Eight Things to Know About the U.K. Vote
Well, the Brits have really done it now. All the experts told us people in the U.K. were smart enough to see that voting to leave the European Union was a mistake -- but not to worry because the referendum was going to lose. I once again must invoke the wisdom of screen writer William Goldman, who as regular readers will know summed up almost everything you need to know with the world's three most important words (no, not those words -- see Item 7 below).
That said, here's how I see it:
1. London, Get Used to It
It was a back and forth between New York and London in the bidding to be the capital of capitalism. That race just ended. This may be good for New York and Hong Kong in some abstract way, but more likely the center of European financial gravity will shift to Geneva or Brussels or Frankfurt; or maybe no one city replaces London and financial power is scattered all over Europe.
London’s ambition to be the world's most important city is now over. Expect it to become more like Colonial Williamsburg: A tourist trap that attempts to depict what life was like in the not-too-distant past.
2. Give Us Your Tourists
With the pound at 30-year lows and falling, the cost of taking a vacation in London has plummeted. Recall the mid-2000s, as the U.S. dollar was in the midst of a 40 percent decline -- the prices in the U.K. were insane. A reasonable and not luxurious hotel ran more than $1,200 a night, and I recall a decent burger was almost $40.
We are now at the opposite end of that currency trade: The pound has had its worst one-day fall ever, and versus the dollar it has returned to levels not seen since the 1980s. It makes me want to take a week off and go for a visit, while doing some bargain hunting. Many in Europe may feel the same.
3. Yes, Donald Trump Is Ecstatic -- For Now
There are two lines of thoughts on this:
The first is to note this data point, reported by Politico: “66% people who left school at 16 voted for Leave. 71% of those with university degrees voted to Remain.” Hence, if the U.S. has a similar proportion of more educated versus less educated, and they vote in similar ways as the Brits just did, it could benefit Trump.
The second involves a bit of reflexivity: If Brexit turns out to be the disaster it looks like it will be, and people come to understand that foolish actions have consequences, then the result could be a move against someone who is seen as a chaos candidate.
4. The Future Doesn't Belong to the Old
It isn't just Bernie Bros in the U.S.: The young in Britain are not going to be happy with efforts by their elders to take them back in time. A YouGov survey revealed a clear cut generational divide: Among 18- to 24-year-olds, 75 percent of those who cast a ballot voted to stay. For those older than 65, the vote was 61 percent for leave.
Here's how this might play out: As a Britain apart from the EU becomes less prosperous, the finances of the national retirement system will come under greater pressure. Don’t be surprised if the younger generation demands cuts to funding for the pensioners. Payback is tough, and this time the oldsters will deserve it.
5. Scotland Will Take the EU Over the U.K.
About two-thirds of Scots who voted picked “stay.” They must be thinking, Why did we hitch our wagon to this irresponsible gang? Northern Ireland also voted to stay, while Wales voted to leave. Another referendum might be coming: This time, the Scots might go, and rejoin the EU.
The phrase "United Kingdom" is now a full-blown oxymoron, akin to "jumbo shrimp" and "death benefits."
6. The Sun Really Has Set on the British Empire
Just in case you had any doubts, the U.K. has now completed its historical round trip, making the transition from a small, impoverished island dependent on farming and fishing, to globe-spanning imperial power, back to a small impoverished island dependent on farming and fishing.
Sure, the U.K. has nuclear weapons, just as fat middle-aged former footballers still have their old team jerseys. Each is a remnant of former glory days, long since gone.
7. Nobody Knows Anything
This is a favorite theme of mine, and my Bloomberg View colleague Justin Fox did a terrific job summarizing how the experts got what was admittedly a close race completely wrong. Not just the pollsters but the prediction markets: U.K.-based Betfair and Ladbrokes, and the stock and currency markets also anticipated a win for "remain." It just goes to show how poor experts are at making predictions.
More disconcerting is how easily ordinary folks can be confused by nonsense -- and not just in the U.K.
8. “Uncertainty” Has No Place When There's a Binary Outcome
I won't beat this dead horse too much, other than to say that there were two options presented to voters: Stay and leave. Voters picked "leave," despite warnings that exactly what is happening at the moment was going to happen. That isn't what the term "uncertainty" means, and those who insist on using the word incorrectly subtract from the sum of human knowledge.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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