The Brexit fate debate

August 21, 2016 01:00 AM
The world was shocked — despite plenty of warning — by the United Kingdom’s vote to leave the European Union. But it is unclear what it will mean. Here is a compilation of thoughts on Brexit from people with skin in the game.

The world was shocked —despite plenty of warning — by the United Kingdom’s vote to leave the European Union. But it is unclear what it will mean. Here is a compilation of thoughts on Brexit from people with skin in the game.

Nigel Farage, Brexit architect, 
in his “victory speech” 
to the European Parliament 


“Why don’t we be grown up, pragmatic, sensible, realistic and let’s cut between us a sensible tariff-free deal and thereafter recognize that the United Kingdom will be your friend, that we will trade with you, cooperate with you, we will be your best friends in the world.”

Ben Hunt, Ph.D., 
Salient Capital Chief Risk Officer


“What’s next? From a game theory perspective, the European Union and European Central Bank need to crush the UK. It’s like the Greek debt negotiations...it was never about Greece, it was always about sending a signal that dissent and departure will not be tolerated to the countries that matter to the survival of the Eurozone (France, Italy, maybe Spain). Now they (and by “they” I mean the status quo politicians throughout the EU, not just Germany) are going to send that same signal to the same countries by hurting the UK any way they can, creating a narrative that it’s economic death to leave the EU. It’s not spite. It’s purely rational. It’s the smart move.”

 

Bob Browne, Chief Investment Officer, Northern Trust


“It’s a good lesson in humility for all of us, we should be very careful about assuming that what we want to happen is going to happen. We were wrong-footed along with the rest of the market, so we have to step back and digest this information in a very careful way before making any other erroneous assumptions.”

William Priest, CEO and Co-Chief Investment Officer of Epoch Investment Partners


“One might expect the Brexit vote will act as a wake-up call for the EU elite. However, there have been many such calls in recent years, yet nothing seems to happen; Brussels appears impervious to dissent. The EU system desperately needs reform but has shown little inclination in that direction. This is truly unfortunate as, even when the EU falls short, like it has when dealing with the rise of authoritarianism in Hungary and Poland, the Union and its institutions are an important restraint. Brexit greatly damages the European project and it could open the door to even more ugliness across the continent. As such, it is no exaggeration to say that a Brexit would call the European project into question, particularly as there is a widespread view on the continent that Europe is failing to deliver economically.”

Jeremy Grantham, founder of Boston-based GMO, a $99B global asset management firm


“In total, if Brexit occurs, the U.K. economy will be hurt for several years. In the longer term, though, there may be some offset for the U.K. economy by virtue of having a smaller financial sector and a more balanced, less London-centric economy…Brexit may even stimulate the EU to reconsider its many weaknesses. It is a particularly complicated exercise in government and as such is prone to unfortunate decisions. It is less democratic than it needs to be, but it appears to be much less democratic than it really is. It has been overconfident about its acceptability to the general public of its member states and badly needs better P.R. Brexit may be seen in 20 years as having woken up and revitalized the EU.”

Colin Robertson, Managing Director of Fixed Income at Northern Trust Asset Management 

“Our expectation is that rates will move even lower. Don’t be surprised if the 10-year Treasury yield drops to as low as 1% ... a pretty significant rally from where we are at 1.5% right now.”

Statement of Chancellor of the Exchequer, George Osborne, and leaders of international investment banks 

“Britain’s decision to leave the EU clearly presents economic challenges which we are determined to work together to meet. We will also work together to identify the new opportunities that may now become available so that Britain remains one of the most attractive places in the world to do business.
One of Britain’s key economic strengths is that it is a world leading financial center. It has one of the most stable legal systems in the world, a brilliant workforce and deep, liquid capital markets unmatched anywhere else in Europe, all of which are underpinned by world class regulators.
In recent years, it has established itself as a global hub for renminbi, rupee, Islamic finance and green finance, as well as leading in new markets such as FinTech. Today we met and agreed that we would work together to build on all this with a common aim to help London retain its position as the leading international financial center.” 

German chancellor Angela Merkel, 
to the German Bundestag

“We’ll ensure that negotiations don’t take place according to the principle of cherry-picking. It must and will make a noticeable difference whether a country wants to be a member of the family of the European Union or not. Whoever wants to leave this family can’t expect to do away with all of its responsibilities while keeping the privileges.”

Jens Weidmann, President of the German Bundesbank, in speech following Brexit vote

“The United Kingdom will feel the economic consequences of withdrawal [the hardest]. But the Eurozone area economy could [also] easily slow down - and the political ramifications are not yet foreseeable. In Germany, the [Brexit vote will cause] the economy [to slow], especially since the United Kingdom is the third most important export market for the German economy. But for the financial center Frankfurt new opportunities could arise. But [that] also requires political backing. We should be the ones who relocate their businesses from London to Frankfurt.” 

Jean-Claude Juncker President of the European Commission, 

“Deserters will not be welcomed back with open arms.”

Jeffrey Grundlach, Doubleline Capital CEO to Barron’s

“The worst thing that could happen would be for the establishment to say we’re not leaving. The people said leave. A vote is a vote. I heard somebody say, ‘It was 52%-48%. Are we really going to let a four-point difference determine our path?’ Yes. We do that every year in the U.S. Referendums that raise taxes and build projects come in at 52-48, and we don’t revote them. Do you keep voting until you finally get what you want? That is not a democracy. If you say that doesn’t count, that gets people who are already angry infuriated. There would be riots if they tried not to leave.”

Nigel Farage, Brexit architect, citing Obama’s visit to the UK at the request of Prime Minister David Cameron

“The lessons learnt from the Obama visit are fascinating. Here is the most powerful man in the world coming from a country that we have always had huge regard for. And people in Britain listening to Obama said: ‘how dare the American president come here and tell us what to do’ and it backfired…And I think we got an Obama Brexit Bounce, because people do not want to be told how to think and how to vote.”

Jim Rogers, co-founder of the Quantum Fund with George Soros, prolific author on commodities investment and chairman of Rogers Holdings

“This is just another straw that’s going to make it worse. Whenever bear markets happen, you always start having bad news, and that makes them worse. We’re going to have a very serious problem in the next couple of years. You should be worried … you think 2016 is bad. Wait ‘til 2017. It’s going to be worse.”

George Soros, Chairman of Soros Fund Management in an op-ed in Project Syndicate

“What the EU must not do is penalize British voters while ignoring their legitimate concerns about the deficiencies of the Union. European leaders should recognize their own mistakes and acknowledge the democratic deficit in the current institutional arrangements. Rather than treating Brexit as the negotiation of a divorce, they should seize the opportunity to reinvent the EU – making it the kind of club that the UK and others at risk of exit want to join. … Europe’s leaders must recognize that the EU is on the verge of collapse. Instead of blaming one another, they should pull together and adopt exceptional measures.”

Nicholas Barrett, deputy editor of thestrix.com in Financial Time op ed 

“Young Brits like me will lose the automatic right to live and work in 27 EU countries. The “Erasmus generation” — named after the EU’s student exchange scheme — has come to see Europe as borderless, and many of us have grown up studying and working in other European countries. Some 75% of voters under the age of 25 opted to stay in the EU. Meanwhile, those over the age of 65 voted most heavily to leave. Those who voted Leave may feel powerless and ignored, but demographically they are more likely to be leading settled, retired lives with little need of a continent’s worth of opportunity. They will have to tolerate the economic chaos they have created for roughly 20 years. Millennials will now have to spend up to eight decades locked out of the union we voted to stay in.”

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