Friday, June 24, 2016

The Brits did it.

The polls had it close, and it was.  The London bookies were wrong, they were quoting 84% to remain.  American investors didn't think Brexit would happen, and yesterday they were happily buying stocks on the assumption that Brexit would not happen.  Today, with the US market opening in a few minutes,  I, and the TV newsies, expect a wave of selling.  European markets, already open, have taken a nosedive. 
  The interesting question, after the first ripples settle out, it what happens to Britain in the long term.  Something like 50% to 60% of Britain's exports go to the EU.  Right now, or at least yesterday, those exports go duty free.  The EU may decide to force Britain to pay full EU tariffs, which will hurt a lot.  They may decide other things.  There are a couple of countries like Norway and Switzerland that are not EU members, but enjoy tariff free entry to the EU market.  I don't see why the EU would cut Britain any favors, but what do I know?  The Brits may seek entry to NAFTA, and I have no idea how that would work out. 
  The EU has it's own troubles, the Euro is shaky, they are still paying off the Greeks, and they have the humongous refugee problem.  Britain was the second strongest member (after Germany) and a lot of Europeans will miss the Brits.  They served as a counterweight to the Germans, who are the biggest and richest country.  With the Brits out, Germany will pretty much run the EU. 
   Brexit surely hands the whole European unity project a big setback  European unity got started right after WWII, with the object of welding Europe together into a single country to prevent another World War from breaking out.  It's been on a roll ever since.  All of Western Europe joined up, they started up the Euro, and all the Russian satellite countries joined right up as soon as the Russian's iron grip slacked off.  What happens next is hard to predict. 
   What the EU ought to do is tighten up their financial system, tell the dead beat countries like Greece no more handouts.  Create bank deposit insurance, and come up with a uniform set of banking regulations to prevent setting up banks in places with no regulations, that proceed to do all sorts of shady deals.  And  loosen up labor laws, permitting lay offs when business drops off, fewer holidays, less vacation, and a 40 hour work week. 
   Whether the EU will do this is anybody's guess. 

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