There is no escape from Boolean logic. True and False are represented in algebraic form by the values 1 and 0 respectively. The simple methodology offers great comfort for business, not necessarily so for politics and certainly not for EU negotiations.

Enter the world of Schrödinger's cat. Scrödinger's cat is a thought experiment developed in 1935 by the eponymous physicist Erwin Schrödinger. It is a world in which duality pertains to truth and falsehood simultaneously.

In the experiment, a cat, a flask of poison, and a radioactive source are placed in a sealed box. If an internal monitor detects radioactivity, as with a single atom decaying, the flask is shattered, releasing the poison, which kills the cat. The Copenhagen interpretation of quantum mechanics implies that after a while, the cat is simultaneously alive and dead. Without looking inside the box, the cat is alive and dead. Look inside the box and the cat is alive or dead. This poses the question for physicists, of when exactly quantum superposition ends and reality collapses into one possibility or the other. Confused ...?

The trick is, of course, to make sure no one looks inside the box. Impact assessments can exist and not exist according to David Davis. The agreement to move on to talks about trade is not an agreement but a statement of intent. A firm date has been set for "Exit Day", the day we will leave the EU on March 29th 2019 at 11:00pm. However, MPs will be given the “power to amend the definition of ‘exit day’” at a later date. The exit day exists and it does not exist. Get the idea?

Exit day will then be followed by a transition period in which nothing will change for a further period of at least two years. Brexit will therefore exist and not exist. We will be suspended in Scrödinger's cat box. Truly global Britain neither dead or alive. A vassal of the EU subject to ECJ mandate without any say or representation on changes in regulation.

The EU has now made things difficult by asking the rather tortuous question of what exactly we want as an outcome. Government has three months to come up with a proposal. Don't be confused by the pan world options. Finland Flash, Canada Dry or Swiss Horn will offer no solution to the schism on the Tory back benches. Our deal will be bespoke, tailored for the UK with off cuts for Northern Ireland and Scotland perhaps.

We want to leave the free market for goods without losing full access. We want to be outside of the customs union yet conforming to established tariff structures and rules of origin. The UK will be leaving the EU and the customs union. However, the UK will ensure full alignment with the rules of the customs union and the single market. We will of course continue to pay into the pot, subject to ECJ legislation, guaranteeing the rights of EU citizens in the process, allowing more into the country to meet the job needs of the UK economy in due course. We will conform to the wishes of the British people, if only we and they knew what they were.

To be or not to be is the Shakespearean solution in Boolean form. To be AND not to be is the ask in negotiation for EU engagement. In the many strands of negotiation, Schrödinger's cat logic offers nine lives to the Prime Minister.  May the talks begin and they will ... don't ask to look inside the box just yet ...

Economics news this week ...
The Fed hiked rates again this week. It is the Janet Yellen swan song. The Chairman of the Governors will retire in February having completed a four year term. Three further Fed rate hikes are outlined in 2018 but probably not before March. The US economy is set to grow by 2.5% in 2018 with inflation averaging just over 2% this year and next. The $1.5 trillion tax cuts will add to inflationary pressure without much impact on growth or the Republican vote.

In the UK, the Bank of England voted to keep rates on hold. Two further 25 basis points rate hikes are outlined for 2018. Rates are expected to rise to 1% by the end of the year. Growth is expected to be around 1.5% with inflation slowing to 2.5% by the final quarter.

According to the ONS, headline CPI inflation increased to 3.1% in November, from 3% prior month. Governor Carney has written to the Chancellor to explain the drift from the 2% target. Airline fares fell but computer game prices increased! Goods inflation held steady at 3.3%. Service sector inflation increased to 2.8% from 2.7%. Food prices increased by 4.4%, transport services are up by over 7%. Producer prices edged up to 3% as input costs increased to over 7%.

So what can we make of it all? Inflation will not return to target any time soon. UK rates are set to rise. We are leaving Planet ZIRP as the Fed and the Bank of England will seek to normalize rates. Markets are soaring but this may well be the time to average out over the next three years.

The Vera Lynn School of Economics will begin to sing again "Recession again, don't know where, don't know when". Well it won't be here or in the US for a few years yet.

