Last Friday, the Dow Jones plummeted 600 points in a single day. Other financial markets went into panic mode. Over $2 trillion was wiped off the global markets. Countless financial reporters spoke of shock and awe. Disaster! Tumult! Historic repercussions!
So, what happened, exactly? Was the President assassinated? Did ISIS blow up Jerusalem? Did astronomers discover an asteroid eighteen hours from Earth? Did the Pope die? Did the Anti-Christ appear? Has an outbreak of new, incurable form of the bubonic plague broken out?
Has Jar-Jar Binks been signed to appear in the next Star Wars movie?
No, no. Something apparently even more earth-shattering than Jar-Jar Binks’ resurrection has shaken the financial world to its core: The voters of Great Britain voted on Friday in favor of exiting from the European Union.
Media reports and newspaper accounts have been full of shock and awe, plunging economic indicators, and angry denouncements of Great Britain’s decision, with Ireland and Scotland vowing to say with the EU and declaring their own independence from Great Britain itself.
In reading about the overwhelmingly negative reactions to the news, it’s been difficult to discover just why this is such a disaster. I got the most intelligible answer from my 92 year-old mother: Great Britain’s money is in the European Central Bank (which is in Frankfurt, Germany, not Brussels, Belgium). If Great Britain withdraws its money from the ECB, she says a great deal of money will
The purpose of the ECB is to guarantee price stability in the Eurozone. The 1,500 member banks in effect borrow cash and must pay it back; the short durations allow interest rates to be adjusted continually. When the repo notes come due the participating banks bid again. An increase in the quantity of notes offered at auction allows an increase in liquidity in the economy.
A decrease has the contrary effect. The contracts are carried on the asset side of the European Central Bank’s balance sheet and the resulting deposits in member banks are carried as a liability. In layman terms, the liability of the central bank is money, and an increase in deposits in member banks, carried as a liability by the central bank, means that more money has been put into the economy.
But, while the United Kingdom is a non-Euro area member, meaning it decided to keep its own currency – the pound sterling – rather than converting over to the Euro, the Pound Sterling is still in play. Eight other nations chose to do the same. Great Britain has a modest sum invested in the ECB. The amount is small compared to that of France and Germany. Therefore, Great Britain’s departure from the European Union would hardly break the bank of Europe.
Other matters, controlled by the EU’s capital, Brussels, were of more concern to the average Brits. Financially, single trade was a factor. Two of the original core objectives of the European Economic Community were the development of a common market, subsequently renamed the single market, and a customs union between its member states.
No customs are levied on goods travelling within the customs union and—unlike a free trade area—members of the customs union impose a common external tariff on all goods entering the union. One of the consequences of the customs union is that the European Union negotiates as a single entity in international trade deals such as the World Trade Organization, instead of individual member states negotiating for themselves.
The free movement of persons means that EU citizens can move freely between member states to live, work, study or retire in another country. This required the lowering of administrative formalities and recognition of professional qualifications of other states. This provision has turned out to be devastating for Europe and particularly Great Britain.
London’s new mayor, its first Muslim, Sadiq Khan, has vowed to not follow Great Britain’s lead in slowing immigration. Some opponents of the Brexit have even declared that London – England’s capital city – should secede from Great Britain.
What’s shocking to Liberal sensibilities evidently is Great Britain’s rejection of group think. The first seeds of a European Union were planted just after World War II, when countries on the Continent feared a resurrection of the kind of nationalism that ignited Europe in the flames of war.
Communists are curiously silent on their role in World War II. Generally, it was fear of Communism that enabled Adolf Hitler to gain power. Stories were coming back from Russia of the horrors of – and the rebellions against – Communism. Still, Hitler was a monster and the Communists were all too happy to let him have all the infamy. Once Europe was secure – in due part to Stalin’s willingness to commit troops to the cause – the Communists rounded up all the emigres who’d fled the “glories” of Communism and promptly threw them into the gulags.
We now hear, after the fact, that Brussels was exercising an iron arm, dictating to the European Union residents every facet of their lives. The European Union is not an elected body; they are bureaucrats, accountable to no one, much like our own shadow-government bureaucracy.
Proscriptions on toasters and hairdryers are only the tip of the European Union iceberg no doubt.
England’s 2011 census indicated that 12.4 percent of London’s population was Muslim. Reports from English residents say that the increasingly minority white, Christian population is being pushed farther to the north. Other reports give a much lower percentage. However, Great Britain has spoken, and with only a bare majority (51.9 percent) to get out of the European Union while the getting is not just good, but still possible.
“England for the English!” they cry, and good for them. Well done, England.