The recent result of the referendum in the UK to leave the EU has been a big talking point in the last few days. Many friends have been asking me what I think will happen in the world of finance and business. Here are my thoughts. Firstly, I must say that in principle, the idea of the EU is quite commendable. To bring together a group of societies that have been at loggerheads for thousands of years, to usher in an era of peace (well, at least between those countries) is no small feat. It is also a wise strategy to tie these countries in together economically, because nothing binds people together like economic interests. That said, the EU does have its fair share of challenges, but that does not make the project a failure; it simply means that in its current form, it is not serving the needs of its constituents. It is still an idea worth pursuing, though it is currently in dire need of reform. Perhaps some day that idea will expand to include all countries and all people, and everyone will be able to live as one big happy family. Now, turning our attention to the present moment while looking through the lens of history: every time an “empire” becomes too big, issues like wasteful expenditure, corruption, loss of ideals, crippling bureaucracy and so on set in. This has happened innumerable times in the past: the Roman empire, the Greeks, The Ottomans, The Mughals … the list goes on and on. There are a great many ridiculous and useless things that unelected bureaucrats from the EU come up with. Sometimes their intentions may be good, but the implementation completely lacks common sense and imagination. At other times, it is difficult to believe that the common people of so many nations are paying taxes to afford exorbitant salaries for idiots who add no value (or in fact, cause damage) and have no idea what they are doing. Here are some examples:
- Some clever bods in the EU bureaucracy decided that it would be a good idea to create rules for … erm, bananas. They set the wheel sin motion to issue a diktat saying that a banana could only be called a banana if it had a certain curvature, a certain thickness, and so on. I mean, really??? What kind of degraded intelligence comes up with nonsense like that? Thankfully, the proposed law never came into effect, but that’s because the “common people” found out about it and ridiculed it to a degree where it was (no doubt resentfully!) withdrawn. I wonder though, how many productive hours were wasted debating such a stupid issue, and how many millions of Euros were wasted looking into this exceedingly stupid suggestion.
- The EU brought into force (with good intentions no doubt) regulations for small cafes. So if you wished to run a cafe, the surfaces needed to be of a certain specification, the lighting needed to be of a certain specification and so on. In principle, it was a good idea to ensure the health of people eating in small establishments. What happened in reality though is that the materials they specified were so expensive that a large number of cafe owners decided to shut down shop, as they could not afford the expensive upgrades. I know because one of my friends was affected in this way. If a place does not serve good food, people will eventually find out, and they place will go out of business anyway. If we can’t even rely on people being semi-intelligent, and the government needs to ‘protect them’ at every turn, then such a society is surely starting to crumble.
- Businesses in the finance world often use contractors for projects. These people do not have the same “rights” as employees, but they are highly paid, their skills are respected, and they are quite happy with their lot. I know, because I was one. In comes the EU, saying that if a contractor works for the same company for more than two years, then they should get the same perks such as insurance and pensions as permanent employees. The idea was to prevent companies from exploiting labour. But let’s face it: are these highly paid, professionally qualified people at any real risk of being exploited? Are the best and brightest minds in finance really that dumb that they cannot protect their own financial interests? Come on! Bringing in the rule for low skilled, low paid labour would have made sense, but the EU minions decided it needed to apply across the board. The result of this badly designed law? The banks certainly did not lose any money by giving extra perks to the contractors. Instead, they started converting contractors to employees, at much lower salaries of course. Who gained? The governments. Because employees pay more taxes, employers also have to pay extra “contributions” to governments for the pleasure of hiring people, and of course, there would be more people forced into sinking their life’s savings into pensions which the governments are free to raid whenever they feel like it. Contractors with real skills started leaving, and jumped ship in less than 2 years each time. This is actually a huge loss for a business, because each time a skilled person leaves, a lot of experience leaves with them.
- There was much brouhaha about Greece and its economy in recent times. While socialists love to talk about how “ordinary Greeks” are “suffering”, let us, for a moment look at retirement ages: http://greece.greekreporter.com/2014/12/04/75-of-greek-pensioners-enjoy-early-retirement/ So, nearly 25% of Greeks retire between the ages of 51 and 55, and almost 60% retire by 61. And 91% retire before the national retirement age limit. What is that telling us? People don’t want to pay taxes, but want to have lots of paid holiday, retire in the prime of their lives, and to magically be fed and pampered for the rest of their days. Where is the money for this going to come from? They don’t care of course; its their “right”. Unfortunately, the EU seems to have (perhaps unwittingly) encouraged that kind of behaviour in most countries that are part of the club, and now the chickens are coming home to roost.
