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June 24, 2016 | They What??

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

Defying the odds, spitting in the eye of convention, shattering the predictions and expectations of financial markets across the entire globe, a slim majority of Britons voted last night to take their country out of the world’s biggest free trade zone. It was dramatic and unexpected by those who felt UK voters would not be myopic enough to opt for nationalism, protectionism and a new form of isolation. But they did.

Financial markets had made the opposite bet, so the reaction is pretty much what you’d expect. A knee-jerk move down for stocks, a surge up for safe haven assets like bonds, the US dollar and gold, plunging bond yields and a devastation of the British pound. The Canadian dollar sank as the greenback surged and oil prices toppled, in an immediate one-two blow for Canadians.

Politically, David Cameron is gone as UK prime minister, ushering in a new period of volatility and uncertainty there. Scotland, which voted to stay in the EU, is now grousing about a new independence vote. There’s talk an emboldened France may want out of the Euro zone for the same reason most Britons did – to control immigration. As such, it could conceivably lead to the eventual breakup of the whole thing, plunging 700 million people into an unexpected and potentially difficult reality. It certainly would thwart the efforts of institutions like the European central Bank to stave off deflation and fight the unemployment that’s plagued the region.

While stock, bond and currency markets will find their level again – likely posing some massive investment opportunities (as did 2008) – the economic and political fallout is something else. No doubt about it, people are in a mood. It’s anti-establishment, iconoclastic, pissy, defiant and visceral. This is the same sentiment which has propelled a talentless bombast like Donald Trump to the threshold of power in the States. Dangerous.

The celebration of the UK’s questionable decision here on this pathetic blog last night is astonishing. So many people see this not as the backward economic and financial step that it is, with global implications, but as revenge for the little guy – against forces they felt powerless to change. Until now. As a cowboy I understand this perfectly. As a financial guy, it’s insane.

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June 24th, 2016

Posted In: The Greater Fool

5 Comments

  • Avatar bh2 says:

    Until now, they didn’t merely “feel” they were powerless to change the EU. They recognized that was the fact and took the opportunity to take back sovereign power they never agreed to cede in the first place.

    Or as some Brit said in another election of another era: “The people have spoken. The bastards!”

    When the people stop being bastards, the government will be.

  • Avatar Fried says:

    Garth, I really enjoy your column. your insight is quite prescient. But the UK “independence” vote is not financially insane: It’s just a bump in the road. The people of the UK will persist quite comfortably.

    • Avatar Ted Catlin says:

      Agreed. It’s not about financial issues. I took a hit along with many others, but in my view it was worth it.
      Britain voted to get back its sovereignty, and get out of the clutches of the unelected twits in Brussels and the ECB.

  • Avatar IAA says:

    I do not agree that Britain got out because of immigration, yes that was part of the issue as it is complex, but the underlying thing here is the fact that Britain does not want to be ruled by Brussels. The EU was doomed from the start because it was not constructed properly in the first place (ie.common currency, and common banking system). What Britain did was get off a sinking ship. As far as the EU coming down hard on them so as to show the other countries what will happen is small and typical of the elite running our finances today. Big guns – fear tactics. What is going on world wide is the people are fed up with the big banks and corporations, corruption and , greed. it is why buffoons like Donald Trump are getting a vote, because there are some underlying truths to what he is saying. The people are fed up with the establishment and are saying so. Things will the rough for Britain and for all of us, but Britain will survive and do well eventually.

  • Avatar Fred Roberts says:

    France really needs out so they can debase their currency again.

    (To stop immigration they’d have to move away from the Mediterranean….)

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