The Brits had a chance to seize the world dialogue with their Brexit vote and they made the most of it. On Thursday, June 23, 2016, Liberty and Free Markets scored a major victory.
On that glorious day the British people voted to leave the European Union in spite of a well-choreographed full-court press inflicted by the establishment over the past several months, who wheeled out every major scholar, political operative (including Obama), and industrial leader (like JP Morgan Chase’s chairman and CEO, James Dimon), to convince the British people that bureaucratic oppression was better than the independent pursuit of prosperity.
Think about that for a second, in April 2016 the President of the United States argued before the British people that a supranational organization of unelected leaders non-responsive to the will of constituents is better than independence for those same constituents. In other words, it’s okay for unelected people to make laws that must be followed by people who not only don’t want those laws, have no way to repeal those laws, and have no way to petition a Congress or Parliament to change those laws. In other words, laws and procedures with no recourse for constituents is a better operating model than democracy.
Obama advocated this.
And if the Brits didn’t agree with King Obama? Well, then, they would just have to go “back in the queue” for trade deals.
The Brits, in the same spirit that liberated us in 1776, served Obama and his ilk the proverbial middle finger.
I join in their contempt.
My case for the ultimate collapse of the EU has always been: How long will the German taxpayer be willing to send their hard-earned cash to fund the Greek Nanny-State, and Portugal, and Cyprus, etc. etc.?
In SURVIVING THE NEXT CRASH[1], I said this…
And while another act of war on the homeland can obviously begin the next major corrective cycle, I still believe the impetus will be money related: inflation, spiking yields, widespread currency and debt devaluations, the collapse of the Euro, or something along those lines.
Friday’s 3.5% downward move in the stock market wasn’t just another wildcat move. It was a move based on something big – a major global event. The British exit from the Euro (a.k.a. “Brexit”) is the first in a series of events that will bring about the next major global reset. It is the beginning of the beginning, a modern day Lexington and Concord.
So what does this mean for the U.S. market, stocks and bonds, and all the other markets that drive global growth?
Not much. England will remain the serious market contender it has always been. Trade will not stop. Military alliance will not cease. And money will continue to flow throughout the world economy. But make no mistake, English succession is going to be a rough and bumpy road; if for no reason other than the EU will not allow it to be an easily travelled path. The EU is going to make it ugly and painful so to deter other member states from following Britain’s lead. An easy British exit would facilitate a mass exodus from the Euro – and the EU doesn’t want that.
But they can’t stop it.
The EU is rife with corruption. Big businesses and big government proponents pump billions of dollars through lobbyists to pass trade and immigration laws that only benefit themselves – the big bureaucracies, labor unions, and large multi-national corporations. The hell with the people is the way they operate because the people have no say, no vote, and no remedy. That is a blank check for corruption.
And the Brits rebelled. While they were the first, they won’t be the last.—And that’s what the markets reacted to on Friday, June 24, 2016. The uncertainty of what happens next.
Never before has a country left the Euro bloc – but already the Dutch are promising to be next. The Italian people are interested in a referendum on leaving, and let’s not forget about the Greeks, who started the movement with their talk of a “Grexit” when negotiating one of their many bailout packages.
So investors could expect a lot of volatility going forward, and I wouldn’t be surprised to see stocks test the lows reached in February 2016 and August 2015. Why not?
The International Monetary Fund (IMF) recently downgraded U.S. growth yet again, and market activity across Europe has been nothing better than lethargic. Chinese growth, the “cause” of the prior two aforementioned corrections, is still weak. Fiscal irresponsibility at the government level remains an epidemic, and the global body politic is in turmoil.
Even with Friday’s price drop stocks are flat this year, and valuations are still rich. There is a lot of room left to fall. Yields continue to drop in America, Germany, and Japan, as investors continue to seek shelter from the storm. And gold is on the rise, indicating a weakening economic and currency environment.
While the EU will make British succession difficult, I doubt they will so stupid as to isolate Great Britain from the rest of the region. That would be suicide. They need a solid relationship with England. Without it the entire Euro Zone is grossly weaker. And even the spiteful members of the EU who want to rip off the Band-Aid, like France, know it.
This puts the EU in a delicate quandary. They could only be so tough, and so accommodating.
Negotiations are going to be very theatrical and will no doubt rattle markets many times along the way. The EU will talk tough and act like a spoiled child who thinks they know better than their parents. And the reason for that is simple. The British vote was a complete and utter rebuke of them and their elitist policies and mentality.
Trump should feel good about that. After all, it is the same sentiment that propelled him to the Republican nomination. Trump has talked a lot about his candidacy being a movement. But that’s not accurate. Trump is not the movement. He is simply riding the wave of the movement, an anti-establishment watershed.
At times it may look like the Brits made a mistake while a new captain navigates their ship through a rough sea, but posterity will vindicate them when their ship makes it through the storm. Until then, freedom, independence, and free markets shall serve as the beacon of light that guides them to prosperity. That combination always outperforms socialist dictatorships.
Always.
The question is: Who will follow next?
Stay tuned…
