Risk off

At this point (midnight) the global economy has been hit by a negative monetary shock, one of the biggest in years.  Here’s what to watch tomorrow:

1. Does the crisis show signs of spreading to the PIIGS?

2.  What do the world’s central banks do, especially the ECB and the BOJ?

Janet Yellen has to be really, really happy that they got a bad jobs number and didn’t move in June, as a rate increase in June combined with this would have been a huge shock to the global economy.  If I read the fed funds futures correctly, they are now forecasting low rates for essentially forever.  T-bond prices must be soaring.  David Beckworth says we are a monetary superpower—well we are now a lot more super than even 3 hours ago.

I’d emphasize that this is an almost purely a monetary shock—in real terms it makes little difference whether the UK is in or out of the EU (especially in places like the US and Japan).  It’s monetary.  That means the ultimate effect depends ENTIRELY on how the central banks react.  Do they show imagination and leadership, or . . . do they keep acting the way they’ve been acting since 2007.  We won’t have to wait long for an answer.  (Obviously the markets believe that the central banks will not rise to the occasion.)

The odds of a global recession in 2017 just increased, by at least a few percentage points (albeit still less than 50-50).  I think this also makes it slightly more likely that Trump will win, although he’s clearly still the underdog.  We saw the second straight example in the UK of the right outperforming the polls–ironically this one will probably cost Cameron his job.

Because it was possible to watch markets move as Betfair prices change, we can see that the vote represented a 120 point swing on the S&P 500, which is almost 6% (as compared to a definite remain vote—say 2010 vs. 2130 on the S&P).

Can’t wait for tomorrow!  Lots of excitement ahead.

 


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110 Responses to “Risk off”

  1. Gravatar of Major.Freedom Major.Freedom
    23. June 2016 at 20:33

    “I’d emphasize that this is an almost purely a monetary shock—in real terms it makes little difference whether the UK is in or out of the EU (especially in places like the US and Japan). It’s monetary.”

    If it really made no difference in real terms, then there wouldn’t be any nominal changes.

    People do not hoard money or spend money for “almost purely” nominal reasons.

    All you are doing is just conveying your (very flawed) theory.

    “Can’t wait for tomorrow! Lots of excitement ahead.”

    Like so.

  2. Gravatar of Major.Freedom Major.Freedom
    23. June 2016 at 20:39

    I think every reasonable person understands that political turmoil has both real and nominal effects.

  3. Gravatar of Harold Harold
    23. June 2016 at 20:41

    Hi Scott,

    There’s no way this is purely monetary. The most real part of the economy is psychological, and this is bewildering.

  4. Gravatar of ssumner ssumner
    23. June 2016 at 20:52

    Harold, Of course it’s monetary, after all, monetary policy is mostly psychological. Even if you think there are some real effects for the UK (I don’t think they are that great) the real effects for the US and Japan are clearly trivial. This is almost purely monetary. The problem is that most people, even most economists, don’t know what monetary is. It’s changing NGDP expectations. (It’s not “concrete steps”)

  5. Gravatar of E. Harding E. Harding
    23. June 2016 at 21:00

    England Prevails.

    Betting markets are now definitively proven officially worse than useless. I had a 50-50 on this on Jan 1. Way more reliable odds than the betting markets over the past 25 hours.

  6. Gravatar of E. Harding E. Harding
    23. June 2016 at 21:01

    https://twitter.com/Nate_Cohn/status/746187073095372801

  7. Gravatar of Richard A. Richard A.
    23. June 2016 at 21:18

    What Brexit may cause in the UK is an increase in demand for the pound and this would show up as a decline in the velocity of money. This can be corrected by the BoE with proper monetary policy.

  8. Gravatar of Bremain Bremain
    23. June 2016 at 21:23

    So essentially this is what, a fall in the “Wicksellian rate” which has effectively tightened monetary policy?

    Has the pound fallen because markets expect future rate cuts from the BoE, or are there more “real” causes for that?

  9. Gravatar of Samuel W. Samuel W.
    23. June 2016 at 21:35

    People critiquing the “it’s purely monetary” part never got out of intro 101. Obviously there’s going to be a some affect on trade/debt but Sumner’s saying that he believes the market is overstating those affect.

    News Flash: All actors aren’t perfectly rational.

  10. Gravatar of CA CA
    23. June 2016 at 21:36

    The reports I’m seeing say that this vote is non-binding, that Parliament would have to approve it.

    Someone who knows British politics better than I do: is Parliament likely to pass this?

  11. Gravatar of Benjamin Cole Benjamin Cole
    23. June 2016 at 21:38

    The globalists need to put a better case together if they want to convince voting publics of their position.

    Trump may lose in Novermber, but it won’t be because of his “America First” position. His well-known penchant for disaffacting large voting blocks will be the reason he loses.

    The globalists and tight money appear to generate a result lethal to large portions of middle classes in the developed world. Recently, several major Australian banks have stopped giving home mortgages to foreigners. Aussie employees are complaining about a flood of Asian workers in their nation.

    I think the answer to successful globalism is robust monetary expansionism, in concert with solid immigration rules, enforced.The importing of large amounts of cheap labor into a developed nation may look good in the GDP stats, but there are a few details to ponder.

    Worse, the US and Australia have made housing production difficult. Sure, bring in lots of new labor and people and cut off new housing stock.

    The cure is abolishing property zoning—but the globalists never mention that. With property zoning, globalists can shield themselves and families from the impact of lots of poor immigrants. As in, “bring in the immigrants, they’ll never sleep in cardboard boxes on my front lawn.”

    But when I lived near downtown L.A. there were homeless living in front of my building, and defecating there as well. But globalism only results in good things, and not bad. Right?

  12. Gravatar of Benjamin Cole Benjamin Cole
    23. June 2016 at 21:39

    BTW Nikkei 225 off more than 7%. Seems a bit extreme to me.

  13. Gravatar of Mike Sax Mike Sax
    23. June 2016 at 21:44

    “Can’t wait for tomorrow! Lots of excitement ahead.”

    It’s easier to enjoy the excitement for those who don’t currently have assets in Britain right now that they were going to convert into dollars soon.

    I wonder how many of the Brits who voted yes today also rely on savings and linked pensions.

  14. Gravatar of Mike Sax Mike Sax
    23. June 2016 at 21:44

    Those Brits may be in for a cruel shock soon

  15. Gravatar of Bob Murphy Bob Murphy
    23. June 2016 at 21:59

    Scott, I would encourage you to do a post (maybe at EconLog) spelling out the sense in which this is “purely monetary.” Krugman et al. say this is bad for UK because of trade restrictions.

    If aliens showed up tomorrow and people starting freaking out, I’m guessing you would call that a “purely monetary shock” too, right? You might want to spell that out, because I think most people would call it a real shock.

  16. Gravatar of Mike Freimuth Mike Freimuth
    23. June 2016 at 22:27

    Scott,

    I basically want to echo what Bob Murphy said. Frankly, I can’t figure out the logic behind any of this fuss. If they start a trade war with Europe I can see that being bad but both sides have an incentive to not do that so it seems like a stretch to assume that will happen. But this doesn’t seem to be a change in monetary policy either. It seems like if it’s purely monetary, it must be something to do with money demand (or whatever you want to call it) or expectations of future monetary policy. But I can’t see a logical reason for this to affect those things. Is it just a frantic, irrational change in money demand (or in other words “animal spirits”)? If so, is there any sense in which unexplained changes in behavior can really be separated into “real” or “nominal” categories? (And if so, what is the way….?)