Interesting set of job stats for the UK this week. Unemployment fell slightly, vacancies increased to a further record level and wages increased to 2.5% on the latest three month average. Retail sales increased by almost 5% in value terms in the month of November. This is not an economy which is slowing ahead of Brexit uncertainty. Growth is expected to be just 1.6% this year but don't be too surprised if upward revisions follow for growth in the current year and forecasts for the year ahead.

Consumer spending is resilient. Investment will follow as businesses take comfort from the direction of travel in the EU deal. It is far too early for the Vera Lynn refrain …

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It all looked so gloomy on Wednesday. A Brexit deal agreed, the announcement to be made. A fine meal of scallops with butternut cream, turbot in a herb crust and tarte tatin with cinnamon scented ice cream preceded. The Irish question had been resolved or so it seemed. The DUP were uninvited to the feast. Arlene Foster had not been consulted. The deal on the table collapsed when the Ulster MPs realised they were unaligned. Theresa May faced humiliation ...

Dissent on the back benches emerged, a vacancy in Number Ten loomed by Christmas. Then Juncker came to the rescue with help from Leo Varadkar, the Irish PM. May bounced back ...

Flying in from Brize Norton, Theresa May was back in Brussels for breakfast on Friday. Fudge for breakfast and the difficult question of the Irish border was resolved. The words 'regulatory alignment' had been replaced with 'alignment with the rules of'. Alignment did not entail any harmonisation with the EU. That would be convergence, which would be unacceptable. Rather, we would have a number of regulations that would look very much like the EU regulations but would be special British regulations. Regulatory alignment is not the same as harmonisation which is too close to convergence. This had been made clear but more was required.

In the final deal, it was confirmed, there will be no hard border in Ireland. The whole of the UK including Northern Ireland will be leaving the EU and the customs union. However, the UK will ensure full alignment with the rules of the customs union and the single market, upholding the Good Friday agreement. No regulatory barriers will be allowed between the Northern Ireland and the rest of the UK without the agreement of Stormont. Confused? Who would not be ...

"Constructive ambiguity" is now replaced by "Strategic Ambiguity". Incompatible objectives were reconciled with a fudge served in a fine word wrap. "At least there is no red line down the Irish sea" explained the DUP leader. Yes, and Theresa May can't walk across the waters just yet.  "There are still matters we would have liked to see clarified but we ran out of time essentially". "We need to go back and talk about these matters again" Foster added ominously.

Ah yes, nothing is agreed until everything is agreed, the mantra. For the moment we are leaving the EU and the customs union but we may ensure "full alignment" with rules and regulations where necessary. The money has been agreed. It could be as much as £50 billion but we may never know. EU citizens rights are guaranteed, subject to ECJ law for the first eight years. A two year transition deal will take place which will push the departure date into 2021. Lots of time for business to adjust, for what as yet, we do not know.

At least it will give government time to make some impact assessments. In June, David Davis had assured all there were almost 60 industry sector impact assessments,“In excruciating detail.” he added in October. In November he confessed “It is not the case that 58 sectoral impact assessments exist", explaining in December in front of the Brexit committee of the house “Just because you use the word "impact" doesn’t make it an impact assessment.” Excellent. "It's just strategic ambiguity" he should have added.

The good news, "sufficient progress has been made to move to the next stage" says Juncker. Now Cabinet must meet to work out just what the next stage is. Just what is the "deal", for which we are going to ask. Surprisingly Cabinet has not met to discuss this as yet .

Should we be concerned? Well yes. An agreement to stop disagreeing is not the basis for final agreement with the EU, the DUP and the Tory Eurosceptics ... Nevertheless business will be reassured by the agreement on EU citizens, the transition phase and the prospect for fudge in any final deal on trade ... no need to pack up and leave just yet ...

Economics news this week ...
Manufacturing received a boost in October. Growth in the month was up by 3.9% on prior year, according to the latest ONS data. A boost from oil and gas output, up by 18% and a strong surge in capital goods by just over 8%, were responsible. Don't get too excited, for the year as a whole we expect manufacturing output growth of just 2.2%. Consumer goods output increased by just 2%.

