Saturday, June 25, 2016

Brexit Questions

Q.  Will the Brexit vote lead to a depression?
A.  Of course, anything is possible but is not likely:

Q.  Why did the stock market react so strongly about the vote?
A.  Wall Street likes to worry but hates surprises.

Q.  Did the British voters make a mistake?
A.  The mistake was not going far enough in creating the European Union originally.  It has control over monetary policy but no control over budgets.  That remains the fatal flaw in a worthy project.

Q.  Do you suspect the European Union will become a "slow-motion train-wreck?"
A.  Unfortunately, it already is.

Q.  Where does something like Brexit fit into your tidy little economic concepts?
A.  Recessions are normal and not to be feared.  A financial crisis is sudden and should scare all of us.  Brexit was a political "2x4 applied forcefully against the head" of the global economy.

Q.  What is the best case?
A.  There is the possibility the British voters will reverse themselves very quickly, AND the E.U. will correct their fatal flaw.

Q.  What was the most telling demographic in the vote:
A.  Young people wanted to remain in the EU, while older people wanted to leave.  I guess older people have had enough change, while younger people were thinking about the future?

Q.  What really worries you about Brexit?
A.  It happens at a bad time in the U.S.  Our economy has long been the economic engine of the world and could pull the global economy along with us, but our fiscal policy is painfully gridlocked.  At least, China can make decisions.