  17. Gravatar of Mike Freimuth Mike Freimuth
    23. June 2016 at 22:32

    P.S.

    The pound is dropping. (I don’t know why) Should they tighten monetary policy to offset the shock? I don’t feel like that’s what you are advocating but I’m not really clear on it. What is the appropriate monetary policy here? (Meanwhile, the FTSE is tanking and the talking heads are babbling about “providing liquidity.”)

  18. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. June 2016 at 22:33

    CA “Someone who knows British politics better than I do: is Parliament likely to pass this?”

    Yes; the Conservative majority Government is essentially committed to implementing the result. Any Tory PM who tried to thwart it would rapidly stop being PM.

  19. Gravatar of Tom Brown Tom Brown
    23. June 2016 at 22:39

    Whatever happens, the pro-Brexit people should be made to own all of it. Don’t let Trump claim “I was never for that!” if things go South. We should call it the Trump-favored Brexit. Right now we’re experiencing the Trump-favored Brexit pound plunge.

    Scott, is it just me, or are you seeing the word “globalist” spreading like a cancer these days? It reminds me of the New World Order (NWO) catchphrase popular with conspiracy theory lunatics.

    New prediction for Trump running mate: Alex Jones, anti-“globalist” radio host, conspiracy theorist and all around whack-a-doodle. He’ll probably claim that any shock caused by Brexit is just misinformation by the trilateral commission, the Bilderberg Group and the Illuminati.

    I’ve changed my mind: I think I’d like to see Kendal Unruh try to lead a convention delegate challenge to deny Mr. Trump the nomination. Succeed or fail, I think it will definitely be good for the country.

  20. Gravatar of Tom Brown Tom Brown
    23. June 2016 at 22:42

    … the other phrase spreading like a cancer is “dumpster fire” (for good reason in that case).

  21. Gravatar of Mike Sax Mike Sax
    23. June 2016 at 22:45

    “Yes; the Conservative majority Government is essentially committed to implementing the result. Any Tory PM who tried to thwart it would rapidly stop being PM.”

    They are not ‘committed’ in the sense that they are happy to do it. Cameron and the Conservatives in his bloc are against it.

    Whether or not they think they have no choice is another.

    It is technically nonbinding.

    Maybe after the pound hits dollar parity by the weekend maybe some of those who voted will feel differently and change their mind. They could always hold another vote later-as has happened with other EU countries who first said no and later reversed it.

    Even if they do pass it, implementation will take a while.

  22. Gravatar of Tom Brown Tom Brown
    23. June 2016 at 22:50

    It’s almost like the warnings from the anti-Brexit “elitists” that the pro-Brexit people said was just scare mongering, is playing out right now. I say make ’em own it. I hope I’m wrong, and that Brexit turns into a wonderful thing (or at least a big nothing), but I’m willing to make ’em (let them?) own it in either case. Let’s drape it around their necks like an albatross or a burning tire. If it turns into something else, great, I’ll give them credit, but let’s be clear who owns it.

  23. Gravatar of Mike Sax Mike Sax
    23. June 2016 at 22:55

    Tom Brown +1

    It is funny hearing all these Brexit folks wearing tin hats tell us that it was just scare mongering as the entire market is on fire. In Europe they’re saying the market is down more than it was after Lehman Brothers.

  24. Gravatar of Tom Brown Tom Brown
    23. June 2016 at 23:11

    “Maybe after the pound hits dollar parity by the weekend maybe some of those who voted will feel differently and change their mind.”

    Maybe it’ll drop so low, Trump will take a jaunt down from Scotland and buy up Northern England with his “unlimited” funds, and do what he did for Scotland there. The lawsuits alone should keep him busy for months, and maybe he’ll forget all about the election. After all, it’s basically a big publicity stunt anyway, and it’s served it’s purpose in spades in that regard. Kind of like Carson’s and Gingrich’s respective book tour / campaigns, only much more huge!

    Oh wait, that’s right… a week ago he needed “emergency funds” of $100k (1/100000th of the ten billion he claims to have in net worth) from donors… so it’s unlikely those unlimited funds will ever materialize. Looks like Scotland (and us) are stuck with him.

  25. Gravatar of Tom Brown Tom Brown
    23. June 2016 at 23:16

    They really should have arranged to do the vote in several rounds… so the public could have seen the results of the Trump-favored Brexit after the 1st round, and let that sink in a bit.

  26. Gravatar of Brexit: The Biggest Global Monetary Shock Since 2008 – Investor Maven Brexit: The Biggest Global Monetary Shock Since 2008 – Investor Maven
    24. June 2016 at 01:12

    […] Scott Sumner is right. Brexit is the biggest global monetary shock since 2008. This could be the tipping point that turns the existing global slowdown of 2016 into a global recession. Here is why. […]

  27. Gravatar of Michael Michael
    24. June 2016 at 03:39

    relax. There was bound to be a market move one way or the other, as the market didn’t price in either 0% or 100% probability for Brexit

    As it happens, the effect is large for one isolated shock — but that’s what it is, after all. In absolute numbers, not so much. Don’t mentally extrapolate this kind of volatility for many days/weeks. It will be elevated, but within historic bounds

    Whatever happened today will do less harm short-term than the GFC. Long-term? I’m actually quite optimistic it’ll turn out a good investment both for Britain and Europe. EU as institution? Not so sure

    Are the markets wrong to fall, then? Not at all: risk has just increased a lot. Maybe — just maybe — markets were too complacent before the event. Not because they underpriced Brexit, but because they underpriced the political risk from an ossified EU

  28. Gravatar of Max Max
    24. June 2016 at 03:54

    I’m a little surprised at the magnitude of the reaction. Seems like too much, but could be self-validating if central banks screw up (expect to hear demands that the BOE prevent the pound from falling).

  29. Gravatar of Dan W. Dan W.
    24. June 2016 at 04:32

    Investor reaction to the vote is the Monetary Shock. The vote outcome creates uncertainty and investors are responding by reducing financial risk. This risk aversion could very well be temporary. If global asset prices do not rebound in short order then further analysis is needed to explain how a change in a government arrangement could have such far reaching global financial ramifications.

    Scott, any thoughts you wish to share about the failure of the betting markets and the financial markets to predict the Brexit outcome?

  30. Gravatar of MP MP
    24. June 2016 at 04:44

    Following on Bob Murphy’s post above, can you get into some more detail on why this is purely monetary. Having read your blog (and a few others) regularly for a while now, I find the case for market monetarism pretty persuasive, but the question of WHY NGDP expectations change is still a gap for me. Is it just “animal spirits”? Is it a response to potential real issues, e.g. trade restrictions? Does it matter?

  31. Gravatar of J Mann J Mann
    24. June 2016 at 04:54

    Scott, as this plays out, I’d love it if you could call out what you think the various banks should be doing and why. I think it would be really informative, so if you have time, I’d love it.

    Everybody, I think the way to look at it was that most people agreed that Brexit-eu-euro-disaster would mean an economic hit for Britain, especially in the short run, but that remaining would mean increasingly surrendering governing decisions to the EU. People could disagree about the magnitude of each of those, but market panic doesn’t necessarily mean the leave voters were wrong, depending on how important sovereignty was to them.

  32. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. June 2016 at 05:01

    All eyes on Carney then. As for the market reaction, since echo-chamber effects are part of the problem (and which the betting markets seem to have reflected) some overshooting is to be expected.

    The transition will be rocky but, in the longer term, the UK has voted to improve the accountability of its institutions and that will work to its advantage.