- Recent developments with the migrant crisis: Despite all its failings, Europe is a fairly safe place, with progressive thinking, where women are respected and treated as equals, and you are generally not walking about in fear for your life. It is incredibly stupid and naive to imagine that letting in many millions of people with a completely different mindset and values will not have a big impact. Of course, there is the humanitarian aspect to consider. The majority of migrants are economic migrants though, not people who are being persecuted. It is of course natural for humans to try and better their lot, but people migrating for economic reasons (I did too, so I have nothing against the concept!) do not constitute a humanitarian crisis. There are some basic questions to consider. If it was purely a “life and death” issue, why are the refugees not going to other countries nearby, why are they heading all the way to Europe? There are many rich Muslim countries like Saudi Arabia, Qatar and the UAE close by – why are they not taking in refugees? Why are the refugees not applying for asylum in places like Serbia, where they are being accorded very humane treatment? The refugees coming through at this point are not just from the affected areas in Syria and Iraq, but there are also many coming in from Afghanistan and Pakistan. Those countries is not in particularly good shape at the moment either, but it goes to show that migration isn’t just about the current humanitarian issues in Syria. The war has displaced people, which is a terrible thing, no question. But let us not forget that there is an economic reason mixed in with the situation, and that is a big factor why the migrants are heading to Europe, not somewhere else. Europe is seen as a “soft target” – once you get in, you are fed and clothed with public money, you can practice your beliefs and speak freely. All these are good things. However, when the beliefs and culture of the migrants starts to hurt the very roots on which European society is based, such as equal rights, freedom of speech for all, and respect for women, then we have a problem. I watched a very informative video with a discussion featuring Ayaan Hirsi Ali. She has experienced these societies first hand having being born and raised in one, and she explains how its quite normal for a man who likes a woman to rape her, knowing that the family will marry her to him in shame (https://www.youtube.com/watch?v=SV_GMeZ_XmA). Its important for any migrants coming in to be properly trained in social rules in the host country. You can’t walk into someone’s home as a guest and then enforce your rules in their house. Unchecked migration with no planning for integration causes problems like the shameful attacks on more than 1000 women in Cologne on new years’ eve 2016 (https://en.wikipedia.org/wiki/New_Year’s_Eve_sexual_assaults_in_Germany). What is even more shameful is the attempt by “bleeding heart” authorities to suppress the stories just so public opinion on letting in refugees would not turn. Simply put, there is likely to be huge social unrest in the EU in the coming decades if the migrant policy is not changed. There are voices which say that the EU political leadership knows this, and wants to encourage it, because a frightened populace is easy to control and will give up a lot of their liberties in the name of “security”. A crisis of fear also conveniently takes attention away from endemic corruption, laziness and incompetent mismanagement. Let us also remember that the migrant crisis is being caused by the actions of America and its European allies, in their stupid desire to dominate the world by projecting power beyond their borders militarily, rather then through culture and understanding. Putin, who is demonised by the press in the West, actually seems to be a fairly level-headed and reasonable chap; far better then war-mongerers like Bush, Clinton and Blair. This short video shows clearly how blinded and one-sided the Western media is, and sadly, they are failing the innocent people who depend on them for news: https://www.youtube.com/watch?v=OQuceU3x2Ww
- On another note, history has shown that the ruling elite can never stand against the might of a united populace. From the French and American revolutions to the independence movements in India and South Africa, we have seen these stories unfold with exactly the same result. Perhaps it is time for people from these places to stand up and fight for their right to freedom, as other societies have done throughout history. Freedom does not come without sacrifice. But the point of this article is not about philosophical arguments on the migrant crisis, so let us move on.
