Attorney Laura Anthony Talks Brexit and Predictive Economics
WEST PALM BEACH, Florida, Dec. 10, 2019 /PRNewswire/ -- Alliances are important, especially in business. In order to accomplish anything of substantial value, people with expertise and resources must band together, put forth a cooperative effort, and act as a single unit. The alliance functions because all members stand to benefit from the success of their collective determination.
However, when being a team player hinders growth and expansion, some members of the alliance will inevitably begin to re-evaluate the tangible merit of their teammates.
Brexit is a rather complicated issue when viewed solely in economic terms, and taking a definitive rain or shine stance on the outcome is pure conjecture. The global economy has many moving parts, and Brexit is just one of them.
The UK joined the European Union in 1972 primarily for the reasons spelled out on the EU's official website: "The union's purpose is to promote peace, establish a unified economic and monetary system, promote inclusion and combat discrimination, break down barriers to trade and borders, encourage technological and scientific developments, [and] champion environmental protection."
The concept is simple: everyone bands together and accomplishes more than they would working independently. This sounds logical, but good on paper and good in practice are two completely different animals. For the sake of clarity, let's put this ideology in terms that everyone can relate to.
A group of neighbors forms an alliance in order to build a recreation center, something that will benefit all of the members. One ally contributes lumber, another provides wiring and electrical services, the attorney on the block works with the city council to pull permits, and one member of the group agrees to provide all necessary architectural services. This sounds like a fair and equitable team effort, but the members providing hard goods, lumber and electrical, must come out of pocket a pretty penny. The two neighbors responsible for permitting and architecture are contributing time and expertise.
Inevitably, a dispute arises because the money people believe they are doing more than the service providers. The construction of the recreation center does indeed require the participation of the entire alliance, but some members believe that they got the short end of the deal because of their considerable financial support. The next time a neighborhood project is proposed, one of the money people may be reluctant to participate.
Extrapolate this scenario so that it consists of 28 countries. This is the European Union.
According to John Mauldin, a Senior Contributor to Forbes magazine, one of the primary reasons for Brexit is the rise of nationalism across the world. There's a growing distrust of multinational financial, trade, and defense organizations created after World War II. The EU, the IMF, and NATO are good examples of this. Many who oppose the EU believe these institutions no longer serve a purpose. Not only that, these organizations take control away from individual nations. Mistrust and fear of losing control made Brexit a reasonable solution to them. The immigration crisis in Europe was a trigger. Some EU leaders argued that aiding the refugees was a moral obligation. But EU opponents saw immigration as a national issue, as it affected the internal life of the country. Steering clear of this issue was an important driver for the "leave" vote.
Remarkably, the vote to leave the EU defied both the Conservative and Labour parties, both of which advocated that the UK remain in the EU. This third faction, The Exiters, shared the sentiment that the British government was no longer looking out for its citizens – it was seeking to protect its own agenda.
Brits view the world through a very historical filter and remember that, not very long ago, the United Kingdom, formerly known as the British Empire, was a global superpower. The UK's most valuable territories were divvied up between the U.S. and the Soviets after WWII. The "Kingdom" was effectively declawed. While the British government was able to swallow this bitter pill, the people never forgot the magnitude of this loss.
Now that Brexit is on the near horizon, economists feel compelled to weigh in on the topic. The majority of them predict a negative financial event that will create a ripple effect across Europe and even the globe. No market or index will be spared.
Taking such a stance is dangerous for the simple fact that no one has a crystal ball. Economic theory is just that: theoretical. It is something that may or not occur, in whole or in part. Many would say it is nothing more tangible than guesswork.
History, however, is real. It cannot be changed or refuted.
Leading up to the year 2000, more notoriously known as Y2K, panic began building as everyone spun their own personal doomsday scenario about a global Internet collapse. Even the brightest, best educated and most well-intentioned predicted that banking records would be lost, power grids were bound to fail and, as ridiculous as it sounds now, we would all be thrust back into the Stone Age at the stroke of midnight on December 31, 1999. None of this ever occurred.
What did happen exactly 70 days from the doomsday date of Y2K was the dot-com bubble. On March 10, 2000, the bottom dropped out of the NASDAQ index. Over the next two years the NASDAQ plummeted from 5,048.62 to 1,139.90, a 76.81% drop. The share prices of even the most robust tech firms like Cisco, Intel and Oracle dropped by 80%.
Economic disasters are almost never anticipated.
The crash of 2008 seemed to appear out of nowhere. The Saudi oil embargo of 1973 sent the price of gasoline skyrocketing, assuming there was any to be had, and no one saw it coming. One day Americans were purchasing big-block cars that averaged seven miles to the gallon, and the next day lines at gas stations wrapped around the block. Silence and bliss preceded the first oil crises. Most notably, the crash of '28 put the roaring '20s to bed without even a whisper of forewarning.
Economic catastrophes do occur, and in one way or another, the economy always bounces back. Harsh realities come and go. Some do more damage than others.
Rampant speculation and fear also yield carnage. The only difference is that these panic-driven events can be controlled for the simple reason that they are apparitions. The lesson to be learned: fear the worst, and the fear becomes tangible.
While economists can't seem to agree on the potential impact of the UK's pending exit from the EU, most accept the fact that markets are emotionally driven. People buy on confidence and sell on doubt. Instability and volatility, for the most part, radicalize just as much in response to public sentiment as they do to actual economic calamities. Simply stated, the public's reaction and perception of a financial event can create more havoc than the event itself.
Even so, being dismissive or overly optimistic isn't very tactical. Worst possible scenarios must be logically and objectively considered as possibilities. Should there be negative repercussions from Brexit, or an outright financial cataclysm, plans should already exist that detail defensive tactics designed to minimize the impact.
Attorney Laura Anthony
Laura Anthony, Esq. is the founding partner of Anthony, L.G., PLLC, a national corporate, securities and business transactions law firm. For more than two decades Ms. Anthony has focused her law practice on small and mid-cap private and public companies, capital markets, NASDAQ, NYSE American, the OTC markets, going public transactions, mergers and acquisitions, registered public and exempt private offerings and corporate finance transactions, Regulation A/A+, securities token offerings, Exchange Act and other regulatory reporting requirements, FINRA requirements, state and federal securities laws, general corporate law and complex business transactions. The Anthony, L.G. PLLC team has represented issuers, buyers, sellers, underwriters, placement agents, investors, and shareholders in mergers, acquisitions and corporate finance transactions valued in excess of $1 billion. ALG has represented in excess of 200 companies in reverse merger, initial public offering and direct public offering transactions. Palm Beach Attorney Laura Anthony is also the creator and author of SecuritiesLawBlog.com, the host of LawCast™, Corporate Finance in Focus and a contributor to The Huffington Post, Law360 and the ABA Journal.
SOURCE Anthony, L.G., PLLC