    Lots of folk seem to be missing what a condemnation of the EU this result represents. In June 1975, after 2 years of being in the European Community aka Common Market, the British voted 67% to 33% on a 62% turnout to stay in the EC.

    In June 2016, after a further 41 years experience of what is now the EU, the British vote 52% to 48% to leave on a 72% turnout, a 19%pt negative shift in popular support–a very major shift in opinion.

    Ignoring the special pleading which says the 1975 British electorate was very wise and the 2016 British electorate stupid and misguided, that is a fairly monumental failure to engage popular loyalty.

    http://lorenzo-thinkingoutaloud.blogspot.com.au/2016/06/brexit-and-eu-failure.html

  33. Gravatar of Tom M Tom M
    24. June 2016 at 05:17

    Now that they have voted to leave the EU, the US should take the UK for themselves. And we should tax them without representation! See how they like it…

    and invoke the right of prima nocta!

  34. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 05:42

    “I’m a little surprised at the magnitude of the reaction. Seems like too much, but could be self-validating if central banks screw up (expect to hear demands that the BOE prevent the pound from falling).”

    Could be. Or possibly, the Brexiters were way to sanguine about this just being a case of fear mongering.

  35. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 05:47

    “The transition will be rocky but, in the longer term, the UK has voted to improve the accountability of its institutions and that will work to its advantage.”

    You mean in the Long Run everything will be fine? Sounds like a very useful guide to human affairs.

    When does the transition end and the longer term begin?

    As for the EU, Britain is very brilliantly ending a deal where they had the best of both worlds.

    They had avoided the euro straitjacket but still got the benefit of EU membership-access to the markets, etc.

    The EU, though really hurt itself with their terrible monetary management. Even though the UK was not a victim of it-it gave the Brexit campaign plausibility.

  36. Gravatar of collin collin
    24. June 2016 at 05:52

    The odds of a global recession in 2017 just increased, by at least a few percentage points.

    What is the percentage of a global recession in 2017? And what is the percentage of a US recession in 2017? They are not the same thing as the global recession may cause investors to move money into the US.

  37. Gravatar of Art Deco Art Deco
    24. June 2016 at 05:55

    It is funny hearing all these Brexit folks wearing tin hats tell us that it was just scare mongering as the entire market is on fire. In Europe they’re saying the market is down more than it was after Lehman Brothers.

    Meanwhile, back in the real world, the Dow, DAX and FTSE have yet to hit lows registered in the last 3 months. Well, if it pleases you to pretend to be anxious, I suppose it’s harmless enough.

  38. Gravatar of Art Deco Art Deco
    24. June 2016 at 05:57

    They had avoided the euro straitjacket but still got the benefit of EU membership-access to the markets, etc.

    What’s amusing is that EU defenders seem to fancy there will be a comprehensive trade embargo on Britain. Switzerland and Norway and the United States do all right without being members of the EU. They even have ‘access to markets’.

  39. Gravatar of Art Deco Art Deco
    24. June 2016 at 06:00

    I’m a little surprised at the magnitude of the reaction. Seems like too much, but could be self-validating if central banks screw up (expect to hear demands that the BOE prevent the pound from falling).

    I seem to recall back in 1998 the New York Times Magazine called a mess of finance mavens together to hear them out on Asia. There was one fellow who was particularly emphatic and voluble on a number of questions, telling the assembled ‘Indonesia’s not going to exist as a country in five years’. These types are an abiding feature.

  40. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 06:17

    “Meanwhile, back in the real world, the Dow, DAX and FTSE have yet to hit lows registered in the last 3 months. Well, if it pleases you to pretend to be anxious, I suppose it’s harmless enough.”

    My real world is the British pound.

    But the Dow is down by 500. That’s a strange reason for Brexiters to be gloating.

  41. Gravatar of Art Deco Art Deco
    24. June 2016 at 06:23

    My real world is the British pound.

    If you weren’t long on British assets and not planning on selling them next week, makes little different.

    But the Dow is down by 500. That’s a strange reason for Brexiters to be gloating.

    Who’s gloating? The market’s down 2.3%. People who are emotionally stable are not bothered by that.

  42. Gravatar of ssumner ssumner
    24. June 2016 at 06:34

    Harding, You said:

    “Betting markets are now definitively proven officially worse than useless.”

    Dan, You said:

    “Scott, any thoughts you wish to share about the failure of the betting markets and the financial markets to predict the Brexit outcome?”

    I rolled a die. It came up 5. The odds of that number were only one in six. This definitively proves the laws of statistics are incorrect.

    Morons.

    Bremain, Yes, a lower Wicksellian rate.

    Ben, You said:

    “But when I lived near downtown L.A. there were homeless living in front of my building, and defecating there as well. But globalism only results in good things, and not bad. Right?”

    I doubt many people immigrate to America to defecate in front of your building. Is it possible that some of these homeless people were Americans? Most of the homeless I see around here are white or black, not Hispanic or Asian.

    Bob, Done.

    Mike, Read my new Econlog post, and forget about the UK. This is not about Britain, it’s about the world economy. The ECB, and BOJ need to react.

    Michael, You said:

    “As it happens, the effect is large for one isolated shock — but that’s what it is, after all. In absolute numbers, not so much. Don’t mentally extrapolate this kind of volatility for many days/weeks. It will be elevated, but within historic bounds”

    I agree.

    MP, The main transmission mechanism is a loss of confidence in the eurozone, that’s why Eurozone stocks fell much more than UK stocks. We are back to something like the Greek crisis, hopefully smaller this time.

    It is about something real. A breakup of the eurozone would lead to massive defaults on public debt, which would hit banks hard.

    J Mann. The BOJ and the ECB need to dramatically ease monetary policy.

    Lorenzo, You said:

    “All eyes on Carney then.”

    No, all eyes on Draghi and Kuroda. Those are the key players.

    Collin, That’s why we need NGDP and RGDP futures markets. I don’t know, but would guesstimate 25% or so, maybe 30%.

  43. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 07:01

    Alan Greenspan says this is worse than 1987:

    Former Federal Reserve Chair Alan Greenspan told CNBC’s “Squawk on the Street” on Friday that the U.K. voting to leave the European Union “is just the tip of the iceberg.”

    “Britons voted by 51.9 percent to quit the 28-country union, shocking markets that had priced in a win for “remain.”

    “This is the worst period, I recall, since I’ve been in public service. There’s nothing like it, including the crisis… This has a corrosive effect, which is not easy [to make] go away,” Greenspan said.

    “The former Fed chair said that the root of the “British problem is far more widespread.” The former Fed chair explained that the result of the referendum will “almost surely” lead to the Scottish National Party trying to “resurrect Scottish Independence.”

  44. Gravatar of Scott Freelander Scott Freelander
    24. June 2016 at 07:19

    Yes, this is mostly monetary. The principle problem today for the US is that demand for dollars rose in response to Brexit, but the markets don’t believe the Fed will be sufficiently accommodative. Much of the same is true of Japan.

    The real effects on the EU will be larger, but it’s still mostly a monetary problem even there, likely.

  45. Gravatar of Scott Freelander Scott Freelander
    24. June 2016 at 07:29

    Bob Murphy,

    This is all about supply and demand for dollars. Hiccups like this often raise the demand for dollar( or yen, etc.), hence if central banks aren’t expected to increase the supply accordingly, economic growth is expected to take a hit in proportion. If the rate of return on the dollar is expected to rise, US output is expected to fall proportionally.

  46. Gravatar of Art Deco Art Deco
    24. June 2016 at 07:39

    Alan Greenspan says this is worse than 1987:

    The long term effects of which were just what? (While we’re at it, the Dow declined by 23% during the 1987 crash, not the 2.57% it has declined today).

