The morning after the night before. - The Honest Truth By Ajit Dayal

The morning after the night before.

27 JUNE 2016

The morning after the night before one wakes up groggy and unsure.
What exactly happened the night before?
Why do I have lipstick on my forehead?
Why is there this dull smell of stale smoke in my bedroom when I don't smoke - and how come there is this stale smoke when I don't even have an ashtray in my home?
Why is...

Table 1: The 4 nations of the United Kingdom did not speak with one voice
Area Leave Remain Voter Turnout
England 53.4% 46.6% 73.0%
Wales 52.5% 47.5% 71.7%
Northern Ireland 44.2% 55.8% 62.9%
Scotland 38.0% 62.0% 67.2%
Total, National Result 51.9% 48.1% 72.2%


And then the images take shape.
The events slowly creep into a stirring consciousness.
And then the events over the decades that led up to the morning after the night before all begin to make sense.
The pieces of the puzzle all fall into place - yes, there are still a few gaps....

Was it a vote against "the 1%"?

The question asked to the voters on the ballot papers was:

Should the United Kingdom remain a member of the European Union or leave the European Union?
Remain a member of the European Union
Leave the European Union

The Electoral Commission of the UK had stated, "We looked at the proposed question (see box above) from the perspective of voters, to see if it was written in a way that means they would have likely been able to easily understand and answer it."

Alas, what the Electoral Commission wrote was not what the voters really wanted to answer.

Despite the well-meaning text prepared by the electoral researchers, the voter had their own question and they wanted to whack the cozy establishment with their blunt answer.

Those voting saw a different question from the one framed by the Electoral Commission.

For those living in rural England who belonged to the lower and middle classes - or did not have a college degree - the question that was really being asked was:
"Would you like to continue to have little or no participation in the globalized world? Yes, 'Made in China' has made the cost of buying many things decline drastically, but you have lost your job and have no income or are working a lot more hours with lower income and benefits. Meanwhile, your neighbor John was forced to sell his land to someone from the City of London so that they could level the small house and build a nice big country home. That is good for you because when the City folks come hopping into the country side with nannies and butlers in tow, they will buy more eggs from you. Isn't that wonderful? Oh, yes, and the money you saved for little Steven's education is not earning any interest. The bank manager and CEO got a great raise and bonus because they don't pay you anything for your deposits and can make a nice profit by lending out your zero-interest money. By the way, when the bank was in trouble in 2008, the government bailed them out. You paid a bit for it, of course, with your tax money but that's what good neighbours are for: to help out those who gambled away your money. But it is a circle of life thing: More money for them, more eggs will be purchased from your farm!

  1. Yippie! Tick here to Remain a member of the European Union if you want more of that!
  2. Whack them hard and nail them on the cross for blasphemy and ask them to Leave!"

Globalisation was not local and did not knock on my door.
Statistics on salary indicate that globalisation has helped those who:

  1. Have a university degree,
  2. Work for large companies,
  3. Are in Finance and IT related work activities
  4. Live in and around the City of London.

Indications are that salaries of people in the City of London have been 2x the national average in the UK and salaries of people in the field of Finance have been 4 x the national average.

A CEO of a UK firm earns 22x that of the median salary of a person working in the same company. In France, the ratio is 15. In Germany, it is 12. In the USA, it is over 400x!

The less educated folks are probably wondering what do all these brilliant people - who live like Gods and (as Goldman CEO Lloyd Blankfein said) "are doing God's work" - actually do to make all the money!

More from The Wall Street Journal in a November 2009 blog:
At the same time, there does seem to be a strange uptick in religious rhetoric from bankers lately, as they strive to counter an upsurge in anti-banker sentiment. For example, Time Magazine's Justin Fox writes:
In a discussion about morality and markets at St. Paul's Cathedral in London, Goldman Sachs international vice chairman Brian Griffiths, a former adviser to Margaret Thatcher, described giant paychecks for bankers as an economic necessity. "We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," he said.
And the New York Times recently quoted John Varley, of Barclays, telling an audience at London's St. Martin-in-the-Fields that "profit is not satanic."

