Markets clearly approve of the the Brexit outcome. Having risen like a caffeinated phoenix since the brief selloff immediately following the referendum.
Of course, everyone appreciates an underdog.
And what an improbable victory it continues to be. As referendum polls closed throughout the UK that evening, reported odds-maker Ladbrokes, there was a one-in-twelve chance that "exit" voters would win.
But, win they did. So, what's it mean?
First, consider the mood on the street.
Main Street -- from Denver to Dubai -- is pissed off. Vindictive. Having watched for two decades as living standards rose across the high-rent areas of world capitals. Brussels. Paris. Beijing. And Washington D.C. While Main Street saw its stead drop like unleavened bread.
Four years ago, D.C. eclipsed Silicon Valley as the nation's wealthiest metropolitan statistical area based on per capita income. Though nothing is created or produced in D.C. Beyond pork, regulations and red tape. In fact, during the Credit Crisis, the only area of the nation that continued to prosper? You betcha... Washington D.C. And all of the politicians, administrators, lobbyists, attorneys, pundits and political errand boys.
As the nation's infrastructure crumbled. Cities went into hock. And the middle class saw no real economic improvement for two decades. The nation's capital produced new millionaires, restaurants, art galleries, town houses and direct flights to Aruba.
The nation took note. And seethed.
As hilarious as it was depressing was an article on Bloomberg last Monday morning. The author seems to have discovered the elixir for the pesky lack of economic growth. Postulating that, just perhaps, the answer to our slow-growth dilemma may be... wait - for - it ... more government!
Not making this up.
The author, Noah Smith, works at Stony Brook University as an assistant finance professor. And does some freelance writing. Accordingly, assistant professor Smith benefits from the largesse of the state. And has never run, managed or operated a businesses. Nor created, set or balance a budget. Nor hired or fired a living soul.
Which, you might agree, uniquely qualifies him to solves the nation's economic dilemmas. That is, once he's through helping the three little pigs to wolf-proof their homes.
In the piece, assistant professor Smith perfectly postulates the essence of Keynesian economic thinking. Whose proponents believe in an inverse correlation between the size of government and preponderance of national problems. And unicorns.
Despite a mountain of contrary evidence.
Before we continue, please understand: I'm not among those who believe that government is the source of all evil. Just the source of most stupid. Because within an economic system based upon efficient capital allocation, one must have some skin in the game to make consistently pragmatic asset allocation decisions. And those spending tax-payer dollars are skinless. Yet privy to an endless spigot of other people's capital.
The bloated bureaucracies running the U.S. and Europe have been economically detrimental to the national interest for much of the last 65 years. Though that reality has not prevented them from usurping an increasing array of responsibilities at the federal level. Responsibilities once handled with aplomb in states and municipalities.
Moreover, bloated bureaucracies worsen matters by throwing good money after bad. Over allocating to ineffectual agencies and programs. Even as they provide little-to-no return on capital. Only contributing with any real consistency to the liabilities.
War on drugs? Disaster.
War on poverty? Catastrophe.
War in general? Senseless.
Of course, anecdotally, assistant professor Smith chose as evidence the very example I might have chosen. That is, were I attempting to make the opposite argument.
In noting the benefits of government-based growth promotion, assistant professor Smith cites the U.S. Postal Service (USPS).
What the assistant professor fails to mention, unfortunately, is that the postal service incurred $125 billion in unfunded liabilities last year. Not to mention $15 billion in outstanding debt.
Moreover, the USPS has been eclipsed by private firms like FedEx and UPS as the nation's primary drivers of logistics services. Compared to the debt-laden USPS, FedEx made $47 billion in revenue last year. While earning over a billion dollars in net income. UPS earned over $58 billion in revenues. And nearly $5 billion in net income.
So, the USPS delivers the mail from A to B. But at the cost of a NASA Mars mission.
Like so many government-sponsored entities. Ultimately performing a task at great taxpayer expense. Of course, that no longer seems to bother bureaucrats.
"But the government's not all bad. It saved us from a Credit Crisis depression, right?"
That pretense has been promulgated by governments these last eight years. That being, without the decisive action of central banks, the 2008 crisis would have conflated into a global depression. One that was avoided thanks to quantitative easing. Zero percent interest rates. And now, negative interest rates.
What a bunch of tripe.
The Obama administration's initial foray into economic stimulus was the "American Recovery and Reinvestment Act of 2009." Or, The Recovery Act. Its primary purpose? To save and create jobs. It cost $800 billion. And did little to create any jobs.
Then, we opted for quantitative easing (QE). Which simply loaded banks up with reserves that they did not lend. If QE did result in economic growth, where's the higher inflation? Where's the weaker dollar? Where's the wage growth? Career jobs? The diminishing welfare rolls? The rising tide that lifts all boats?
What about the negative-interest rate policies (NIRP) now eclipsing the zero interest rate policies (ZIRP) in capitals around the world? Central banks have always believed that low short-term rates create economic stimulus. So, why not evolve that to the logical next step -- negative rates!