    As for the rest, here’s another news flash: nonagenarians often don’t make a whole lot of sense (and people writing a gloss on what nonagenarians say make even less sense). Remember Paul Samuelson saying George W. Bush was the worst president in history? A silly remark when he made it and silly in retrospect. Nothing’s happened but some traders losing some money, and Greenspan says it’s worse than 8 major American financial institutions being simultaneously in distress or insolvent (with the company of Fortis and the Royal Bank of Scotland abroad).

  47. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 07:48

    “As for the rest, here’s another news flash: nonagenarians often don’t make a whole lot of sense”

    Aint that the truth. It was the over 65 folks that voted for Brexit even though this has immediately whacked their savings and linked pensions.

  48. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 07:49

    Scott I’m not disputing you that it’s about Europe and Japan but why is the big immediate monetary effect in Britain?

  49. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    24. June 2016 at 07:50

    Richard Epstein called it correctly earlier this week;

    http://www.hoover.org/research/cautious-yes-brexit

    ———–quote———
    The EU’s power rests on the critical notion of harmonization. The union subjects all member nations to uniform rules and regulations in order to ease the burden on cross-border transactions. Uniformity surely has some advantages, but to classical liberals like myself, the advantages come at far too high a price. To see why, it is critical to see how a federal system should work, which is best exemplified in the American Constitution—not as it is interpreted today, but as it was understood in 1787.

    Generally speaking, economic and social activities—including manufacture, agriculture, and mining—take place at discrete locations that are usually under the jurisdiction of a single state. These states are certainly capable of engaging in abusive activities toward their own citizens, but firms and individuals hold the right to exit a state that imposes stiff regulations on its members and move to one where the regulations are less punitive. Exit—and equally importantly, the threat of exit—imposes a huge discipline on local governments who know they will pay a heavy price if they impose unwanted taxes and regulations on their local citizenry. People leaving badly governed states like California, Illinois, and New York are putting real pressure on local governments to mend their ways, without having to identify the particular shortcomings that take place. Knock out the exit right and one reduces the internal pressures for economic and social reform.
    ———–endquote———–

    Epstein points out that currently more law is made for Britain in Brussels than in London. E.g., meat, fruit and vegetables have to be sold in non-english measurements. Then Angela Merkel blundered, big time;

    ————quote———–
    But all of these calculations have changed in light of the mass migrations out of the Middle East, which make open borders a far more difficult issue. It is thus no accident that Andrew Roberts’s impassioned plea for Brexit plays the immigration card. In his view, Angela Merkel invited many young Muslim refugees to settle in Germany, and under the current system, they can migrate to Britain once they get a European passport. There seems to be little doubt that this helps explain the current sentiment in the UK in favor of Brexit. Indeed, it threatens to unravel the rest of the EU as well.

    Yet even if immigration is kept to one side, the economic issues tend to favor Brexit, given the massive overreach of the EU. The great post-war achievement was the formation of the European Economic Community (EEC), or European common market, which went into operation in January 1958 and whose initial members were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. The point of a common market is to allow free movement across national borders of people, goods, services, and capital. A common market with such modest aspirations leaves each nation free to organize its internal production as it sees fit, knowing that its comparative advantage lies in keeping those regulations that foster commerce and eliminating those that do not. The common market may require that nationals from other states be allowed to cross borders for purposes of trade, but it does not give them the right to become citizens or permanent residents of other nations.
    ————–endquote———

    The EUrocrats overreached. If they’d simply kept to the idea of the Common Market, without the ‘harmonization’ (irony alert!), Britain wouldn’t have rebelled.

  50. Gravatar of Dan W. Dan W.
    24. June 2016 at 08:10

    Scott,

    The pundits are calling this vote a surprise. You say the outcome is characterized by the laws of statistics. But why was it a surprise? How is it that the “experts” and, more importantly, the “markets” did not see this coming? Can you appreciate that the poll of people at the ballot box and the “poll” of investors at the stock exchanges did not match, and that this is so despite both polls being open at the same time yesterday?

    Do markets have predictive power? If not, and there are so many examples where market predictions fail, then what policy purpose would an NGDP futures market serve?

  51. Gravatar of Tom Brown Tom Brown
    24. June 2016 at 08:28

    Scott, this one is nuts: after they vote, suddenly there’s interest in what the EU is:
    https://www.washingtonpost.com/news/the-switch/wp/2016/06/24/the-british-are-frantically-googling-what-the-eu-is-hours-after-voting-to-leave-it/

    “Even though I voted to leave, this morning I woke up and I just — the reality did actually hit me,” one woman told the news channel ITV News. “If I’d had the opportunity to vote again, it would be to stay.”

    Wow… what’s wrong with the media over there? Same thing as here? It is a tabloidocracy?

  52. Gravatar of Art Deco Art Deco
    24. June 2016 at 08:42

    Aint that the truth. It was the over 65 folks that voted for Brexit even though this has immediately whacked their savings and linked pensions.

    People over 65 make a normative judgment you do not approve of. A man over 90 is quoted as saying something nonsensical (and that happens when you’re that old) and you fancy these are equivalent circumstances. I have it on reliable authority that I’m the moron.

  53. Gravatar of Art Deco Art Deco
    24. June 2016 at 08:46

    Scott, this one is nuts: after they vote, suddenly there’s interest in what the EU is:

    The entire sum of your commentary is a variation on point and sneer. It has no value.

  54. Gravatar of John S John S
    24. June 2016 at 08:50

    Mike Freimuth,

    Looks like your domain name is almost expired. I hope you renew it — it’d be a shame for your posts to be wiped from the internet. You’re a great blogger.

  55. Gravatar of E. Harding E. Harding
    24. June 2016 at 08:59

    “I rolled a die. It came up 5. The odds of that number were only one in six. This definitively proves the laws of statistics are incorrect.”

    -Scott, my odds, thought up on January 1 of this year, were much more accurate than the markets’ which had the advantage of a constant flow of new information, right up until the very end. And the Brexit vote was not a random event. It was nothing whatsoever like rolling a die. The laws of statistics were not definitively and officially shown worthless yesterday. Prediction markets were.

    I am now much more in favor of an East-German-style planned economy, especially when combined with genuine superforecaster wisdom, than I was a day ago. I certainly am far more against Hansonian futurarchy. Considering mistakes like this, the errors made just by cutting out the middleman can’t be that bad. Of course, sometimes those errors can and do add up, which is what caused the East German failure.

    Sumner, HOW MANY SUCH BLATANT, OBVIOUS, AND PREDICTABLE FAILURES OF THE BETTING MARKETS DO YOU HAVE TO TOLERATE before you FINALLY ADMIT they are WORTHLESS?

    “The ECB, and BOJ need to react.”

    -Agreed. I am now even more in favor of explicit NGDP level targeting than I was yesterday.

  56. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 09:08

    As Nate Silver points out the polls weren’t wrong. They showed a tossup. What happened was in the margin of error

  57. Gravatar of Cliff Cliff
    24. June 2016 at 09:51

    E Harding,

    How many times do I have to toss a die before I finally admit it is worthless?

    You would have to go back and look at the probabilities set by the betting markets for many events and then determine how often events of that predicted probability occurred. If there were 100 events given a 15% probability each and 90 of them happened then it’s broken. If 15 happened then it’s working perfectly.

