
Cautionary Tales from Brexit, Grexit and U.S Budget Battles - prostoalex
http://www.wsj.com/articles/forecasts-of-brexit-gloom-may-be-overdone-1472406752?=e2fb&mod=e2fb
======
mpweiher
The article is incredibly disingenuous.

For example, the FTSE 100 rose largely because of the fall of the pound (which
has remained low): most of the FTSE 100 companies have income largely
denominated in non-pound currencies but are themselves valued in pounds in the
FTSE. So a fall of the pound immediately makes them more valuable, measured in
pounds.

Other effects were ignored, for example last I checked commercial real estate
was hit hard, and all of the commercial real estate funds closed down post
brexit. The London private property market was also hit, with the market
nearly stalled despite a retreat on prices.

And that's all before Brexist has actually happened, when most people didn't
actually expect it to happen and therefore contingencies are only slowly
coming online (and many won't until we know that the trigger will actually be
pulled and what the consequences are).

Then there is the classic use of a non-zero y axis.

Or the use of Grexit, which _didn 't happen_. So maybe the dire consequences
that were predicted didn't happen because the event that was thought to
precipitate those consequences was averted??

Geez.

~~~
TheOtherHobbes
More than that - the FTSE 100 and FTSE 250 are both being pumped up with QE.
The cost to the UK in borrowing costs is already far more than the total
historical contribution made to the EU.

And so on. There's more, but the picture is clear enough.

This article is either shockingly and unprofessionally misinformed, or
deliberately misleading.

------
_delirium
The Greece bit of this article is strange:

 _Warnings abounded in 2015 that if Greece rejected an international bailout,
it could spark a sovereign default or a banking crisis or Greece being cast
off the euro. Greece’s economy is far from a success story, but it hasn’t gone
bankrupt. Its banking system has been battered and drained of deposits, but
hasn’t collapsed. It remains in the euro._

But Greece _didn 't_ reject the international bailout; it accepted it (despite
a referendum voting "no", Tsipras signed it anyway). So this article is
arguing: Experts predicted ~A -> B, but since in reality both A and ~B came to
pass, experts are wrong. That's... not valid reasoning. Presumably the experts
would argue that to the extent Greece isn't (quite) bankrupt, it's precisely
_because_ it heeded their dire warnings, and got cold feet about rejecting the
bailout package.

------
sudoscript
A quote I read once: "History works slowly at first, and then all at once."

I still think it's too early to tell what the impact of events like Brexit and
Euro crisis will be. As humans, we're wired for immediate feedback loops, but
that's not usually how the world works. We (and particularly the media) tend
to look for immediate impact, but it's way too early to say that there will be
no consequences from all the things that have been happening in 2016.

------
rayiner
It's true that the real ramifications of Brexit remain to be seen. But it's
interesting to see how many people want Brexit to fail. What if we don't need
a fledgling world government in the form of the EU? What if its okay for
different groups of people to retain their autonomy and their sovereignty--
something people have fought and died for throughout history? Would that be
such a disaster?

~~~
mikeash
The whole reason the EU even exists is because Europeans kept fighting and
dying to retain autonomy and sovereignty, and they finally got tired of it.
People are afraid that without supernational institutions tying it all
together, Europe will return to its old patterns. That would be a disaster
almost beyond imagining if so. Modern weapons will make the Second World War
look like a fun romp in the park by comparison.

Of course, maybe it won't happen that way. But pointing out that people have
gone to war over this stuff throughout history is not really helping.

~~~
Hermel
The question is: is the EU the symptom or the cause of peace in Europe?
According to the Nobel price committee, the EU is the cause. But I have some
doubts... a badly governed EU could even spark nationalist resentments instead
of containing it.

~~~
DicksenZuider
The American/Allied victory in World War II is the responsible for most of the
relatively peaceful world situation. A cooperating West Europe resulted from
this.

~~~
AnimalMuppet
And a cooperating West Europe existed for years before the EU. Ascribing the
peace to the EU seems somewhat revisionist.

~~~
mikeash
The various precursor institutions to the EU go back to 1952.

~~~
AnimalMuppet
Sure, but nobody's crediting the six-member European Coal and Steel Community
with being the source of European peace.

------
mmanfrin
Quite literally nothing has happened with Brexit yet -- other than the vote
itself. "Doomsayers Stumble[d]" is a far conclusion to draw from the aftermath
of an event that hasn't yet come to pass.

~~~
teamonkey
Yes, this is really important. The markets have responded to the _potential_
of leaving (because the referendum isn't a guarantee, although it would make
any party that contradicted it extremely unpopular), but nothing else has
happened.

EU trade deals are still intact, free movement is still in place. How can the
economists' post-Brexit predictions fall foul when we are still pre-Brexit?

------
doctorpangloss
The FTSE graph before and after Brexit is incredibly misleading. The reason
equities rose is because the Pound depreciated to a historical low. The value
of that stock in FTSE in other currencies of course declined.

~~~
tobltobs
Even if it wouldn't have declined, the non reaction could just mean that Mr.
Market doesn't believe that Brexit will ever happen.

