If Winston Churchill were alive today, he’d probably drop dead all over again after seeing the political path his beloved Britain is taking. Churchill was an advocate of a tight union between European nations. In 1946, he delivered a groundbreaking speech in Switzerland calling for building a “United States of Europe.” It never went that far, but the eurozone came close — and now the whole unification project may be blown apart.
In 1940, when France came under attack from Nazi Germany, Churchill proposed the audacious idea of a Franco-British Union that would share defense, foreign, financial, economic policies and citizenship. France ignored his idea and quickly lost the war to Germany. Today, when surveying the economic and political landscape of the world, Churchill would probably be more convinced than ever that Britain needs to remain in the European Union if it is to preserve its power.
But in an attempt to get cheap votes, David Cameron, the current U.K. prime minister, is allowing the very fabric of Europe to unravel with a referendum on Britain’s role in Europe. The stakes are high, and very few fully understand the extent of the consequences. If Britain leaves Europe, Scotland would leave the United Kingdom, breaking up the U.K. as we know it. When he first proposed the idea, Cameron never thought that Brexit would be a reality, but as recently as December, the polls show the Brits divided 50-50 on the U.K.’s future. So what was initially an attempt to appease eurosceptics has now become a dangerous gamble that could backfire badly.
|Will David Cameron’s gamble backfire?|
In just a few years, Europe could look very different than it does today. And what’s frightening is that even the onshore experts can’t estimate the true cost of Brexit because it all depends on how the exit will be structured. Will the rest of Europe reward them with a free trade agreement? Will Britain deregulate their economy enough to compete successfully with the other members of the union? Or will it be marginalized and see its lucrative finance franchise move to Frankfurt?
No one knows the answers to these questions until Britons vote to leave because only that would kick off the process of negotiating the exit and it will take time to implement. This leaves the markets with a period of uncertainty that will destabilize U.K. and European markets. We know with relative confidence that Britain’s exit poses a major threat to the U.K. economy and London’s position as the financial capital of the world. Britannia no longer rules the waves, and soon it may no longer rule the global markets it if decides to separate from the EU.
As the Dow Doubles …
We are on the cusp of the most profitable bull market of our lifetime. Stocks will be driven higher by powerful global undercurrents that Wall Street will either ignore or fail to understand. As the Dow doubles, some stocks will see explosive gains of 300%, 400%, 500% and more. Savvy investors who make the right moves will become very rich! Click here for my free report and to find out how it could make you rich beyond your dreams. – Larry
Leaving the EU would mean a period of deep economic uncertainty that will hurt consumer, business and investor confidence, which ultimately hits headline growth. The transitional costs will be astronomical, as the uncertainty causes businesses to pull contracts and defer spending. That will mean significant costs for trade, investment and jobs and, if the U.K. fails to strike a trade deal with the EU, Brexit could cost the economy as much as 2.2% in GDP growth according to OpenEurope. The following chart shows how many businesses in Europe believe a British exit from the EU would have a negative impact on Europe, according to research compiled by Grant Thornton, the world’s fifth-largest professional network of independent accounting and consulting firms.
Percentage of businesses who think exit would have a negative impact on the European economy
But the U.K. won’t be the only part of the world affected. The Brexit vote will be a defining moment for all of Europe. It would shift the balance of power and make the EU as a whole a much less attractive place to invest as everyone will start to wonder who will be the next member to leave, creating a crisis of confidence with no end in sight.
However, Europe’s troubles can be your opportunity as it makes other asset classes more attractive — we’ll show you how to profit from Brexit in the coming days.
Boris and Kathy