But Keynesian theory fails to grasp that negative rates represent more or less a tax on the financial system. Which represents an economy's capital allocation system. The conveyor belt for monetary policy. So explaining why nations that have adopted negative rates have seen no economic enhancement. Nor will they. Because negative rates equate to slower money growth.
Someday, Keynesians and other bureaucrats -- be they bankers or politicians -- will recognize that governments and central banks do not create wealth. Only tedious acronyms. Entrepreneurs create wealth. Conceiving ideas that improve lives. That engineer life-enhancing technologies. That free us from disease. Liberate us from foreign autocrats. That make the world smaller.
Government spending and regulations, on the other hand, serve as a drag on efficiency. Reducing economic growth and productivity. Making it difficult for entrepreneurs to perform their societal roles. Evidenced by the sad fact that 2015 marked the first year in 35 that more businesses died than were born.
Thanks to ZIRP, NIRP and other central-bank experiments, American seniors cannot find attractive yields without assuming too much risk. With yields on 30-year Treasurys at 2.10 percent -- the lowest-ever for U.S. long bonds -- retirees have gotten the proverbial shaft.
Of course, American seniors remain the lucky ones. Those in Japan, Germany, Sweden, Denmark and Switzerland have loaned their governments money at negative interest rates. Meaning that they'll receive back less than what they loaned out.
All done to capture elusive economic growth. Which has yet to occur. Though the nation's outstanding debt increased by 104 percent these last eight years. An annual average increase of 9.3 percent per year.
No growth and more debt? Don't have to be an economist to see the lack of efficacy in that, assistant professor Smith.
June of 2008? National debt was $9.492 trillion. June 2016? Same debt had ballooned to $19.38 trillion. A $9.9 trillion increase in eight years.
And what have we gotten in return?
The most contentious period of social unrest since the 1960s. Zero improvement in middle class earnings. A Social Security program projected to go bankrupt in 2028. No foreign policy. Crumbling national infrastructure. A debt burden that the non-partisan Congressional Budget Office reports will sooner than later become the next financial cataclysm. And the growing sense that the nations' elites have no clue as to how they might solve this array of problems. Only worsened by the lack of will to do so.
Alas, no need to worry, assistant professor Smith. The denizens of D.C. continue to earn markedly more than the rest of the nation. Regardless of their lack of productivity.
Which explains why Great Britain fired Brussels.
The British electorate tired of watching 10,000 Brussels-based bureaucrats earn higher salaries than did Britain's own prime minister. Even as European Union officials drafted deleterious tax policies and regulatory provisions that hindered economic growth. And forced Great Britain to absorb an ever-increasing population of immigrants. While the nation's economy struggled to care for its own.
Those in Manchester viewed the bureaucratic shackles in Brussels as do those in Des Moines, Duluth and Delray Beach view policies written by D.C.'s bureaucrats.
Since taking office, the Obama administration has heaped 20,642 new regulations onto Americans' plates. Imposing more than $22 billion last year alone in new regulatory costs. Bringing the total new regulatory burden of the last eight years to more than $100 billion annually. With U.S. federal government regulations amounting to an estimated $2.028 trillion in 2012. And compliance costs allocated disproportionately to small businesses. Costing them nearly $12,000 per year for each employee -- just to remain federally compliant.
No wonder entrepreneurialism has been in decline.
Did the administration cast a blind eye to post-Credit Crisis economic realities? How else can you explain the decision to place thousands of new obstacles in the paths of businesses and households as they struggled to regain their post-Credit Crisis financial footing? Would pragmatic advisors counsel such tomfoolery?
Perhaps because the denizens of D.C. never stopped prospering. Even as the rest of the nation did. Which, at the very least, renders them a bit out of touch.
Were this nation a publicly traded company, assistant professor Smith? We'd have fired the executives and the board long ago. Restructured the entire enterprise.
Increasingly, the global electorate realizes as much. Evidenced by Trump's rise on the political stage. And the unexpected Brexit outcome.
Global shareholders -- being the worldwide electoral constituency -- have begun to rebel against large, out-of-touch bureaucracies. Even as elites (like assistant finance professors at state universities) call for more government initiatives. Bigger government agencies. Wider government reach.
Which, in hindsight, may be seen as big government's final, greasy, despoiled and desperate attempts to hold onto the fiefdoms they've created. Recognizing, to their horror, that the world's mainstream electorate has had enough. Has determined to dispose of autocrats and bureaucrats in Europe, Brazil, Venezuela and -- perhaps soon enough -- the United States. Choosing to rescind their powers and send them packing.
Moreover, I suspect you'll see this expurgation intensify before it is through, assistant professor.
And so the tables will turn. And if bureaucrats can't earn their meals? They'll risk being eaten.
In preparation for this piece, I emailed assistant professor Smith. Challenged the thesis of his article. Rebutted the wayward, worn-out wisdom. Seven days hence, our relationship remains a unilateral affair.