By Miles Clyne
For good or worse, the people have spoken. 72% of Brits voiced their opinion with 51.9% saying leave the EU.
The immediate reaction across financial markets was as expected if the vote was to exit, sudden volatility in currencies, stock and bond markets, with Britain taking the brunt of the carnage.
I’ve stated for years the two primary drivers of markets are natural disasters and government policy. An argument certainly could be made that immediate aftermath of this governmental policy has created a bit of a natural disaster. The reality is that the sun rose today and that quite literally the world carries on. Businesses will open, people will shop and do all the things they did before. The world will adjust to the new reality that Britain has chosen to stand on its own. I personally raise my fist in solidarity of anyone choosing to be responsible for themselves.
When the EU was first formed, I wrote an article on the event. The essence of the article was that this was an experiment and sometime down the road we’d see how it worked out. The question now is; is this the beginning of the end for the EU? Is this a house of cards and did Britain see the writing on the wall? The old saying, you don’t want to be the last one out may have some merit in this situation.
One of the arguments against the EU from the beginning was that it was a crutch for the countries with small and or weak economies. They’d benefit from the union having a higher credit rating given its collective size. We saw the disaster in Greece that was drug out for years, at least partially because they could continue borrowing rather than deal with their internal problems.
What comes to mind when I think of this is the danger of group think, which is the herd mentality (think herd of lemmings running off a cliff). If we want to really see what this is like when it comes to finances read the book or watch the movie “The Big Short” based off of the global financial crisis in 2008-09. Institutions could put together a group of bad investments and then say they were better and safer because there were more of them. Governments supported this, investors rushed in, everyone lost their minds until the party ended. It took a number of years to see the consequence of the logic.
For a great perspective, check out this article.
Vive la Britain.