Standing in line, marking time
Waiting for the welfare dime
‘Cause they can’t buy a job
The man in the silk suit hurries by
As he catches the poor old lady’s eyes
Just for fun he says, “Get a job.”
“The Way It Is”
Bruce Hornsby and the Range (1985)
In the highest turnout in a UK-wide vote since 1992, 30 million people took to the poles to vote whether or not the UK would leave or remain in the European Union on June 23, 2016.
Leave won by 52% to 48%.
Many knew #Brexit was a trending topic on Twitter, but that’s about the extent of it for a good handful of spectators not interested in the outcome.
I, however, spent last Thursday night watching Bloomberg TV on my hotel television until 1am Pacific.
I watched this like most Americans watch sporting events; however, this in my opinion, had far more reaching consequences than the bread and circuses many have been conditioned to watch.
You need only to venture to the trending tweets and Facebook posts to see people avidly memeing the outcome and, even more, questioning…
How does this affect me?
I’ll get there in just a second. First let’s talk about why I think this historic decision played out like this.
The Political Drivers
Here’s what I think happened:
1. People who say one thing in front of their friends will often do just the opposite behind the privacy of a voting booth.
The media, who was heavily biased towards Britain remaining in the EU, couldn’t persuade voters to stay.
All of the polls got it wrong.
Every single one of them.
Then again, the polls are only what the media wants you to believe, catered to your tastes and likings.
For example, if you’re concerned with urban strife and struggles, you watch the blue stations such as CNN or MSNBC.
If you are concerned with the military and war, guns and all things Americana, you watch the red station such as Fox News.
The divisiveness this creates adds to their ratings and hence, larger revenues in Election Years.
2. The Lower-Wage Worker Decided This Outcome – Loudly.
There was an article in The Guardian that interviewed a member of the working class in Britain, and to paraphrase said “If you’ve got money, you vote in. If you haven’t got money, you vote out.”
Now, here’s the $64,000 question.
Will this happen this November in the United States?
Let’s first see what the principal drivers were for this Brexit.
- Britain’s general population of laborers have been cleanly divided in two: between optimistic new arrivals and resentful, miserable locals who are forced to accept lower hourly wages because the latter would work insane shifts for lower rates.
- The European Union had essentially strip-mined the working class; Brexit is the consequence of the economic bargain struck in the early 1980s, whereby we waved goodbye to the security and certainties of the postwar settlement, and were given instead an economic model that has just about served the most populous parts of the country, while leaving too much of the rest to anxiously decline.
Couple that with Britain’s own anger about politics and that is now so ostensibly inefficient and caters to the wealthy only, you have a new layer here that is not just about the European Union, but more so about class and inequality.
The mere fact that Prime Minister David Cameron could mention the word “austerity” to his constituents after having them witness such expensive debacles such as Iraq, and most recently the MPs Expenses scandal, it’s little wonder – in hindsight – that the results were so overwhelmingly for a #Brexit.
The Economic Consequences
Immediately when the election results started coming in, the markets began to sell off, too. The bookies got it wrong, just like the polls. But the traders were prepared.
Something interesting I read was that the traditional random phone-based polling that had been used had failed everyone, by almost all accounts.
What was much more precise was what the media (perhaps purposely) ignored in the end: web-based polling and polling via text messages.
What is the definition of savings?
Savings for most people is stored labor after taxes. Think about that for a moment.
Even if you’re in a tax-advantaged vehicle like a 401(k) or an IRA, the government will still get theirs and the taxes you take out. If you placed your savings into a Roth that just means you paid taxes first on that income prior to making a contribution.
So hardworking savers and pensioners in the US and around the world woke up to see that their stock portfolios decimated as a result of what the mainstream financial services industry had urged them to do: stay in the market. You know this refrain well.
Where is the alignment of interest? There isn’t any.
We are living in an uncertain world.
The future is unknown and we are not dealing with markets that are free markets anymore. A free market is defined as a market when no market participant has a dominant influence and can manipulate the market.
Now we have government interventions everywhere and you don’t know what they will buy next. Federal Reserve Chairwoman Janet Yellen already offered your taxpayer money to help stabilize the markets and currently it looks like a rate hike for 2016 has been abandoned.
Adding insult to injury for savers, the Feds bought bonds and mortgage backed securities to depress the yields on these securities, they pushed interest rates essentially everywhere to 0, and by doing that they basically expropriate savers.
Because one of the functions of paper money is to store value, but at zero interest rates there is no store of value.
Now, Dear Reader, I will ask you if you see any corollaries to the sentiment of the working class British to those of Middle Americans today.
How do you see this playing out in November?
Place your Comments below and I may respond personally to them.