Monday, June 27, 2016

Brexit: What Now

The battle was neck to neck with a difference of a million votes which means the country is split right down the middle: for every one voted Leave, there is one voted Remain, well, almost.

The Brexit referendum on 23 June therefore has been most divisive and there is a need for the nation to heal. But this is going to take some work because even the two major political parties are split. The Cameron/Osbourne camp is not happy with the Johnson/Gove camp. The Corbyn camp is not happy with the Hilary Benn camp.

This political mess is the source of the uncertainty over the consequences of the vote to leave the EU. The uncertainty is that no one at the moment is deciding how the UK should leave the EU. The people are uncertain. The businesses are uncertain. The European Parliament is uncertain.

In this uncertainty, the first instinct of the financial markets is to sell. There is no point holding to your portfolio and waiting for the uncertainty to be resolved. It is better to get out and wait. If you want to get out, it is better to be the first the get out than to the last to do so. This is why the financial markets are selling down.

Is Brexit bad for the UK economy?

In the first place, the world economy including the European economy is already in bad shape before the referendum as a result of the consolidation that is taking place in China which some have forecast that it would take five to ten years for the consolidation to be completed and a recovery engineering with a new framework for domestic-oriented growth in China. US is on the verge of a recovery and the Fed has been trying to raise US interest rates and end the quantitative easing which has so far been creating perverse flows in the global economy.

The major perversion of financial flows in the global economy has been the putting of financial resources in the hands of extremists who now have access to heavy weapons. It is this war that is creating the flood of refugees who are fleeing for their lives and in search of greener pastures that is disrupting the peaceful and happy life of the Europeans. The refugees want to enjoy the lifestyle of the English, French and Germans.

Presumably what Brexit will do first is to put a stop to this uncontrolled immigration into the UK, and in its place will be a process of processing and approval. Other thing else will adjust.

Whether Brexit means a complete withdrawal of the UK from the common market is another point to be argued. Nobody wants to do less trade; it will be silly for the EU if it wants to be punitive in the hope of discouraging other EU components to leave.

No doubt there will be investments which would have come into the UK before Brexit and which may want to rethink, mainly because of the uncertainty surrounding the terms of the departure rather than the unhealthiness of the UK economy which probably is no worse than other European economies. Investments that are already in the UK should have no further push to get out.

Certainly, there are many serious to be discuss between the UK and the EU parliament. It will be a long process of at least five years to sought out all the details, although the main details can be framed within two years. This is when political cohesion in the UK politics is crucial.

I expect the financial markets to recover soon after all the sellers who wanted to sell have sold their position. Then they will start looking at the bright side. By then, 18 months ?, Brexit may be a happy word on the lips of ordinary people.

4 comments:

walla said...

1. The northern half voted to stay and that would be understandable since its rural belts would want continued and easier access to a bigger market for its bulky and perishable agro-produce.

2. But the southern half voted to leave whose immediate result is the weakening of its vaunted pan-european financial and related services which had enable its London and the southeast to fuel post-crisis economic growth.

3. So the cause for brexit must have been the referendum triggering an undercurrent present for some time in the southern half. That the results are only marginally different must therefore mean the undercurrent itself was composed of economic benefits to stay just pipped by social arguments to leave which were subscribed for the first time by both centres, left inasmuch right.

4. Since the only surprise was in the southern half, what was its difference from the northern half? Immigrant workers.

5. Yet those workers had provided grunt work to fuel the services growth of London and the southeast without displacing locals.

6. Perhaps it's a subset of the immigrant worker polity - since the other immigrants are inconspicuous and undemanding, a growing alarm that the milk of kindness given has only been returned as a trojan horse by a certain grouping in the form of islamic radicalization that has already broken all hopes of patience for a newer brand of non-dogmatic conservatism that is more flexible for having been given welcome to a modernizing society open to a continuous evolution of the more urbane elements of what are called the basic goods first identified by Finnis, namely a healthy and right-sized BALANCE of:

life, knowledge, play, aesthetic experience, sociability of friendship, practical reasonableness, and religion.

7. Suffice to say, the most critical factor there, for that matter everywhere else, is the reproduction rate. At its rate of nine times the locals, the UK will become an islamic state by 2050.

8. Given the faith's increasing intensity of social exclusivity and unwavering exclusiveness captured on celluloid across the globe, those twenty-seven still in the Brussels domain cannot be resting easy these days.

9. Maybe the brexit voters had exercised a certain phronesis of the event and had felt impelled to sacrifice economic benefit as their way to stave off the Huntingdon syndrome that has penetrated the EU after breaching its Atlantic Wall.

10. What are the lessons we can draw closer home? If we implode, we may see our own version - a Maxit. Our own undercurrent has been going on for too long. There is no need to elaborate. All the writings have been carved on the wall, and they ain't no graffiti. Same factors - artificially created social and religious divides, economic challenges, productivity declines, political insanity even.

11. The only difference is that here we are historically all immigrants. So the undercurrent is only about principles and how to build a basic goods framework that progresses, not lock itself into some unnatural dogmatic persistence where pragmatism, rationale and humanity are constantly rocked and sacrificed by kleptocrats and the occasional sub-species from the cohorts of muftis, ex-chief justices, racists and shit-stirrers.

12. No?

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henry tan said...

Yes I do agree with you that it is just a matter of time to recover to the glory days.