  58. Gravatar of J Mann J Mann
    24. June 2016 at 09:54

    E. Harding, it’s frustrating, but it’s hard to systematically test probability predictions.

    1) One way to look at it is that if the betting markets predict that an event like Brexit is 25% likely, then they should be “wrong” (i.e., Brexit should win) 25% of the time. In other words, if all of the 25% likely events predicted by markets NEVER happen, or even happen significantly less frequently than 25%, then the markets are underpredicting the likelihood.

    2) The other problem is that you would expect odds to update as we learn more information. If the markets predict that Deshaun Watson is 15% likely to win the Heisman trophy in September 2015, and then he’s seriously injured in November and the odds drop to 1%, does that mean that they were wrong in September, or was that the correct prediction based on the information available at the time?

    3) There’s also a problem of which date to use – the betting markets predicted everything from 40-60 to 15-85 on different dates.

    http://blogs.spectator.co.uk/2016/06/chance-vote-leave-reaches-highest-level-ever/

    As I said, that’s not satisfying – the upshot is that you can’t really say much about the markets from one data point or even several.

  59. Gravatar of Scott Freelander Scott Freelander
    24. June 2016 at 10:14

    Trumpistas,

    You’re conveniently ignoring the many more numerous times when betting markets are closer to correct. Scott never claimed betting markets were always right. He’s only claimed that betting markets will be right more often than individuals, on average.

    If you guys really think betting markets are so bad, why aren’t you bragging out out-sized profits? Why didn’t you guys make money. You don’t seem to realize what jokes you are.

  60. Gravatar of Gabe Gabe
    24. June 2016 at 10:15

    Dr Sumner,

    Please answer a hypothetical for me: IF the central banks(including US Fed) continue with their pre-announced tightening plan and raise rates 2-3 more times this year….or merely refuse to do a QE4…..and the economy descends into a bad recession. t what point do you change your mind and say OK the Fed is not just dumb, clumsy or willfully ignorant….they actually wanted to cause a recession?

    Gabe

  61. Gravatar of ssumner ssumner
    24. June 2016 at 10:28

    Harding, You said:

    “Do markets have predictive power? If not, and there are so many examples where market predictions fail,”

    And why do I get so many comment from morons who do not understand basic probability theory? Betting markets fail as often as you’d expect, why is that so hard to understand?

    Harding, See my answer to Dan.

    You actually showed a glimpse of (unintended) humor in combining East German style planning and superforecaster in the same sentence.

    Gabe, The Fed does intentionally cause recessions on occasion, they did so in 1920 and again in 1981. If they do so this year, I’ll say so. As far as rate increases, it depends what the markets look like at the time. Certainly the Fed has no justification for raising rates at the moment, and I doubt they will.

  62. Gravatar of Art Deco Art Deco
    24. June 2016 at 10:31

    You’re conveniently ignoring the many more numerous times when betting markets are closer to correct.

    The question was a binary, Scott. You’re either correct or you’re not.

  63. Gravatar of J Mann J Mann
    24. June 2016 at 10:47

    Art Deco writes:

    “The question was a binary, Scott. You’re either correct or you’re not.”

    But the answer was non-binary. The markets predicted (at one point) that Brexit had a 25% chance of passing.

    Let’s say Art is planning to flip a fair coin twice. He asks both E Harding and me whether the coin will come up heads twice.

    I say: “There’s a 25% chance it will.”

    E Harding says: “Yes it will.”

    Art flips, and it does in fact come up heads twice. Does that show I’m unreliable? What if we do it a thousand times and it turns out that it does in fact happen about 25% of the time?

  64. Gravatar of E. Harding E. Harding
    24. June 2016 at 11:14

    “E Harding says: “Yes it will.””

    -Whoa, whoa, whoa, I said there was a 50% chance it will.

  65. Gravatar of Art Deco Art Deco
    24. June 2016 at 11:19

    But the answer was non-binary. The markets predicted (at one point) that Brexit had a 25% chance of passing.

    I think the assessed probability was down to 12% at one point.

    The context is these discussions, where the usual sorts assure us that the sophisticated answer is to look at prediction markets (not that any of them ever point to a bilbliography on the question of their reliability vis a vis survey research).

  66. Gravatar of Art Deco Art Deco
    24. June 2016 at 11:20

    You don’t seem to realize what jokes you are.

    Well, you know, Scott, we don’t always see ourselves as others do.

  67. Gravatar of E. Harding E. Harding
    24. June 2016 at 11:20

    “Harding, You said:”

    -No, I didn’t. It was Dan who said that.

    “Betting markets fail as often as you’d expect, why is that so hard to understand?”

    -Is there a study on this?

    “You actually showed a glimpse of (unintended) humor in combining East German style planning and superforecaster in the same sentence.”

    -The humor is probably intentional. What kind of humor did you get from it?

  68. Gravatar of Scott Freelander Scott Freelander
    24. June 2016 at 11:39

    Harding,

    There’s only a research literature going back decades that supports the what Scott says about betting markets.

    Seriously Harding, if you lack such confidence in betting markets, why aren’t you bragging about your winnings? It wasn’t hard to put money down on Brexit ahead of time. You could’ve just loaded up on some Treasury ETFs, for example.

  69. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 12:07

    “You’re conveniently ignoring the many more numerous times when betting markets are closer to correct. Scott never claimed betting markets were always right. He’s only claimed that betting markets will be right more often than individuals, on average.”

    Also, the polls were not really wrong on this, nobody believed them. They showed Brexit would be a very close vote.

  70. Gravatar of J Mann J Mann
    24. June 2016 at 12:15

    E Harding, I was using your name in a hypothetical example just because you were involved in the discussion, not to represent your view – sorry if I offended you.

    (But it would be pretty funny if you picked 50% in my hypo!)

    Everybody, can we agree that specific examples don’t tell us much about the accuracy of prediction markets? I’d love to see the literature – it would be tricky to design a good study, so I’d be interested in what people try.

  71. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 14:10

    “Every presidential election, to one degree or another, turns on the question, “Who are we?” But sometimes that question becomes particularly urgent, and the events of the last couple of days have made it clearer than ever that this election is about a fundamental divide in how we view the past, present, and future of America.”

    “If the electorate decides — as British voters just did in their own way — that our country has become too diverse, too modern, too cosmopolitan, too connected to the rest of the world, too polyglot and too tolerant, then it will make Donald Trump the next president of the United States. If it decides otherwise, Hillary Clinton will win. And there’s nobody with more of an ability to make that case on her behalf than Barack Obama. This may turn out to be his primary task as he campaigns on her behalf: bringing out the “Obama coalition” that enabled him to win two elections.”

    https://www.washingtonpost.com/blogs/plum-line/wp/2016/06/24/barack-obamas-job-in-the-2016-election-is-now-clearer-than-ever/

    The election will come down to who are we as Americans

  72. Gravatar of Mike Sax Mike Sax
    24. June 2016 at 14:26

    Economic vs cultural anxieties

    “Just as we’re seeing in Britain, cultural anxieties are often expressed as economic anxieties; the two aren’t completely separable. You can have a sincerely felt concern that immigrants will take your job, at the same time as what really bugs you is the feeling that they’re changing the character of your country, making it feel like it’s no longer your place. If we could just stop the flow of outsiders, many believe, we could return to the time where everybody talked like me and looked like me and thought like me.”

    “It’s clear that this same feeling drove much of the sentiment in Britain in favor of the vote to leave the E.U. Particularly striking was the divide by age: in one poll, 60 percent of those over the age of 65 wanted to leave, compared with only 20 percent of those under 25.”