~~~
ianai
Doesn't believe or doesn't know how to price it, yet.

~~~
c0g
Then it would decline due to increased risk.

------
ianai
News just in: huge, economy level change that hasn't begun to unfold, yet,
appears to have not impacted the market...again, yet. You can just stop
reading after "It’s early".

------
tobltobs
So far there haven't been any kind of a Brexit. It is even completely unknown
how a Brexit might look like. And if there ever will be a Brexit at all.

~~~
afarrell
There has been a bit of a dip in rents, possibly due to Europeans wary of
immigrating.

~~~
teamonkey
Also because the housing market is over-inflated and a steep recession seems
likely; people are worried because the last recession caused housing prices to
drop severely. Also the pound has crashed against the Euro, food prices are
already starting to climb, so housing costs are simply not as affordable as
they were a few months ago.

------
plafl
You can have an accident if you drive while being drunk. The fact that most of
the time there is no accident doesn't mean that it's not dangerous. Sometimes
it looks like we take economic and political decisions similarly.

~~~
chimeracoder
Agreed, though in this case it's more like smoking, or exposing yourself to a
large dose of radiation, because there's a latency in between the event
(Brexit vote) and the ultimate outcome.

Just because you don't develop cancer the very next day doesn't mean you won't
suffer long-term health consequences[0]. Likewise, just because the outlook
two months later doesn't look dire, that doesn't mean the UK won't suffer
long-term economic consequences from the vote.

(The disease analogy breaks down when you also factor in the uncertainty
around whether Article 50 would even be invoked after the vote, or the
uncertainty around what the ultimate outcome of the exit negotiations will
be.)

[0] Likewise, just because you develop cancer, that doesn't exactly mean that
you got it _because_ of that exposure either.

~~~
gutnor
> Likewise, just because the outlook two months later doesn't look dire, that
> doesn't mean the UK won't suffer long-term economic consequences from the
> vote.

Also, maybe if the economic consequences had been really bad after 2 months,
people would be trying to avoid Brexit in the first place.

The Brexit is something that will be judged in a generation.

------
20yrs_no_equity
Fundamentals are hard to argue against, but predictions of timing are hard to
get right. The fundamentals may indicate one thing, and predictions based on
them are reasonable, until the fundamentals change. Timing of predictions is a
very different thing because despite the fundamentals there are external
factors you simply cannot predict.

Predicing there would be a housing bubble in 2001 was merely a case of seeing
the changes in the law under Clinton, the change in financial settings at the
federal reserve under Bush due to the dotcom crash and 9/11, and looking at
the way the incentives were set up with Fannie Mae and Freddie Mac. Many
people said you can't predict such a thing and in 2006 it was common to see on
TV the claim that there was no housing bubble, and that the economy was
fundamentally sound and I heard this a great deal from people in day to day
life who were buying houses and thought I was insane to think houses were
overpriced. I'm not a genius, I just read the right article in 2001 from a
"economic doomsayer" and between 2001 and 2008 as far as everyone was
concerned, I was crazy, and then after 2008 instantaneously "it was obvious"
there was a housing bubble and thus my insight was pointless.

The lesson here is to look at the fundamentals, but don't bet on the timing. I
invested against the housing market in 2002-2007. I wish I had known about the
existence of CDOs. I got out in 2007. I was a year early. You can't predict
the timing.

But you can take fundamentals to the bank.

------
yk
Thing is, this is media phenomena, a journalists decides which quotes to use.
There are of course a lot of people who could be called 'expert' and one of
them will have a very quotable opinion.

------
cloakandswagger
Globalists and economists are burning through what little remains of their
credibility with each failed prognostication.

David Cameron suggested a Brexit might spark WW3. Economists claimed it would
decimate the British economy in short order. These same naysayers are still
prophesying, this time saying that the collapse is gradual but imminent.

Your average "Main Street" person is tired of being talked down to by ivory
tower economists and globalists, and they're responding with support for
populist movements.

I predict this will reach a boiling point in the US when Fed monetary policy
results in the opposite intended reaction.

~~~
dragonwriter
Since Brexit hasn't actually occurred, its a little early to call any of the
prognostications as to what it might produce "failed".

~~~
cloakandswagger
Markets are made up of people who can read future events into current prices.
The idea that the negative impact of Brexit won't take effect until the final
papers are signed doesn't hold water with me

~~~
dragonwriter
Its not a matter of "the final papers" being signed. The process by which
negotiations to produce "the final papers" would _begin_ hasn't been started,
and there is only loose speculation as to when it _would_ start.

The idea that the negative impact of Brexit would be fully realized while
people are still actively discussing why despite the public, but not legally
binding, commitments it still might _never happen at all_ , is, well,
ludicrous in the extreme.

------
antisthenes
The great thing about being a doomsayer is that you only have to be right
once.

~~~
JadeNB
Is this dismissive of the anti-Brexit claim? (I can't really tell.) It seems
to me that it doesn't really demonstrate anything; I could equally well say
"the great thing about predicting Utopia is that you only have to be right
once." All predictions, of good or of ill effects, will, or at least can, be
(by the predictor) loudly trumpeted if right and ignored if wrong.

