Friday, 1 July 2016

Headless chicken syndrome

In the quiet moments during the day while I'm working from home, when it takes 5 minutes to open or save a file, I've been listening to podcasts.  Always, after they download, the BBC money ones - and Kermode* - get queued to "Play next"**.   The money podcasts I listen to are:  Money Box, Money Box Live (a phone in mid-week edition of the show) and 5 Live Consumer Team with Martin Lewis.  

Over the last week, the on-going theme for all three of them has been Brexit and what on earth happens to our personal finances now.  The headless chicken appears to have taken over, with the most frequently asked questions boiling down to:-

1).  I was going to buy a house or remortgage but, with Brexit, should I wait?  What happens if I don't wait?  Will I lose all my money?  (Answer:  don't wait.  You need a roof over your head.  If your personal economics were right two weeks ago, ie you could afford the mortgage and you were sensibly fixing it for a few years, then nothing has changed.)

2).  I have money in the stock market, either directly invested, through a unit trust or a pension scheme.  The stock market fell after Brexit.  What do I do now?  I've lost "money".  Do I sell up?   (Answer:  the stock market moves all the time and is now back to the level it was at two months ago.  You haven't lost any money unless you sell, which is when you crystallise your paper losses.  (Incidentally, the market promptly bounced up again, that afternoon.))

Frankly, if the headless chicken continues, people will talk Britain into a recession, long before we even start the process of leaving the EU.  It will become a self-fulfilling prophecy.  It's a vicious cycle  People will sell their shares, causing a run on the stock market, crystallising their losses.  They'll then stop shopping and stop eating out because they feel poor, which in turn will mean less money coming in to local businesses, which in turn means they'll have to start laying people off and eventually may have to shut up shop, potentially defaulting on loans in the process.  That, in turn, will lead to landlords going bust, which means more loan defaults.  The banks will get stressed out and stop loaning money.  More unemployment leads to more people on benefits which also leads to less money being spent in the economy, which means more businesses going out of business.... And so on, and so on.

As things stand, we don't know what will happen re Europe.  My bet is on us joining the European Economic Area, a la Norway, which means that we have to sign up to almost everything except shared sovereignty, the common agricultural policy, the common fisheries policy and certain VAT, tax and tariff regimes.   All that is in the future, however, because the one BIG problem with Brexit is that no credible alternative policies were put forward by the Leave campaign, even by those who technically are still in the government. 

Into the void has stepped an awful lot of speculation and panic.  Last weekend, the only person talking any sense was Martin Lewis: , with whom I totally agree.

If the headless chicken comes anywhere near me, he's soup!

- Pam

* The Kermode and Mayo Film Review, which is a download of the live, BBC Radio 5 program with anything up to another 45 minutes of them wittering on before and after the show.  I started listening to them broadcasting live on a Friday back in 2008, on my long 200+ mile drives home from Site.  Now, even when I catch part of the live show, I will also download and listen to the Podcast in order to hear all the extras.

**The Podcast App on the iPhone has this wonderful, on going ability to build a playlist.  You can queue "Play next" - and it will play immediately after the current podcast finishes - or "Add to up next", which puts whatever you are queuing to the back of your playlist.  

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