Personally, I wasn’t in either camp: until the day of the referendum, I felt it didn’t really matter which way the vote went. From what little I followed of the discussions in the preceding days, it seemed clear to me that both camps were not giving objective information to voters: false numbers were being bandied about, and there were silly predictions of everything from financial armageddon to terrorists overrunning the UK. It was clear that the establishment wanted the people to vote Remain. In the absence of sensible information, people will always vote emotionally. That’s where both camps failed the people. As the results started coming out, and the Leave vote was leading, I had a growing feeling of excitement. When the final votes were counted, there were many people who complained that they had not got their way, but let’s be objective: in a country where people are more tolerant than in most other countries, more than half the population were saying they were unhappy with the way the EU is. That is an incredibly large number saying that something about the EU is broken, and its bad enough for them to want to leave, no matter how hard it may be in the short term. I hope that the EU leadership wakes up and hears this for what it is. It cannot be “business as usual” any more. There seem to be some encouraging signs of this happening: http://www.bbc.com/news/world-europe-36712550 and http://www.bbc.com/news/uk-politics-eu-referendum-36710399 (last paragraphs in both articles) The UK is the fifth largest economy in the world; it did not get there without hard work and intelligence. At one point it ruled a significant proportion of the world, and while subjugating the people of another country is not a good thing (they did some terrible things at that time, but also good things, and who are we to judge the deeds of past generations?), let us not forget that it was no small feat for a tiny island nation to dominate world economics and politics for so long. That empire was built with courage, intelligence, sacrifice and discipline; virtues that are still desirable to this day, in any society or people. The British public endured the worst during WWII, without complaint, and came out on top. The UK was always once of the voices of reason in the EU; not one of shrill ones always complaining and asking for dole-outs. It would be ridiculous to say that a nation with over a thousand years of history and prosperity would suddenly implode if it came out of a 40-year old arrangement with the EU. Yet, that is what the political leaders of the EU and the UK wanted the people to believe. And the people responded by thumbing their noses at the political establishment. What I found encouraging is the saying “no” to fear. I suspect if both side had presented more sensible arguments, people would have voted based on those arguments. Trying to use fear as the major selling point caused a huge backlash for the Remain camp, and they only have themselves to blame. So what next for the UK? I believe that in twenty or fifty years from now, it’ll be just fine. There will of course be some short term uncertainty. The economy may falter, but it needs to anyway, regardless of the EU; its been propped up for far too long on crutches and needs to fall to find its legs again. The UK housing market is over-inflated. The currency, which has lost 10% in the past week, is still far higher its real worth (as are the euro and the dollar). The weakening of the sterling is not a bad thing for the economy: it makes British products cheaper, so helps exporters; it makes visiting Britain cheaper, so brings in more tourists. Britain is currently frighteningly expensive for anyone coming in from abroad, and a softer sterling will help. Where a weaker sterling affects the lifestyle of British people negatively is that holidays become more expensive, but then again, how long do people go on holiday abroad? Typically between 2 and 4 weeks in a year. Imported products also become more expensive with a weaker currency, but that is offset by the increase income from exports (from the perspective of the national economy I mean; it does not help Joe Bloggs from down the street who has to pay more for his Dutch cheese and French wine). What about the impact on the rest of the world? Not much, really – the world will take this in its stride and move on. Some friends who are invested in the Indian stock market asked me about the impact on India. I’d say either no impact or a positive impact, because now the UK is likely to need more trading partners, and will be free from cumbersome EU regulations which forced the UK to follow the EU’s line on trading with countries outside the EU. On 23 June, the Indian Sensex closed at 27,000. On the 24th, when Brexit became a reality, it dropped to a low of 25,911: a drop of nearly 1100 points. But from that point on, it gained and closed the day at 26,398, so nearly 500 points up from the day’s low. And today, one week from the event, it closed at 27,144, higher than it was before the Brexit result. So it took just one week for India to get over the “shock” of Brexit. I’d like to see the faces of those who predicted worldwide financial armageddon in the light of hard facts. An interesting side note here: what happened in this one week was a classic example of transfer of wealth. People who did not know what they were doing, or why they had bought the companies they had bought (just followed the herd or some ‘tips’ I’d imagine) panicked. They started selling off their shares due to fear, causing the market to fall. When it had fallen 1100 points, the clever folks saw great companies available at a discounted price and started buying. By the end of the day, more than half the fall had been reversed, and in one week, not only was the fall completely reversed, but in fact, the market closed above pre-Brexit levels. It goes to show that people who invest emotionally without knowing what they are doing end up losing money, and those who invest with confidence for the long term do tend to make money in the markets.
In closing: hats off to the British people for making a brave choice. I have a great deal of respect for the way the votes were counted fairly, and how the result was respected by those in power, even if they desperately wanted a different result. Thumbs up to David Cameron for being a real leader and acting respectably post the result. Britain is going to be fine. Any challenges it faces financially will not really be due to the result of the referendum; they will be because of economic fundamentals that need to be addressed anyway. The result of the referendum may just have helped to bring those to the surface. Above all, it is important to choose hope over fear; we are capable of facing anything that we put our minds to. An occasional shakedown is a good thing; it helps remove collected dust.