Bigger is rarely better. Especially when it comes to governance. The “bigger” government is, the more detached from the governed it becomes; the more onerous its regulations and taxes become, and it becomes more susceptible to the ideologically motivated cause célèbre of the ruling elite. We have seen that verity over the past several years in America, and apparently the United Kingdom (UK) has come to the same conclusion.
The result of the vote created a veritable tempest in a teapot for financial markets, as most global stock exchanges dropped by 8-12% over the next two trading sessions. The stock selloff resulted in a predictable flight to safety, as traders moved to treasuries and the metals, spiking bond values and dropping yields. U.S. markets have recovered most of that volatility-induced loss, while most European markets have only somewhat recovered.
They were also planning on banning six of the top 10 selling vacuum cleaners in the UK, including immensely popular British manufactured Dyson models. The move was seen as more “nanny state” meddling in the minutia of daily life. And their proposals were seen by Britons, apparently, to be as inane and idiotic as when the U.S. congress outlawed incandescent light bulbs as one of the first “accomplishments” of Nancy Pelosi’s 110th Congress in 2007. Ideologically driven regulatory meddling – the “nanny state” personified!
MFS, the Boston-based mutual fund company, explained in a research piece this week, “To sum up, it looks as though the UK’s decision to leave the EU could be the beginning of a large, protracted process in which dissatisfaction with the effects of three decades of globalization is being expressed in ever more impactful ways.”
Theodore Bromund, senior research fellow in Anglo-American Relations at the Margaret Thatcher Center for Freedom, expresses little concern from the Brexit vote. He argues that the benefits to both the U.S. and the U.K. are much greater than staying with the EU.
“The upside, economically, is that the UK would have the ability to sign genuine free trade agreements with whichever nation or nations that it could negotiate satisfactory agreements. The U.K. has a much wider financial role than just trading with the United States, as important as that is, and the city of London could continue its worldwide financial role, unrestrained by Euro related concerns. So that’s the economic side.”
Professor Tim Congdon of the University of Buckingham, has highlighted the high costs of regulation from the EU. He maintains that EU membership costs the U.K. over 10 percent of GDP, and that long-term they’ll be much better off.
The Brexit vote could be the beginning of the unravelling of the EU. Other countries considering their own “Brexit” are Czechoslovakia (“Czechout”), Finland, (“Finnish”), Italy (“Italeave”), and Netherlands (“Nexit”). As the anti-globalization sentiment grows, there could be a domino effect, which could see the unraveling of the EU and their currency, the Euro. Since the UK retained their Pound Sterling, at least they won’t have to worry about a currency reversion.
Presidential candidate Donald Trump was not surprised. “The world doesn’t listen to him.” Trump said he wholeheartedly backed Britain’s decision to leave the EU and once again forge its own path. “You just have to embrace it,” he said. “It’s the will of the people. What happened should have happened, and they’ll be stronger for it.”
Farage explained further, “People power can beat the establishment if they try hard enough.” It worked for the UK, and may carry over to other EU members with their upcoming votes. The U.S. could join that same anti-globalism and anti-establishment wave with a Trump victory in November. Time will tell.
Associated Press award winning columnist Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, Idaho and is a graduate of Idaho State University with degrees in Political Science and History and coursework completed toward a Master’s in Public Administration. He can be reached at rlarsenen@cableone.net.
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