    “A few weeks ago, Trump was asked his opinion about Brexit, and was unfamiliar with the term. When it was explained, he quickly answered that he was for it — after all, if his campaign theme is “America First,” it stands to reason he thinks other countries should also be insular, suspicious of immigrants and fearful of outsiders, whether he knows or cares about the details. But it’s important to understand that Trump will not alter his basic appeal. He’s driven above all by impulse and what he sees right in front of him. So when he holds rallies and hears his supporters whoop and holler at the most visceral cultural appeals he serves up, his conclusion is that those are the things that will win him the election. If anyone were to tell him to tone that stuff down, he’d surely find the idea absurd. Isn’t that exactly what people are so excited about?”

    https://www.washingtonpost.com/blogs/plum-line/wp/2016/06/24/in-britain-cultural-resentments-won-out-over-stability-can-donald-trump-create-the-same-result-here/

  73. Gravatar of Art Deco Art Deco
    24. June 2016 at 14:30

    “If the electorate decides — as British voters just did in their own way — that our country has become too diverse, too modern, too cosmopolitan, too connected to the rest of the world, too polyglot and too tolerant,

    By which Mr. Waldman means those things Mr. Waldman cares to tolerate.

    Trump supporters know that that’s not them or anyone like them.

  74. Gravatar of Major.Freedom Major.Freedom
    24. June 2016 at 14:30

    Sumner wrote:

    “Harold, Of course it’s monetary”.

    Of course it is not purely monetary. You even said so in your latest post when you said “Those who claim that Britain may have done the rest of the world a favor by providing a cautionary tale for a withdrawal from globalization better take another look at those stock markets.”

    So was the stock market moves purely nominal, or was it the result of political upheaval?

    Ignorance is strength.

  75. Gravatar of Tom Brown Tom Brown
    24. June 2016 at 14:37

    Mike, interesting read. I liked the final paragraph as well, especially the bit about Trump being an “agent of chaos.”

    His [Trump’s] voters will not be swayed to abandon him by the argument that electing Trump will bring uncertainty and instability. They don’t much care. Is it possible that some series of events in the world could increase the level of instability and anxiety we’re experiencing here in the United States, convincing enough undecided voters to roll the dice on an agent of chaos like Trump to push him past 50 percent?.

  76. Gravatar of Jake lubben Jake lubben
    24. June 2016 at 16:22

    Not sure why everyone doesn’t understand betting markets in the slightest. Betting markets make predictions that amount to percentage likelihoods of certain outcomes. That a less likely outcome occurred DOES NOT mean betting markets failed. You’d need a larger sample size. In fact,a betting market where the more likely bet always won wouldn’t be much of a betting market. People need to understand that something can be more likely to occur while not actually occurring in the end.

  77. Gravatar of E. Harding E. Harding
    24. June 2016 at 17:30

    “People need to understand that something can be more likely to occur while not actually occurring in the end.”

    -Riiiiiiiiiiiight. Not much comfort to real people relying on them.

  78. Gravatar of Art Deco Art Deco
    24. June 2016 at 18:58

    Mike, interesting read. I liked the final paragraph as well, especially the bit about Trump being an “agent of chaos.”

    Well, what’s ‘certain’ and ‘stable’ about the American political order?

    1. Congress will accomplish nothing in the realm of ordinary legislation other than tossing some bon bons to well-connected economic sectors.

    2. The executive will continue to be derelict in its duty to control the borders. Congress may make some feint (say, re-instructing the executive to implements some feature) which the executive will ignore.

    3. Congress will fail to balance the budget (and will fund the government with a ghastly catch-all continuing resolution).

    4. Addison Mitchell McConnell will continue to be the Senate Majority Leader, guaranteeing 1 & 3, unless the job passes to septuagenarian crook Harry Reid.

    5. The Clintons will continue to enjoy legal impunity.

    6. The appellate courts (in a conspiracy with the har-de-har public interest bar) will continue to arrogate to themselves the franchise to impose social policies whenever they damn please.

    7. The courts with the connivance of the har-de-har public interest bar, the sorosphere, and the social work industry, will continue to connive to gut effective social policies and spread disorder.

    8. The courts and the federal bureaucracy, with the connivance of the har-de-har public interest bar, will continue to harass cultural minorities. The Mercatus Center will issue a working paper on occupational licensure.

    9. The educational apparat will continue to make ass-clowns of themselves at all levels. Tyler Cowen will refuse to comment.

    10. 1.3 million unborn children will be slaughtered in the womb. You have the courts and the usual lawfare artists to thank for that.

  79. Gravatar of How bad will Brexit get? Here's what top economists are saying. – Brexit What Next How bad will Brexit get? Here's what top economists are saying. – Brexit What Next
    25. June 2016 at 02:01

    […] the director of the Program on Monetary Policy at the Mercatus Center at George Mason University, points to monetary policy as the key […]

  80. Gravatar of Major.Freedom Major.Freedom
    25. June 2016 at 11:30

    Scott Freelander:

    Reading your posts is like watching pigeons playing chess.

    This is all about supply and demand for dollars. Hiccups like this often raise the demand for dollar( or yen, etc.)

    Why would people raise their demand for money holding if not for real reasons? Obviously there is something about the real future that people have changed their expectations about such that they prefer to have more purchasing power in the present. Printing more money won’t solve this problem because it is purchasing power people are seeking to increase in the present, not merely dollars while everything rises in price.

    If people were expecting absolutely no real changes at all from the vote outcome, then there would be no reason for them to raise their demand for money holding because of it. It is incorrect to claim that this is “purely monetary”. It is both.

    You’re conveniently ignoring the many more numerous times when betting markets are closer to correct. Scott never claimed betting markets were always right. He’s only claimed that betting markets will be right more often than individuals, on average.

    This is just a sleazy, weasal way of never having to admit that any example is a falsification. No matter what happens, this position tells us to ignore it as an outlier, while retaining the core position that betting markets are right more often.

    Oh that guy bet against the betting markets and won? He just got lucky.

    Oh that guy bet against the betting markets and won? He just got lucky.

    Oh that buy bet against the betting markets and won? He just got lucky.

    And on and on.

    If you guys really think betting markets are so bad, why aren’t you bragging out out-sized profits? Why didn’t you guys make money. You don’t seem to realize what jokes you are.

    Speaking of jokes, your comments are one giant series of bad jokes. Even if people did make money, your envy and resentment and your emotionally stunted kowtowing to a flawed belief will just have you chant the mantra that these people cannot exist (they do). Before you even gathered any data at all on anyone, you just sweepingly rejected any possibility of it and just cavalierly pretended that no such people can exist. Pathetic.

    Nobody has to believe the betting markets are “bad” (what are you, 12?) to recognize an opportunity to make money by going contrarian. There wouldn’t even be such a thing as betting markets if there were not both views put into action. That is another thing with you. Somehow you have developed this ridiculous notion that betting markets and the market in general is just one belief in one direction in one quantity. The market is actually fully dependent on contrary bets. There is no “one” prediction in terms of direction and quantity. The market consists of a multitude of different, indeed opposite, views and predictions.

    The economically illiterate often conflate markets with politics.

    Nobody can bet “for” or against ANY “market”. You can only bet for or against specific individual investors. There are short and long positions on virtually every stock. There are short and long positions on virtually every currency. There are short and long positions on virtually every commodity.

    To even pretend to know what you are talking about in accusing others of “betting against the market” just shows how utterly bankrupt is your understanding of basic theory.

  81. Gravatar of ssumner ssumner
    25. June 2016 at 13:05

    Jake, Yes, it’s odd so many people have trouble with the concept of uncertainty.