Trade figures received a boost in October, that and a revision to earlier data in both this year and last. The total trade deficit narrowed by £2.7 billion to £5.0 billion in the three months to October 2017. This was due mainly to goods exports, which increased 3.8% to £88.6 billion. Unspecified goods (particularly non-monetary gold) were the main contributor to the increase. The UK is benefiting from recovery in Europe specifically and the growth in world trade more generally.

For the year as a whole we now expect a deficit (trade in goods) of £135 billion broadly in line with prior year. The service sector surplus could now be as high as £110 billion. The combined deficit could fall to just £25 billion compared to a £41 billion deficit last year. This is good news for growth and for Sterling.

Survey data from IHS/Markit CIPS suggested construction activity in November was rising at the fastest rate for five months boosted by the growth in housing. Commercial and infrastructure activity continued to decline.

Service sector growth eased back in November from October's six month high. Price hikes and inflation were evident in the survey. Underlying inflation is likely to exceed the Bank of England 2% target for some time to come ...

Any Haldane went back to school this week. "Everyday Economics" the title ... his speech was delivered at Nishkam High School in Birmingham. Economists have a problem of trust and understanding, claims the Chief Economist at the Bank of England. So often the problem is in delivery. So it was with the choice of title ... or so he claims ...

"If I’d taken media studies rather than economics, I’d have gone about things differently. I’d have drawn you in with a “hook”, such as people or children or dogs. Had my title been “Economics for the People”, I’d have doubled my readership. Had it been “Economics for the Kids”, I’d have quadrupled it. If I had opted for “A Fluffy Labrador Puppy Explains the Economy”, the Bank’s website would have crashed."

Really? Must check the open rates for The Saturday Economist this week. It could be time to rethink the headlines and the title as we enter our seventh year in publication next year.

Andy's school visits don't always work out so well. Fifty nine minutes into one session at a school in one of the poorest areas of the country, it was time for questions. Well two actually. "Who are you and Why are you here!" the query. It was a cruel enquiry. A show stopper. That's the problem with stand up comedy and economics. We all get those bad gigs from time to time.

In case you missed it, there was a big engagement announcement this week. Greg Clark released the UK Industrial Strategy White Paper on Monday. The Government is engaging with industry. A focus on five things, people, places, infrastructure, ideas and business environment. A great focus on robotics and AI. Yes I see the future and it works but not for as many as in the past.

No need to worry about manufacturing for the moment. The latest PMI Markit survey was exuberant. UK manufacturing climbs to highest level in four years the headline. Growth in output employment and orders all gathered pace. There was even an uplift in investment goods. Yes we haven't had it so good since 2013 the story. Don't get too excited. Manufacturing production is rising at a rate of just 2% in the quarter according to Rob Dobson, director at IHS Markit. Welcome growth in steady steps but no real "march of the makers" …

Economics news this week ... I see the future ...
Jeremy Corbyn was on the front cover of GQ magazine this week. Wearing a smart red tie and a Marks and Spencer suit, staff at the magazine suggested he was pushed around by his aides, like an old grandpa for the family Christmas photo shoot.

Underwhelming the verdict. The Labour leader seized the opportunity to slam the international banking community. "They are right to fear me" said Corbyn, "They think they run our country". "I will rein in the speculators and gamblers who crashed our economy in 2008" he added. Morgan Grenfell had dared to suggest a Corbyn-led government was a greater risk to the economy than Brexit. Maybe ...

As if on cue Richard Sharp delivered a speech at UCL on Thursday. "It Pays To Be Paranoid" the title [paranoid about puppies] would have been better. The Bank's FPC member issued a reminder the UK government had accumulated £1 trillion of debt since the crash. No scope for a Labour party spending spree. Don't take anything for granted. Venezuela had a "Triple A" rating thirty years ago, now in default. A Corbynista government in power, challenging the international banking community would create an interesting scenario for the Central Bank and for Sterling. Default and Depreciation in prospect ... I see the future in a Marks and Spencer suit with patches on the elbows and holes in our shoes ...

Is anyone worried about Michael Gove? Last week he was telling us that Brexit would be good for puppies. This week he was calling for more water fountains across the country according to the Times today. Access to drinking water in the UK would alleviate the problem of plastic bottles in ocean waters around the world. Excellent. Now there is a man with vision and a clear sense of infrastructure priorities. And yes he could be Chancellor one day ... another threat to the economy to put on the list …