is for sure and it will definitely not be as easy to totally stop immigration to your country, as you might think now.

    On top of that, you must find a solution for the 1.8 million of your countrymen and women who are now living all over the EU. They will also demand answers from you. We won’t call them immigrants and queue jumpers, as you did to EU citizens, but we probably can’t warrant automatically that they can stay in the EU as long as they want. Brexit = Brexit, y'know?!

    And probably you will find out that the good old European Union had substantial advantages and many things on offer that you only start to appreciate now that they are gone. Ignorance is bliss, but it mostly can’t last forever.

    Last, but not least: the situation around Northern Ireland could deteriorate easily, when new disputes and conflicts arise concerning the new border with the EU. A border that will lie at the old border with Ireland and prevent from free, unhampered trade between the Catholic part of Northern Ireland and Ireland itself. Yet, I don’t think that we will return to the old civil war-like situation, as too many people probably appreciate the current peace and quiet. But nevertheless, it remains a gamble!

    Whatever happens, your political career is over then. But it will probably also be over with the other two options. And something tells me that you would not mind that very much.
  • And there is finally the third option: you return to your parliament and tell them that this is the deal they get for their Brexit from the EU! Take it or leave it! 
    There might be some negotations about more or less cherries and whipped cream on the Brexit cake, but the form, ingredients and flavour will not change anymore. It is what it is!

    Although some people, like PM Mark Rutte of The Netherlands, might give you the impression that there is a pinch of room for further negotiations between the European Union and the United Kingdom, there is in fact not a micron of room in the Brexit deal, as it sits.

    The bravest thing that you can do is tell the likes of Boris Johnson, Nigel Farage and Jacob Rees-Mogg that this is it and that there is the chance of a snowball in hell that things will change in their favour! And that you strongly advice them to accept this deal, or face the harsh consequences of a No Deal-Brexit. I count on you!

    Do me a favour and please think about the British citizens outside Whitehall, who don’t have an Oxbridge education and an estate to live from...

    People who have been lied to by your utterly questionable and deceitful press and your politicians, like the earlier mentioned Boris Johnson. And people that might face years of mass unemployment and economic hardship, when there is no viable deal with the European Union or with anybody else in the world. These British citizens are depending on you and your deal. And also the 1.8 million people living abroad.

    If you ever saw the film Brassed Off, you are aware of what the poverty and hardship was that came out of the policy and politics of your predecessor Margareth Thatcher in the Eighties of last century.

    A period in which the pride and self-confidence of the United Kingdom and its citizens was stripped to the bone. Things could even become worse than in that period of time, when the economic situation really gets out of hand after a No Deal-Brexit. That won't hurt Boris Johnson and Nigel Farage, but it will hurt the people in Liverpool, Manchester, Londonderry and Glasgow…
But whatever you do: time is running out for you and your Brexit team to make that decision! Do it now!!! You can’t postpone things until eternity! In March, 2019, the two-year period of the Article 50 will have passed and will leave you with a No Deal Brexit, that only the most reckless politicians in your country want.

I wish you much wisdom and good judgement with your decision...

But please, please, please don’t believe in the eternal patience, benevolence and/or stupidity of the other 27 countries of the European Union. 

Everybody in the European Union is really sick and tired of the way that your country has been hijacking all decision-making for the last 4 years, since David Cameron announced his dreaded Brexit referendum.

The other countries’ patience with your situation has run out a long time ago and they want it to be over with foregood. Don’t disappoint them, as they can hurt you really bad economically, when their compassion with your country is gone and their anger is mounting!! 

Don’t ponder about your past role as a great empire anymore, as those days are gone foreverJust make the final decision and defend it with all your energy in front of the Lords and the Commons!

Yours sincerely,


Saturday, 1 December 2018

The Dutch housing bubble is back at pre-crisis levels and in fact worse. An implosion might be imminent.

The Dutch housing situation is akin to a bubble again, almost purely based upon speculation and expat housing in the big cities.  It might explode sooner than you think, as the underlying wage growth is actually negative.

Everybody who would take a look at the Dutch housing market in 2018, would think that the Dutch economy is growing dramatically at the moment.

