JULY 2016 FORBES ASIA | 11BREXIT
THE UGLY AFTERMATH
BY STEVE FORBES, EDITOR-IN-CHIEF“With all thy getting, get understanding”FACT & COMMENT
THE BILL to the world for Brexit will
be huge, far beyond the stock market
hits it let loose.
ƀLJ( ,.#(.3ź Investment is critical
for growth and a higher standard of
living. Capital spending has been stag-
nant in most of the world since 2008–
09, thanks to higher taxes, a tsunami
of new regulations and highly harm-
ful central bank policies. Brexit will
compound these obstacles for Europe
and the U.K. Why put money at risk if
you don’t even know what the rules will be? An already
sluggish world economy will slow even more.
ƀLJ" LJ/(,0 &#(!LJ) LJ." LJź To prevent another Euro-
pean-instigated world war, post-WWII diplomacy has
focused on tying European countries together. This ef-
fort has been astonishingly successful. Despite centuries
of bloody rivalries, a war among EU nations, particularly
between France and Germany, is inconceivable today.
But ugly forces are once again stirring because of
chronic economic stagnation and massive Mideast im-
migration. Xenophobic parties of the kind that plagued
Europe before WWII are on the rise in France, Austria,
Hungary and elsewhere. Ominously, Germany is not
immune to antiliberal impulses. The most popular fig-
ure there is a member of the Green Party. The second
most popular is the foreign minister, a socialist, who
has declared that the sanctions against Russia for its
aggression in Crimea and Ukraine are a “provocation,”
and who wants Berlin to distance itself from Washing-
ton and work more closely with Moscow.
ƀLJ" LJ.", .LJ) LJ!!, --#)(LJ!,)1-ź Most immediately
ominous are the ambitions of Russia. Vladimir Putin
wants to achieve what the old Soviet Union never could:
domination of Europe. The EU’s existential crisis, exac-
erbated by Brexit, plays right into his malignant hands.
Europe’s disarray will tempt Putin to subjugate the Bal-
tic nations of Estonia, Latvia and Lithuania under the
pretense of protecting Russian minorities there, who, by
the way, have no desire to be Moscow’s
subjects again. These states are part of
NATO, and the U.S. and other NATO
members are under treaty obligation
to defend them from a Russian assault.
A Munich-like capitulation by Presi-
dent Obama would destroy NATO, the
alliance that enabled the West to win
the Cold War. The Balts are visibly
fearful that their days of indepen-
dence are numbered. Poland is also
increasingly anxious about its security.
The U.S. and NATO are planning to station an ad-
ditional NATO battalion in each Baltic country and in
Poland. None of this will deter a determined Putin.
ƀLJ (.,&LJ (%-LJ1#&&LJ )/ & LJ )1(LJ)(LJ." #,LJ #& LJ*)&-
# # -ź The Federal Reserve, the European Central Bank
(ECB) and the Bank of Japan (BOJ) have engaged in
antigrowth policies. (The Bank of England has been
less of a sinner in this regard.) The suppression of inter-
est rates and the binge buying of long-term bonds have
destructively distorted credit markets, restricting capi-
tal to small and new enterprises (see p. 12). Like doctors
of old who kept bleeding their patients even when
they didn’t get better, leaders of the ECB and BOJ are
feverishly stepping up their economic malpractice.
The Federal Reserve’s painfully slow liberalization
of interest rates will continue to drag on. While not
expanding its bloated bond portfolio, the Fed is elon-
gating maturities, which exacerbates the malfunc-
tions of our financial markets.
ƀLJ/,0#0&LJ) LJ." LJź ź Scottish nationalists took heart
from the Brexit vote. Scotland was overwhelmingly in
favor of remaining in the EU, and secessionists think
they could now win an independence referendum.
The only good thing about the post-Brexit turmoil is
that it may give moderate Scots pause: Political divorce
can be as painful and messy as the personal kind.
Still unknown is what will unfold in Northern Ire-
land, which also voted against Brexit.