The poor local in East Lindsey did not have his college education. But he must have asked himself, while stirring his porridge on a cold blistery evening, if these City folks are like Gods or doing God's work, why the hell did they make all these blunders? Or were they just gamblers playing with the savings of the wider middle class and the now larger lower class.

A simple man does not need a degree from Oxford or Cambridge to know he has been had. He just needs to see the trucks rolling in and bulldozing neighbor John's crumbling house and watch the Polish folks from across the sea help build a new glass and steel structure.

Of course, globalisation has had its winners.
The Asian shop keepers I met in London told me that the women from Eastern Europe earn up to GBP 500 for "day and night" work. The other skilled immigrants from Eastern Europe are the new handymen in UK and have sent money back to families: just as the Indians in Dubai send money back to Kerala to spruce up the lifestyle of their family members back in India.

Yes, economists will write essays on the benefits of globalization and prepare millions of pages of graphs to support that view. Many economists will hold chairs in universities funded by the very companies that benefit from globalization - companies that the economists are studying to arrive at conclusions. Does this conflict of pleasing the funder affect the economic rigour of the report? Does it influence the outcome of the reports? (In the documentary, "The Inside Job" there is a brilliant expose on this.)

But there is another reality that economists do not measure: In an XL sheet, the world has become better. That is GDP = Gross Domestic Product.
If you add the cost of climate change from the transportation of goods and people, or the damage to societies due to large bursts of immigration - then the benefit of globalization to simple John may not be as certain. Maybe the Gross Happiness Product (GHP) has declined?

Obama's desire to change was fiction!

In November 2008, I had the honour of attending a global conference in Japan.
President Obama had just won his first term as President of the USA but would not take office till January 2009. That was a tough situation since the financial world was crumbling.

Lehman had gone bust on September 15, 2008 and AIG had to be rescued - some critics alleged that AIG was saved to keep Goldman afloat. (Goldman's past CEO, Hank Paulson happened to be the Secretary of Treasury of the US, the equivalent of the Finance Minister in India).

An informal Task Force was set up by the interim Obama Administration to work out what to do when they got into the Oval Office.

The attendees of the global conference were asked to list 3 things that the Obama Administration should do on assuming power in January 2009.
The mike went around the room.
It came to me.

This is what I said:

  1. Those in the field of finance, must have more humility;
  2. There should be a cap on salaries and benefits of USD 500,000 per annum;
  3. The financial firms must be broken down and Glass Stegall must be brought back

(Note: the Glass Steagall Act prevented a financial company from dabbling in various other financial activities; it was abolished during the tenure of President Bill Clinton in 1999 soon after Citibank acquired broking firm Salomon Smith Barny. Note that Robert Rubin was the Secretary of the Treasury from 1995 till 1999. Why is that important? He worked for 26 years with Goldman, Sachs and - after his stint with the government - was with Citibank including as a Chairman. His total compensation while at Citigroup: USD 126 million in cash and stock. That is Capitalism, in the modern era.)

Donald Trump is right.
Not only did the people of UK take back their nation, they now seek justice and a less corrupt and twisted world where the connected can no longer be parasites in society. While those in and around London see the dangers of moving into totally unchartered territory and would rather have their "Remain" vote, the "Leave" folks are fed up with a society has learnt to worship this charade that passes by for capitalism and free markets. The politicians have failed: they are all insiders.

Yes, as the sun breaks into a new dawn, the mind clears and you remember why you did what you did the night before the morning after. And it dawns on you that you must look ahead and experiment - because what was served to you as gospel truth in the past never stood the scrutiny of time. It was a lie. So you asked yourself the question and gave the EU a chilling - and fitting - response.

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is Founder of Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site.

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