The Real Economic Meaning of Brexit

[BobK71]

You will probably never hear this story from the mainstream media.

The core problem of today is that the world has far too much money, debt, and other financial assets, compared to real goods and services, at current prices.  More tickets have been sold than there are seats in the house, and the ticketholders know it too, after 2008.

Among all the options in this no-win situation, probably the best is to recognize that all those financial assets aren't worth as much as first thought, and devalue them, by devaluing money itself, with massive inflation.

The elites are trying to get a little inflation, but not the massive kind that would pave the way for stability and growth by recognizing reality and spreading the pain proportionally among all holders of the assets.  This kind of shock threatens to turn public opinion against the elites' system by exposing its core nature of financial asset inflation, and the elites probably will only use it as a last resort.

But a single country that does this has a lot to gain, even by doing it part-way.  By devaluing its currency, this country would achieve both stability and growth well into the future, by drawing in demand and capital.  (Did the corporate media of any country ever tell us that?)  This country would be breaking faith with the global elites, to be sure, but there's no real moral reason to stay inside what is essentially a collusion among the top politicians, central bankers, and top financiers of major countries.

This is precisely why the global elites simply cannot tolerate any act in this direction by any leader.  This is why they "generously" bailed out Greece multiple times rather than see it leave the euro -- putting the Greek people through hell, but at least maintaining their system.  This is why they fought tooth and nail against Brexit.

With Brexit, British politicians will have more political incentives to pursue Britain's own economic interests, and that will be devaluation and inflation.

The global elites know, if one or two country's inflated financial assets are reconciled with reality, reality is coming after their own assets next.

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[Dajackal]

Very true. You should consider a job in writing.

[OROBTC]

...

BobK71

Another fine thread, very well written as Dajackal mentions.

But, I am not sure that the first country to devalue would gain a lasting advantage.  To be sure, there would be some short-term advantages (for their exporters, etc.), but later on...?

Also, I myself would be reluctant to put any money into a first devaluer.  As I would have concerns that they would devalue again in the future.  That country might not be disciplined...

My take is that free yet disciplined countries (as Germany apparently still is, and Japan was) are most likely to benefit over a longer haul.  The USA did just fine when it was more restrained.  In this era of "anything goes" (today's USA scandal is Lowretta's dismal appearance on TV today trying to downplay her private jet, 30 minute meeting with Big Bill), I think that it is a matter of time before we all suffer a financial meltdown.

[OROBTC]

Very good thread man. I guess you should consider being a blogger man.   I think you will earn a lot from it.

Blogging is hard work for very uncertain pay!  Blogging never made me any money.

Mike "MISH" Shedlock once wrote me by email saying that blogging makes very few people any money at all.  And his blog has ads.  It may have drawn in investors to the money management firm he works for however.

Jim Quinn (theburningplatform.com) appears not to make (much) money from his, he has ads and asks for donations.

[groll]

You will probably never hear this story from the mainstream media.

The core problem of today is that the world has far too much money, debt, and other financial assets, compared to real goods and services, at current prices.  More tickets have been sold than there are seats in the house, and the ticketholders know it too, after 2008.

Among all the options in this no-win situation, probably the best is to recognize that all those financial assets aren't worth as much as first thought, and devalue them, by devaluing money itself, with massive inflation.

The elites are trying to get a little inflation, but not the massive kind that would pave the way for stability and growth by recognizing reality and spreading the pain proportionally among all holders of the assets.  This kind of shock threatens to turn public opinion against the elites' system by exposing its core nature of financial asset inflation, and the elites probably will only use it as a last resort.

But a single country that does this has a lot to gain, even by doing it part-way.  By devaluing its currency, this country would achieve both stability and growth well into the future, by drawing in demand and capital.  (Did the corporate media of any country ever tell us that?)  This country would be breaking faith with the global elites, to be sure, but there's no real moral reason to stay inside what is essentially a collusion among the top politicians, central bankers, and top financiers of major countries.

This is precisely why the global elites simply cannot tolerate any act in this direction by any leader.  This is why they "generously" bailed out Greece multiple times rather than see it leave the euro -- putting the Greek people through hell, but at least maintaining their system.  This is why they fought tooth and nail against Brexit.

With Brexit, British politicians will have more political incentives to pursue Britain's own economic interests, and that will be devaluation and inflation.

The global elites know, if one or two country's inflated financial assets are reconciled with reality, reality is coming after their own assets next.

Your opinion is well made. And you are right when you say that the brexit has or will bring a major economic effects on the economy worldwide. Though this may signal a positive or negative impact or an advantage or disadvantage but we will not yet know who will gain and profit and whose countries will suffer. The cause and effect in the economy is hard to predict but we can only determine when its already there.

[BobK71]

Very much appreciate all your kind words.

I'd agree that the markets will have trouble trusting a serially devaluing country (as Italy and Greece were before the euro, for example.)  But if you have a one-shot big devaluation and then hold your ground, you might do well (as France did during the 1920s.)

In any case, it's  not as if well-informed investors nowadays weren't aware that the entire world system is based on state-supported asset inflation, followed by real inflation through devaluation (against foreign currencies and/or against gold) anyway.  They still have to take their pick and buy the assets of some country, at least for the short term.

Also agreed that it's hard to tell who will be the winners and losers in a shock like Brexit.  I can only hope, especially if the eurocrats don't succeed in tying down Britain some other way, that the British electorate will force their elites to make the moves that will, if nothing else, bring some honesty to the asset values.

Another reason for optimism in this particular case is that Britain's financial power allows it to punch above its economic weight.  The uncertainty surrounding Brexit will probably become a big threat to its asset values, so much so that it might force the hand of its elites (if they have any loyalty to the British people) to pursue devaluation and inflation, whether they want to or not.

[calkob]

As i have said i dont think that Brexit will have any effect on bitcoin price, i think that the brexit issue will drag on for years,.

[panju1]

If there is massive inflation, people will always turn against politicians, because they will see their wealth eroded away.
And then they will link it to Brexit, and will probably want to join Europe again. 

[Enotche]

Finance Minister said that in the short-term consequence for the economy will Breksita or simply "shock" or "strong shock".
 In a first embodiment, the production will be reduced by 3.6%, the unemployed will be more than 520 000 pound sterling depreciated by 2.3 percentage points. A second decline in GDP of 6%, unemployment will increase by 820,000, the pound has depreciated by 15%, while inflation will rise by 2.7%. All this will happen in the years after. Breksa also affect property prices and may pierce the London swollen bubble in the housing market, or at least a long time to reduce the cost of real estate.