Thursday, 28 July 2016

Much Ado About Very Little

Brexit Contagion

When the British people were considering how they might vote over Brexit, the hen house suddenly flew open and Chicken Littles ran squawking down every highway and street, past every hamlet.  If Britain voted to leave, calamity upon calamity would result.  The very sky would fall in.  

One such prophesied calamity was that a recession, if not depression, would descend upon the UK economy.  In matters economic, the Governor of the Bank of England, Mark Carney was one of the loudest doomsters, declaring that the UK economy would suffer greatly, were the UK to leave.

To be sure, once the vote to leave was successful, the UK sharemarket went south, along with most other bourses around the world.  But markets react to fear and greed.  In this case fear--heightened by the expectation that Brexit would be voted down--caused pension fund managers to hit the "sell" button.  Within days, however, the markets had returned to pre-Brexit levels.  What was that all about?  Much ado about very little.

And what are we hearing now?

Nearly a month on from Britain’s historical vote to exit the European Union (EU), the Bank of England has admitted that the British economy shows no sign of slowing down, negating doom-laden forecasts made during the EU referendum campaign.  A monthly study issued by the Bank of England’s agents, who survey British businesses in situ, has found that most companies are continuing with business as usual despite the momentous decision, the Daily Mail has reported.

And although the agents found that there had been a marked rise in business uncertainty as Britain prepares to enter a two year long exit negotiation with her former Brussels partners, they further found that companies do not expect that uncertainty to impact their investment or hiring plans.  “As yet, there was no clear evidence of a sharp general slowing in activity,” the report noted.  [Breitbart London Emphasis, ours]
One often comes across this phenomenon.  The mass media promote doomsters hyping up risks in an effort to gain a headline and sell some copy--only to be followed by surveys of actual Main Street businesses, which run the line above: "Yes, business is going to be harder (hat tip to the doomsters), but our business is doing just fine and the prospects ahead are bright" (hat tip to reality, free from spin and headline seeking histrionics.)

Another doomsday scenario painted by the anti-Brexiteers was mass corporate emigration.  Things would be so terrible that businesses would leave in droves, along with people looking for jobs.  It's early days, but how are things looking now?
And contrary to Project Fear warnings from Remain campaigners that a vote to leave the EU would spark an exodus of businesses from the UK, the report found that some companies are considering a return to Britain or find more domestic suppliers thanks to the current relative weakness of the pound against other currencies.

Adam Tyler, chief executive of the National Association of Commercial Finance Brokers, said: “This latest report from the Bank of England will provide considerable encouragement to the UK business community.  “The findings are certainly consistent with what we are seeing on the ground, namely that most businesses are carrying on more or less as normal.  Businesses are monitoring events closely, especially news surrounding future trading relations, but the corporate paralysis some suggested has simply not materialised.”
And the doomsters were found all throughout the upper echelons of Europe's elites.   Christine Lagarde, head of the IMF, delivered this dire jeremiad to the British voters:
In the run up to the vote, The International Monetary Fund’s Christine Lagarde said that quitting the EU would be “pretty bad to very, very bad” for Britain’s economy, adding that Brexit would result in a “protracted period of heightened uncertainty” for the country, possibly sparking a recession.
But now her own shop has had to issue a correction of sorts:
But the IMF has now released figures showing that Britain’s economy is growing faster than France or Germany’s.  It now expects the UK’s economy to grow by 1.7 per cent this year and 1.3 next year, while Germany’s economy is expected to grow by 1.6 per cent, and France’s by 1.3 per cent.
If Brexit was a Day of Doom, the elites throughout Europe and the UK had better watch out.  How many more European nations will decide to follow Britain's lead looking to share in their very own Day of Doomish Disasters?

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