  82. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 14:44

    2. The executive will continue to be derelict in its duty to control the borders.

    Wait, Trump is changing his tune on immigration now and complaining that Obama has “mass deported vast numbers of people — the most ever”:

    “The billionaire-turned-politician said his immigration policies would have “heart,” suggesting he may be shifting tone to transition into general-election mode after the bruising primary season.

    “President Obama has mass deported vast numbers of people — the most ever, and it’s never reported. I think people are going to find that I have not only the best policies, but I will have the biggest heart of anybody,” Trump said.

    Pressed on whether he would issue “mass deportations,” Trump answered: “No, I would not call it mass deportations.”

    http://www.redstate.com/brandon_morse/2016/06/25/trumps-new-180-immigration-mass-deportations/

    Bwhahahaha!… But “Trump fights!!” right?

  83. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 14:53

    10. 1.3 million unborn children will be slaughtered in the womb. You have the courts and the usual lawfare artists to thank for that.

    … next he’ll be promising to increase funding for Planned Parenthood. He still thinks it’s a wonderful organization.

    What evidence is missing to indicate that Trump University is the rule and not the exception with this guy? How many major promises does he have to reverse himself on? Traditional politicians at least wait till they’re elected for that. It’s staring to look like a Millerite cult to me.

  84. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 15:25

    George Will leaves the GOP (Geoxist?)
    https://lastmenandovermen.blogspot.com/2016/06/george-will-leaves-gop.html

    And Paulson says it’s country over party for him:
    https://www.washingtonpost.com/opinions/when-it-comes-to-trump-a-republican-treasury-secretary-says-choose-country-over-party/2016/06/24/c7bdba34-3942-11e6-8f7c-d4c723a2becb_story.html

  85. Gravatar of Art Deco Art Deco
    25. June 2016 at 15:39

    Charles Calomiris offered seven years ago that Paulson’s mad improvising baffled him given that financial crises are not rare events and there are well-established procedures for handling them. We can be charitable about that bit of public service, perhaps, but not about putting Douglas Shulman in charge of the IRS. Now, Paulson’s boilerplate interests me just why?

  86. Gravatar of Art Deco Art Deco
    25. June 2016 at 15:43

    What evidence is missing to indicate that Trump University is the rule and not the exception with this guy?

    Hillary is acceptable to you, so why are you pretending to be concerned with ethical questions?

  87. Gravatar of Art Deco Art Deco
    25. June 2016 at 15:45

    George Will leaves the GOP (Geoxist?)

    High school’s over, Tom. I didn’t care what the cool kids were up to then, much less the chess club.

  88. Gravatar of Art Deco Art Deco
    25. June 2016 at 15:53

    Tom, there is no need for ‘mass deportations’ nor is there the manpower for that at this time. There is a need for

    1. Barriers with armed guards. Cement, razor wire, bullets.

    2. A check-in and check out system at points-of-entry, with biometric identifiers.

    3. Punishment of people in violation of immigration law, not catch and release. This will require building dedicated apparati of magistrate’s courts and prisons. Just 10 weeks in detention and a multi-year ban on re-entry (again, with identifiers accessible by consular personnel worldwide) should do.

    4. A ready means for employers to verify status, as well as civil and criminal penalties for noncompliant employers.

    5. Dedicated forces to follow up on people who check-in and do not check-out. The point is for gross deportations to exceed gross overstays and whittle down the stock of illegal aliens. ICE must be split into two agencies, one for merchandise and one tracking people, and the manpower of the latter increased.

  89. Gravatar of Art Deco Art Deco
    25. June 2016 at 15:56

    One other thing, Tom. No more political signalling a la Obama and Merkel. Also, refugees are provided for in camps proximate to their homes, with a view to repatriation. Refugees in occidental countries should be retail admissions or should come from source countries on our frontier (i.e. Haiti and Cuba).

  90. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 16:08

    “Hillary is acceptable to you, so why are you pretending to be concerned with ethical questions?”

    Not all ethical concerns are created equal. I don’t expect any politician to be squeaky clean, but I do expect them to have some diplomacy, normal intelligence, a calm demeanor and some respect for and knowledge of the institutions they intend to govern. But mostly I expect them not to make their living ripping people off like they were operating a pump-and-dump penny stock boiler-room (a position which I do think Trump is more than adequately qualified for: one I’d prefer him over Hillary for if I were the unscrupulous owner). I also expect them to have just enough shame and decency to dissuade them from blatantly breaking too many promises, or stiffing their contractors and involving themselves in 1000s of lawsuits, and exercising that court system you’re always complaining about.

    If you’re going to gamble on chaos, why do it with an obvious con artist?

  91. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 16:12

    “Tom, there is no need for ‘mass deportations’ nor is there the manpower for that at this time.”

    Hmm, I seem to remember several times that Trump promised to raise a “deportation force” to round up 11 million illegals in the US and deport them. So he was just bullshitting us then? I wonder what else he’s bullshitting us about? Not surprising. That’s how he makes his living apparently. I’d like to see those tax returns.

  92. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 16:15

    “No more political signalling a la Obama and Merkel.”

    With a link to a RedState article? Yeah, they’re big Obama fans over there.

  93. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 16:38

    Just three years ago:
    http://edition.cnn.com/2013/01/22/business/opinion-donald-trump-europe/

  94. Gravatar of Frances Coppola Frances Coppola
    25. June 2016 at 19:12

    Hi Scott,

    I agree that the magnitude of this shock is huge. I disagree that the effects will be felt mainly outside the UK.

    As you know, I am British: perhaps I know my country better than you. This is much, much worse than you realise. Greenspan is right, though he doesn’t go far enough. We are looking at the breakup of the United Kingdom. It is already beginning.

    We are possibly also looking at the unravelling of the EU, though I am less convinced by this, at least in the short term.

  95. Gravatar of Frances Coppola Frances Coppola
    25. June 2016 at 19:25

    CA,

    the Brexit vote is not binding on the government. It is advisory only. Government could refuse to act on it. In fact the current Prime Minster has effectively done exactly that. He’s resigning, though not till October. The next PM will have to decide whether or not to initiate Brexit by triggering Article 50 of the Lisbon Treaty. This doesn’t need Parliament’s approval, but it does need a clear statement of intent by the PM. Cameron doesn’t agree with Brexit and doesn’t want to provide that statement. That’s why he is resigning.

    Tom Brown,

    Heck yes, the UK tabloidocracy is every bit as bad as the US’s. The tabloids (except the Mirror) are largely responsible for whipping up the anti-EU and anti-immigrant fury that has led to Brexit.

  96. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 22:48

    Hi Frances!

    Thanks for the comments. I’m curious what you think of your countryman’s videos on this subject (he’s a scientist by the name of Phil Mason). Each is ~10 to 15 min:
    https://www.youtube.com/watch?v=33BDDAUV8vg

    https://www.youtube.com/watch?v=gm1xZh5fqY8

    https://www.youtube.com/watch?v=HUm36PYvvzw
    (that last one includes clips from another of your countrymen, John Oliver)

    If I could sum up Phil’s sentiments it would be that in the very long run it may not make that huge difference: trade one set of imperfect trading rules for another set. Perhaps you could argue that one set is incrementally better than the other. However, the disruption and chaos it causes in the near to medium term is definitely not worth it. And that’s what he says everyone is overlooking: the huge expense of rewriting all those rules and renegotiating them and then other countries around the world who trade with the UK having to learn them, and their efforts to do so will be rewarded with a smaller market. It’s an interesting take, but you’d be more qualified to evaluate the veracity of it I think.