Since June, 2013 –  identified as the trough in the average Dutch housing prices since the housing crisis started in 2007(!) – the average house price rose by a staggering 41%, to €291.000 from €206.000. These figures are based upon data from Statline, the online database of the Dutch Central Bureau of Statistics.

And while these data are slightly distorted by the sturdy price growth in large cities like especially Amsterdam and Utrecht, the general feeling in the rest of the world could be that the sky is the limit again in The Netherlands.

The average housing prices and the average sales numbers
in The Netherlands from 2008 - 2018
Chart by: Ernst's Economy for You
Data courtesy of
Click to enlarge

The uninformed reader could think – based upon these shiny figures of the Dutch housing market – that the Dutch average wages have grown dramatically since 2013. Yet, that is not the case, as the following chart shows:

The average collective wage rise vs inflation
in The Netherlands from 2010 - 2018
Chart by: Ernst's Economy for You
Data courtesy of
Click to enlarge

To the contrary, I would say. As a matter of fact the collective labour agreement wages (i.e. CAO wages), as negotiated by the labour unions, have not grown at all in comparison with the inflation. The black line in the second chart represents the net effective wage growth in The Netherlands, when corrected for inflation.

The grim conclusion for The Netherlands is that there was actually a net wage decrease for the middle and lower income groups, who are mostly bound by the CAO wages. This wage decrease is caused by the rise in consumer prices for all kinds of goods and services, as well as the sturdy growth in local and central taxes and levies.

Then the multi billion euro question is: what did cause this extraordinary growth in housing prices in The Netherlands in a time when wages did not grow at all?

My answer is: probably the causes are pure speculation – based upon financing against the still near-zero interest rates that large investors have to pay –  at one hand and the soaring demand for housing on behalf of expats and foreign knowledge workers in the urban areas at the other hand.
The average housing prices in the largest cities and
wealthy areas from 2010 - 2018
Chart by: Ernst's Economy for You
Data courtesy of
Click to enlarge

Especially Amsterdam and Utrecht as well as the cities closeby are very popular among expats and knowledge workers from around the globe, as the aforementioned chart shows. Amsterdam “enjoyed” a 60% raise in housing prices since 2013 and also Utrecht saw a 33% growth since the same year.

The companies and institutions who hire these expats and knowledge workers are mostly more than willing to pay topdollar for a small house or condo at close range, as it is still a relatively low expense in comparison with the labour costs of these workers themselves. This circumstance probably fueled the broad speculation by all kinds of private and corporate landlords in Amsterdam and Utrecht and makes that the housing prices have soared in those areas.

On top of that, these extremely popular urban areas have almost certainly a trickle down effect on the housing prices in neighbouring regions, even if these are less popular among expats and/or Dutch middle class people. This leads to the housing prices going up in general and all over the country, as the following chart shows.

The average housing prices in the four areas of
 The Nerherlands from 2010- 2018
Chart by: Ernst's Economy for You
Data courtesy of
Click to enlarge
Therefore the current housing prices have equalled (and sometimes exceeded) the housing prices since the crisis of 2007, when the housing crisis broke out.

Is that a healthy situation? No it is not!

Can it continue? No, it cannot!

When the net wages of the Dutch middle classes have actually dropped since 2008 (or since 2013 as a matter of fact), but the housing prices have risen sturdily since then, a new and more dangerous bubble has probably inflated.

And to make things worse: this bubble must be close to popping!

The imploding housing bubble of 2007 did not have much to do with the American mortgage crisis, which was only looming in those days. The real reason was that the housing prices in The Netherlands were totally out of balance with the housing prices in countries like Belgium and Germany, as they sat in 2007, and the people got fed up with their ever higher mortgages.

The same situation is now also present and perhaps even worse. I heard a radio interview with a Belgian realtor shortly and his message was the same: Dutch people are more and more looking for cheaper housing in Belgium.

What will be “the needle” to implode this bubble?

I would say a sturdy increase of the general interest rates, shaking out the pure speculators and cash strapped landlords, who are over their heads in debt! But also an imminent buyer’s strike could certainly be a possibilty, as the same happened in 2007 and led to a 30% price drop.

All the signals are there that the Dutch housing bubble might have a short life and that the explosion might send shockwaves all over the country.

When the lower and middle classes don’t have the money for Dutch housing anymore, the rise in housing prices cannot last much longer!