The Vote


First, the vote itself is one of the biggest stories of the decade. The reason is that so many movements that have tried to upset the establishment and the status quo have failed. From third party attempts to win the presidency, to the Tea Party movement, to Bernie Sanders, none have succeeded in overthrowing the "powers that be". 


The vote to succeed from the European Union did. Every major institution, every big name and popular star imaginable including President Obama, was paraded before the English people telling them that a leave vote was crazy; that it would bring economic disaster and social upheaval upon Britain.

Most of the media shouted from the roof tops that a leave vote was irresponsible. The poles showed a lead for the remain vote throughout the campaigning period. The bookies who are rarely ever wrong had it 80 to 90 percent that Britain would remain, and right down to the last day gave 7 to 1 odds of a remain vote winning out.

Even more convincing were the markets. From the rise in value of the pound to the stock markets, to gold, to the bond market, the evidence was on the side of a remain vote. The bottom line is everyone "knew" that the vote to remain in the EU was assured.


The vote wasn't even close. To leave won 52% to 48%. It was the biggest political upset in history, and it shocked the world. It is a tribute to the power of individual choice over money, media, and fear. It shows that the power still remains in the hands of the people and not the so-called establishment. It is modern day evidence that independence and liberty are still attainable in the world today. It was a modern day non-violent coup as we saw the Prime Minister David Cameron resign. It was indeed, the night of nights.


The Reason for the Vote


There are many opinions as to why the people of Britain voted to leave, but the main reason to my way of thinking was the backlash over the EU policy of open borders. Over the decades everyone and anyone that wanted to enter Britain could. The problem was over the years the new immigrants did not assimilate. There were pockets in England that were like walking into a foreign country. Even the laws that were established in these “dark areas” were contrary to British laws. British police eventually stopped patrolling these areas for fear of their lives. Britain was losing control of its nation.


Brits had always been proud of their culture, and they began to lose that identity. There was no assimilation of the British culture, values, and traditions, over the decades. Even second generation immigrants in many cases were not integrating into the British culture. This is not true in America. People come to America from all over the world from all cultures, but they do assimilate over time. They come for work and for a better life for their children; but for the most part they love America, and they love freedom and the American way of life. Second, third, and fourth generation immigrants, which we in America all are, consider ourselves Americans first.


The movement to leave the EU was fought on many grounds, such as getting away from non-elected bureaucratic rule out of Brussels, and not wanting to support the weak economic countries at Britain’s expense. But while all of these issues are very important, the emotional tug to leave was immigration. A majority of people there wanted to take back their country and preserve old England and its culture. All the other issues were side issues.


The Political and Economic Repercussions of the Vote


My position on the vote was that I agreed with the desire to leave for all of the above reasons -- but not now. I told my Market Update subscribers that at this time the world was too fragile and the world would be vulnerable to shocks if it did in fact choose to leave the EU. A decision to leave is a gamble and definitely has its risks. But they have chosen to leave and there will be a price to be paid. How big a price will be determined by the actions going forward.


Markets will need to adjust. We saw the beginning of that adjustment on Friday. It wasn't pretty. The pound fell 8% overnight to its lowest level since the 1980's. Trade contracts will need to be renegotiated. A new government will need to be formed. Immigration policies will need to be established. And midst all of this the world will be watching what other EU countries do, and what the immigrants within Britain and a new government do.

The threat of contagion is the main fear now -- that other nations will leave and lead to the slow disintegration of the EU. That there will be a banking crisis; that currency values will be chaotic and currency wars will result and perhaps trade wars. Or that all of this will not come to pass at all and will blow over in a few weeks or months.

Economics is a science of human action and as we saw in Britain, human action is unpredictable. No one knows what decisions will be made by the heads of the EU, central banks, corporations, investors, speculators, or the new British government, let alone the millions of citizens involved. I doubt that any of these players know themselves exactly what they will do.

The bottom line is uncertainty. We are all in the position of sitting back and watching and waiting to see how this all plays out. To say the least, the days ahead will be interesting.

Paul Nathan