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FTSE 100: The Wrong Measurement

Many economic "experts" are fixating on FTSE 100 as the primary indicator of the UK's economy. When the FTSE 100 is down, they panic. When it rebounds, they rejoice.

The fact is: they are looking in the wrong place. The FTSE 100 measures the hundred wealthiest companies - not the 100 most innovative ones. The new, innovative, largely undiscovered small startups will be the drivers of growth in the UK's new, innovative economy. Those businesses are not part of the FTSE 100; most are not publicly traded at all. They are small startups that will be the next large job creators.

The majority of new jobs in America come from small businesses. The same is true in the UK, and will become increasingly true as the UK's economy moves away from large crony capitalists and towards entrepreneurial startups. New jobs in the UK will come from innovative small businesses, not from businesses that have the ability to get special favors from EU regulators.

Some economists have suggested that the FTSE 250, which looks at the 250 wealthiest companies, is a better measure. It might be, but not by much. The companies that will make the UK's new, independent economy great might show up in the FTSE 10,000 (if it existed). But in reality, most of those companies are not even publicly traded.

Some of the FTSE 100 companies are not even UK companies, and are headquartered elsewhere in Europe. Some of the fluctuations in their stock prices simply reflect the fact that without the UK, the lazier economies in Europe will lose one of their biggest crutches. In other words, if their stock prices fall, that doesn't necessarily show a lack of faith in the UK; they show a lack of faith the socialist economies in the rest of Europe. Investors realize that without the UK shouldering a huge portion of the burden (1/6th of the EU economy), the EU won't last.

A government bailout or similar "stimulus" will certainly help the FTSE 100 companies - at the expense of the innovative entrepreneurs who could actually build the economy. It amounts to replacing EU special privileges for large businesses with UK special privileges for large businesses. It creates unsustainable, bailout-based jobs, instead of meaningful, lasting, productive jobs. That's a lateral move at best.

Instead, the UK should reject crony capitalism, eliminate regulations on small entrepreneurs, and reduce the taxes that stifle innovative small businesses. That means more innovation, better products and services, and more real jobs.

If the UK can disentangle itself from the EU crony capitalism and UK crony capitalism, and move towards a capitalist and innovative economy, it will soon see a massive resurgence in jobs and economic growth. This will be true economic growth, without crony capitalist strings attached.

In Liberty

Arvin Vohra
Vice Chair
Libertarian National Committee

Brexit: The British Pound Will Be Fine

Fear mongers have said that the pound is "taking down the Euro." Nonsense.

Remember group projects in school, in which a few people would work together and everyone would get the same grade? You always wanted as many A students and as few D students as possible in your group.

The EU is like one of those groups. It had two A students: Britain and Germany. It also had 26 D students. Now one of those A students is leaving.

The pound is going down for a simple reason: investors are pulling out of crony capitalist companies whose primary value is special privileges from EU regulators. That lowers demand for those stocks, and thus lowers price.

Those investors have started looking for innovating and productive companies instead. In a few weeks or months they will find those companies. At that point, demand for those new stocks (and their prices) will rise.

But what about the euro? Why did the price of the Euro fall? If the pound falls, if anything, the Euro should go up. After all, the dollar and yen did, as people looked for temporary alternatives to the pound. If people believed in the EU, then nothing much would have changed in the euro.

The euro dropped because people don't want to invest in D student economies. A thousand fools don't make a wise man, and 27 D students don't make an A student. That's why the Euro has been steadily declining for years. Free trade is good; but welfare for lazy countries more than cancels out the gains from free trade.

Maybe Germany can carry the rest of Europe, keep bailing out Greece again, etc. Maybe it can't. Maybe it will also exit, and let the D student countries fend for themselves.

The fall in the pound is just temporary rearrangement. If Britain moves towards capitalism and away from welfare socialism, the demand for the pound will go right back up. But the euro?

It would require a massive movement away from current socialist policies and towards a massively freer market. No one would be happier than I if that happened in Europe. I would love to see modern Greece reach the work ethic and greatness of Ancient Greece; I would love to see a France that followed the effective economic policies of Bastiat. I would love an Italy as innovative, resourceful, and hard working as it was in the early Roman republic.

But I doubt that will happen until the EU finally goes the way of the USSR.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee

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