I applauded the “Leave” vote by the peoples of Britain regarding the EU. After all, the central planning behemoth of Brussels is even more socialistic and meddlesome than our nanny-staters in Washington. Both believe they have, as it were, “divine right” to make whatever changes they deem right for our lives, without our consent, any time they think it necessary. No thanks!
The financial panic that resulted from the shocking result was also revelatory. It may even be a harbinger of greater events to come!
Think of that reaction, there was, in essence, a filing of divorce papers. But then every person who knew either party decided the world was ending tomorrow, and sold off their financial holdings.
Wait a minute! I’ve been thru a divorce, and the filing is not the result, it is legally, and financially, only the beginning of the dissolution of the ties that bind. Likewise with the Brexit! Now begin the claims, and counterclaims, and the negotiation of the terms of dissolution. What if the Brits end up somewhat like the Swiss, not in the EU, but with close bi and multilateral ties across that union?
Everyone knew that the negotiations had not even begun, but they ran in panic for the exits anyway. Curious, no? What does that mean???
Worldwide, investors reacted as though these heads of government were, without fail, going to do something positively stupid! Secondly, their reaction was one of hair trigger panic first, before the facts and players in the negotiations to ensue were even determined. Any whiff of uncertainty elicits panic!
And then, a couple of days later, the markets rebounded back on trend and made higher highs. Nothing had changed. What gives?
The Brexit panic was a clear demonstration of how completely governments have undermined the credibility of the financial markets. Yet, anyone with assets must be a participant in them, regardless how unsettling that might be.
Most cognizant investors realize that, a la Reagan, government is not the solution; it’s a big part of the problem. So we must behave as heretics to the “holy words” spoken by our “leaders” as a knee-jerk reaction in a sense of self preservation. We know that they’re going to “do something” even if in so doing they exacerbate the problem by the scores of unintended consequences of those actions.
The good part, potentially, is that our young are hearing their erstwhile leader pontificate, vouched for by the education hierarchy. Yet they see and hear the reality of the effects of those words from on high in discussions over the family dinner table, about budgets, and their prospects for college or a new car. Socialism is great until you run out of other peoples’ money! Even the uneducated can sense when things aren’t right, and today the dis ease is palpable. This dissonance is similar in potential to the era preceding the War for Independence. The minds and hearts of the people are losing faith in the status quo; thus the TEA Party, MoveOn, BLM, Bernie Sanders, and Donald Trump arise in cathartic response to the death rigors of that status quo.
Likewise, Americans are losing faith in the legal system: illegal immigration, the VA, selling guns to the Mexican drug lords, use of the IRS for political purposes, riots in the streets, Islamic violence, etc. And look, everyone knows Hillary is guilty of egregious conduct, if not multiple felonies. Yet, she goes unpunished, and is in line to be rewarded with the highest of honours for such conduct? Who can respect that?? And Trump? To ask the question defies common sense!
Yet here we are. This loss of faith in the legal system compounds the levels of risk in the financial system. Without reliable faith in the law, no contract is sound, so perhaps it is wise to panic first, and learn the facts later.
The only psycho-economic characteristic that has yet to appear to guarantee economic destruction is the increase in the velocity of monetary exchange. We are at near historic lows in monetary velocity. The central bankers assure us that they are in control, but the reality is far different. Those same central bankers, worldwide, have created an unprecedented overhang of digital currency. They are prodding the commercial banks to get it into circulation. Yet, so huge is their unprecedented historical monetary creation, should it move into circulation, rather than being posited on bank balance sheets, it could drive the prices of all commodities, goods, and services into the stratosphere in short order. There would be no semblance of control anymore, and the poor schleps that solely relied on the banking system would be left with no assets to exchange for such goods & services, even food, when the banking systems seize up.
Here we stand on the precipice. As the commercial goes, “What’s in your wallet?”