    He also claims that payments to the EU amounts to about 100 pounds per person in the UK now, and that certain sectors (like scientific funding) actually end up gaining. He says that the EU supplies about 1/2 of the current funding for hard sciences in the UK, and that it’s very unlikely that will be replaced if Brexit actually happens. I wonder if there’ll be a brain drain because of it? People like Phil already spend the bulk of their time outside the UK as it is (in France, Germany, the US and Switzerland).

    Also, do you happen to know if ex-pats could have voted in the referendum? I hear there are about 2 million UK ex-pats living in the rest of EU, not to mention those in other parts of the world. I would have imagined that those folks would have primarily been Remain voters if they’d had the opportunity to vote remotely.

    BTW, the guy who did those vids wrote down a prediction in a comment. Here it is:

    “anyone who thinks Brexit won, doesnt know what a pyrrhic victory is! FYI…. having thought about this a little. Im gonna make a bold prediction (Ill explain later sometime). Britain will remain in the EU because of a referendum. But will democracy really have triumphed? Screencap now for posterity! EDIT… the details. U cannot have a second referendum without a reason. If it looks like the UK will hurt hard (which it will, who will invest in a country with an unstable future) or Scotland will leave etc etc. NOTE the article 50 exit clause hasnt been invoked yet (2 years to exit). Until someone hits the red button, all bets are off. EU will negotiate a deal with UK….. and what choice will uk have but for a second referendum. The close margin of the last referendum will probably galvanize the remain ppl for referendum 2. There will be wailing and gnashing of teeth. Personally I think the UK should sleep in the bed its made. But honestly, i see the above as more likely.”

    Agree or disagree with that prediction?

  97. Gravatar of Tom Brown Tom Brown
    25. June 2016 at 22:49

    “He also claims that payments to the EU amounts to about 100 pounds per person in the UK now”

    That would be per year.

  98. Gravatar of Mike Sax Mike Sax
    25. June 2016 at 23:33

    Helllo Frances! I am a British citizen though I grew up in the US-am now naturalized American as well

    My problem is the pound. We had an account there finally slotted to disburse soon and now the Brexiters decided to strike. Where do you see the pound in the short term? Is it going to $.90 cents on the dollar or might things stabilize short of that?

    If nothing else I guess maybe I could move back…

  99. Gravatar of Art Deco Art Deco
    26. June 2016 at 07:33

    the Brexit vote is not binding on the government. It is advisory only. Government could refuse to act on it. In fact the current Prime Minster has effectively done exactly that. He’s resigning, though not till October. The next PM will have to decide whether or not to initiate Brexit by triggering Article 50 of the Lisbon Treaty. This doesn’t need Parliament’s approval, but it does need a clear statement of intent by the PM. Cameron doesn’t agree with Brexit and doesn’t want to provide that statement. That’s why he is resigning.

    When Mr. Johnson assumes office, he’s going to have to decide whether or not to do something which will provide an excellent incentive for over half his voters and 40% of his MPs to defect to UKIP and leave him occupying the same political space David Steel once did.

  100. Gravatar of Art Deco Art Deco
    26. June 2016 at 07:38

    This is much, much worse than you realise. Greenspan is right, though he doesn’t go far enough.

    Sorry you have so many 1st, 2d, and 3d degree relatives employed at the European Commission.

    We are looking at the breakup of the United Kingdom. It is already beginning.

    I saw Nicola Sturgeon’s speech. Either she can motivate the Scottish electorate with that piffle or she cannot. If she cannot, she’s history. If she can, it’ll improve the quality of your public life to be rid of them.

  101. Gravatar of Art Deco Art Deco
    26. June 2016 at 07:41

    With a link to a RedState article? Yeah, they’re big Obama fans over there.

    Tom, the whole world does not revolve around your tuchus. You can signal all you want to. You’d be completely quiet if you stopped doing that. When BO and the hag-chancellor signal, you get flash mobs of refugees and ‘refugees’ showing up on the border. The signal should be ‘the border will be defended with live ammo’.

  102. Gravatar of Art Deco Art Deco
    26. June 2016 at 07:45

    Not all ethical concerns are created equal. I don’t expect any politician to be squeaky clean, but I do expect them to have some diplomacy, normal intelligence, a calm demeanor and some respect for and knowledge of the institutions they intend to govern.

    Trump has adequate intelligence and has been negotiating business deals for four decades. People who know Hillary Clinton face-to-face will not tell you she has a ‘calm demeanor’ unless she’s still signing the checks for them; there’s a reason Secret Service agents were pondering about just when they had an obligation to intervene to protect the President from his wife.

    And, of course, you’re quite content with a politician running a vast money laundering operation.

  103. Gravatar of ssumner ssumner
    26. June 2016 at 08:48

    Frances, Just to be clear, I have said that I think this will be bad for the UK. I’ve also said that it could lead to the breakup of the UK. I’ve also said that it could cause major problems for the rest of the EU.

    But I still think the risks are greater on the continent, where the situation is far more fragile. There’s a great deal of ruin in a nation, with one exception—monetary policy.

  104. Gravatar of Tom Brown Tom Brown
    26. June 2016 at 09:08

    And, of course, you’re quite content with a politician running a vast money laundering operation

    Oh god. Aluminum foil hat time I see. Maybe you’ve been breathing too many chem-trails?

    I saw Nicola Sturgeon’s speech as well, and thought it was pretty straightforward and clear. A good speech overall. For anyone that’s interested:
    https://www.youtube.com/watch?v=1moPW7b9mHI

  105. Gravatar of » Economic implications of BrexitECHO DIGEST » Economic implications of BrexitECHO DIGEST
    26. June 2016 at 22:40

    […] the director of the Program on Monetary Policy at the Mercatus Center at George Mason University, points to monetary policy as the key […]

  106. Gravatar of Art Deco Art Deco
    27. June 2016 at 03:30

    Oh god. Aluminum foil hat time I see.

    It’s a matter of public record, whether you wish to acknowledge it or not.

  107. Gravatar of Tom Brown Tom Brown
    27. June 2016 at 17:53

    It’s a matter of public record, whether you wish to acknowledge it or not.

    Posted without any links, as usual. Is it behind the StormFront pay wall? What about your claim that Obama’s “political signalling” caused “Central American” “flash mobs” or some such? I tried Googling a few of those phrases and it led to pretty sketchy areas of the web I wasn’t sure I wanted to go. Links?

  108. Gravatar of How bad will Brexit get? Here’s what top economists are saying. – India SpeakUp How bad will Brexit get? Here’s what top economists are saying. – India SpeakUp
    30. June 2016 at 06:13

    […] the director of the Program on Monetary Policy at the Mercatus Center at George Mason University, points to monetary policy as the key […]

  109. Gravatar of Brexit | Theo Jones Brexit | Theo Jones
    23. July 2016 at 14:19

    […] Scott Sumner thinks that this will become a major monetary shock,5 and will worsen the global economy substantially, even outside of the U.K and the E.U. It looks like central banks will need to engage in expansionary monetary policy, “the ultimate effect depends ENTIRELY on how the central banks react.  Do they show imagination and leadership, or . . . do they keep acting the way they’ve been acting since 2007“ […]

  110. Gravatar of How bad will Brexit get? Here’s what top economists are saying… | Coaching Ejecutivo How bad will Brexit get? Here’s what top economists are saying… | Coaching Ejecutivo
    9. August 2016 at 13:24

    […] the director of the Program on Monetary Policy at the Mercatus Center at George Mason University, points to monetary policy as the key […]

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