Prime Minister Gordon Brown Stepping Down; What's it Mean to the British Pound?

It seems like ages ago yet it was only yesterday when I said Good Riddance to "Clown" Brown

This [UK election] result does not give anyone a clear victory. Gordon Brown can hang on if he wins a coalition with the Liberal Democrats.

I am stepping quite a bit outside my area of expertise here, but it seems to me that Brown's Labour Party was totally trounced in the election and the Liberal Democrats did not capitalize one bit.

Moreover, Brown has made enough enemies in parliament that he has virtually no chance of forming a lasting coalition to stay in office.

If this analysis is correct, good riddance to "Clown" Brown. Now, if we can only have similar results in the US mid-term elections, throwing out the clowns that do nothing but kiss Obama's ass, the world will be better off.

Kiss Brown Goodbye

Today it's official: Brown Announces New Talks and End of His Tenure

Britain�s quest for a new government took a sudden turn on Monday when Prime Minister Gordon Brown announced he would resign within months as Labour party leader as part of a bid to lure the Liberal Democrats into joining a rejuvenated Labour party in a left-of-center governing coalition.

Speaking to reporters outside 10 Downing Street, Mr. Brown said he would remain in office to oversee negotiations for a new government, but would stand down as Labour leader and prime minister when a new Labour leader was elected sometime before the Labour party�s annual conference in September.

Monday, Mr. Brown sounded like a chastened man, and his move stunned many in his party and the country. By sacrificing his own career in an attempt to keep Labour in power, Mr. Brown appeared to have made a potentially game-changing move, though how it would work out in practice remained deeply uncertain.

Mr. Clegg [the Liberal Democrat leader], apparently conscious of the potential damage to the Liberal Democrats� reputation as a party of principle that rejects the politics of backroom deals and Machiavellian calculation, lost no time in making a statement of his own. He emphasized that talks with the Conservatives, which he described as having been very constructive� and having achieved �a good deal of progress,� would continue. In proposing talks with Labour, he said, he was not jilting the Conservatives, but recognizing, as he put it, that it was �the right thing� to open discussions with Labour �on exactly the same basis� as with the Conservatives.

In practice, senior Liberal Democrat officials said that Mr. Clegg had come under mounting pressure from within his own party, whose left-of-center policies on many issues, the officials said, were more compatible with Labour�s policies than those of the Conservatives.

Within his cabinet, Mr. Brown has faced arguments that Labour would do best to step aside for a new Conservative-led government, then sit back and watch as the Conservatives wrestle with Britain�s worst economic crisis since the 1930s, making deeply unpopular cuts in public services and other government programs that could provoke widespread protests and a new election as early as fall that Labour could win.

But Mr. Brown, announcing his resignation, made it clear that he had sided with those ministers, mostly left-wingers, who have argued viscerally against handing power to the Conservatives. He said there was �a progressive majority in the country,� and that it was Labour�s duty, as well as �in the national interest,� to explore whether that could be translated into a new governing coalition with the Liberal Democrats.

The logic underpinning talks between the Conservatives and the Liberals Democrats has been that their combined 363 seats � 306 for the Conservatives, 57 for the Liberal Democrats � would constitute a clear majority of at least 37. But if Labour, with 258 seats, combined with the Liberal Democrats, they would be short of the 326 seats required for a majority by 11 seats, and dependent for survival on attracting the support of eight other small political parties and blocs, including regional groups from Scotland, Wales and Northern Ireland that would be likely to demand a heavy price for their support, in terms of government subsidies and other programs for their regions.

That has set the stage for what could be a bitter Labour leadership fight now, with the candidates likely to include the home secretary, Alan Johnson; the foreign secretary, David Miliband; the education minister, Ed Balls; the deputy prime minister, Harriet Harman; and a popular left-wing Labour backbencher, Jon Cruddas, who has argued that Labour needs to return to its working class roots.

Politically and Economically Speaking

Politically, a coalition between Labour and the Liberal Democrats has far more in common than a coalition between Conservatives and the Liberal Democrats.

Whereas a coalition between Conservatives and the Liberal Democrats is like mixing oil and water, a proposed coalition between Labour and the Liberal Democrats adds rancid Brown eggs to the mix to make putrid mayonnaise.

The result will not taste very good, or be offered for sale for very long, but it will mix. Moreover, if Labour does unite with the Liberal Democrats, Brown will be around until September before everyone wishes him good riddance.

In a sense this is good news. Labour can destroy itself in the process, with Brown leading the charge.

Economically speaking, a coalition that put the Conservatives solidly in charge would likely be good for the British Pound. Anything else may wreck it. Unfortunately, even if a coalition between the Conservatives and Liberal Democrats is formed, it may not last very long.

Expect to see lots of turmoil no matter what coalition forms. As it stands now, the "coalition" will be between things that do not mix at all, and something akin to putrid mayonnaise.

Good luck with that.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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