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Cycle

Brexit: New Innovations Funded

In America, investing in weapons manufacturers makes sense. The U.S. government loves to bomb and invade countries, and that means they need to buy weapons. While investing in those companies is immoral, it is profitable.

What would happen if America improved its foreign policy? What would happen if the U.S. government stopped bombing hospitals and weddings and stopped occupying other countries?

Investors would pull their money out of weapons manufacturers. That would almost certainly hit the stock market hard, and lower the value of the dollar.

That's not because peace is bad for business. Peace and prosperity go together.

It's because those investors would need to find something else to invest in. Right now, they are just investing in the military-industrial complex. That's pretty easy to do, since those companies are big and obvious.

After a few weeks or months, they would find peaceful enterprises to invest in. They might invest in startups that were developing cures for rare diseases, or in new entertainment companies, rising education businesses, etc.

After all, less military spending means lower taxes. People would have more money to spend on food, entertainment, private education, medicine, electronics, computers, etc. New companies would be starting everywhere. Some would grow, create jobs and opportunities, and better products and services. We'd have a lot more Apples and Sonys, and a lot fewer Halliburtons.

Something similar is happening in the UK. Until last week, investors were just investing in crony capitalists. They were finding which companies had gotten unfair EU privileges, and the companies that benefited secondarily from those crony capitalists. That type of investing is not moral, but it certainly is profitable.

Now that type of investing is no longer profitable in the UK. Investors are pulling their money out of cronyist industries. That means stock prices go down. Investors are now looking for businesses that are better at innovation and useful productivity.

Investors will find them. England produced Newton, Adam Smith, and Dyson. Its people are innovative, resourceful, hard working, and intelligent. They will create great ideas and products...as long as they prevent the UK's own statism and crony capitalism from interfering.

It may take a few months, or even a few years, for the British economy to transition from a cronyist one to an innovative one. But once that transition is complete, if it is not forestalled by Britain's own socialism and statism, Britain will become a world leader in innovation and productivity.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee

Brexit: Positive Market Readjustment

In a couple hours, you may see the British pound and stock exchanges massively fall. Here's why that's good:

1. For the last several years, investors have been strategically investing in crony capitalists. They have been investing in whichever companies had most political influence to get special favors from EU regulators.

2. With Britain out of the EU, that no longer makes sense. Special favors from EU regulators don't matter as much now in Britain.

3. Investors' first step is to pull money out of stock in those crony capitalist companies. Those corrupt companies just aren't as valuable any more. When investors leave crony capitalists companies, stock prices will obviously fall, and the demand for the pound sterling will also fall.

4. Their next step is to find innovative, productive companies to invest in. It will take several weeks or months to figure out who those companies are. Few investors have been looking, since it didn't matter. In the EU, innovation doesn't matter as much as political influence. But in Britain, innovation will be king.

5. Once investors figure out which new, innovative companies to invest in, demand for British stock and currency will increase again.

As long as Britain can stay competitive by lowering taxes and regulation, its economy will grow. They've thrown off the yoke of the EU. If they can throw off the yoke of their own socialism, they will succeed.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee

Brexit: New Investment Opportunities

Brexit's effects on stock markets don't mean what many think they do. In fact, the short term stock market hit is just a sign that investors are figuring out which new, innovative companies to invest in.

The price of a stock is based on two primary factors: risk and expected return. A highly volatile stock with an expected return of 10 percent will be in lower demand than a highly stable stock with an expected return of 10 percent. Thus, while many investors are pulling out, most of that is coming from uncertainty, not from a lack of expected growth.

Much of that uncertainty comes from this: investors don't know which companies to invest in. That's actually a good thing.

When Britain was part of the EU, it was easy for investors to know which companies to invest in. They just had to look at the big, politically influential companies. Those are the ones with growth opportunities, since those are the ones that can manipulate EU policy to get unfair advantages. Those companies are huge and easy to find.

Now everything is changed. The best companies are no longer the ones with the most EU influence. They are the ones who are the most innovative and productive. The problem: right now, investors have no idea who the hell those people are. Is it the small family owned business that no longer has to follow EU restrictions? Is it the teenager whose brilliant idea no longer requires EU approval? Is it the group of university students whose startup can go ahead without EU permission?

During the next four years, Britain has the opportunity to allow natural innovation cycles to take place. During this time, venture capitalists will be looking for the next great ideas from the nation that produced Adam Smith, Newton, and Dyson.

Stock markets will probably pick back up, as investors find the market entrepreneurs who innovate goods and services, and leave the political "entrepreneurs" who just find ways to get unfair government favors. Although, in frankness, the non-producers in the stock market matter far less than the productive individuals and businesses who generate products and services.

If Europeans are lucky, other nations will follow England's lead. Instead of a single, oppressive, overbearing, monolithic government, Europe could have 30 laboratories of innovation. And within each country, entrepreneurial innovation would be a lot easier.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee