Never mind that it was the win of the illiterate and least productive over the strivers and the achievers in the society.
Never mind that it was the selfish act of the elderly to rob the young of their future and earning potential while mooching off the very welfare state that those young are supposed to uphold.
Never mind that in the already horrid hooliganism caught on video you can begin to see exactly how Nazi Germany was born.
Let’s just stick to economics. The U.K. is the biggest debtor nation in the G-20 universe. Debt of 100% of GDP? Ha! 200% of GDP? Ha again! Try nearly 500% of GDP and likely to climb through the ceiling should Brexit go through.
But that is not even the U.K.’s biggest problem. The country sells 50% of its exports to the EU, while the EU sends only 7% of its goods to the U.K.
The U.K. runs a massive current-account deficit of 5% — again the worst in the industrialized world — and it will skyrocket to a deficit of 10% if Brexit goes through.
|Could the U.K. find a way to remain in the European Union?|
Up to now that’s never been a problem. As the capital of finance, the U.K. has been able to attract plenty of capital, both licit and illicit, to wash away its spending sins. But who is going to foot the bill now? Who will invest in the U.K. if it won’t have unfettered access to the Continent or possibly even the U.S.?
Which means that those U.K. gilts that are yielding less than 1% on the 10-year are possibly the most toxic assets in finance. There is a very real chance that if the U.K. spins out in all its glory, its economy could nosedive into a massive recession.
The pound could tumble to the unimaginable exchange level of parity against the buck, and investors would dump U.K. bonds, creating the worst of both worlds — inflation and recession.
Under such a scenario, there is no doubt that gilts will be on the best shorts over the next few years, but before we turn into perma-bears, there is a ray of hope that the Brexit nightmare may not come to pass.
|“The most ardent ‘Leave’ advocates have been uncharacteristically cautious in their post-victory rhetoric.”|
As of now, the U.K. is a fully functioning member of the EU. And until and unless it invokes Article 50 — which makes its divorce “official” — the current legal arrangements hold. In the meantime, British politicians are hardly sprinting to invoke Article 50. In fact, even the most ardent “Leave” advocates have been uncharacteristically cautious in their post-victory rhetoric.
Some analysts have speculated that the longer the U.K. waits, the less likely it will actually go through with Brexit.
The Brits are masters at stalling for time when they don’t want to do something. If Article 50 is never invoked, the paroxysms of fear caused by the market reactions across the world would actually present a good buying opportunity.
But if the U.K. actually pulls the trigger on Brexit, sell U.K. assets with abandon. The British Empire will have finally turned into Little England.
Telecom giant Vodafone, one of the U.K.’s biggest technology firms, warned that it could move its headquarters from the U.K. depending on the outcome of the country’s negotiations to leave the European Union. Vodafone, which employs about 13,000 people in the U.K., said that it was important to maintain access to the EU’s free “movement of people, capital and goods” and that it was too early to “draw any firm conclusions regarding the long-term location for the headquarters.“ It added, though, that it would “take whatever decisions are appropriate.“
U.S. home prices soared in April, with Boston, Charlotte, Portland, Oregon, San Francisco and Seattle setting record highs. The Case-Shiller 20-city home price index rose 4% in April from the year-earlier level. It had increased 5.5% gain in March. Home values are now just 9.6% below the peak a decade ago, the report said.
U.S. consumer spending, a key indicator of economic strength, increased in May after a slow start to the year, the Commerce Department reported. Personal spending increased 0.4% in May from a month earlier, matching expectations of many economists and analysts. The report also showed that incomes are edging higher, suggesting the labor market remains stable. In a separate report, however, the Labor Department said that employers added jobs in May at the slowest pace in more than five years.
Your views on Brexit? How are house prices doing in your region? Having trouble selling a house? Consumer spending is rising – are you spending more? Share your comments with your fellow readers below.
The Money and Markets team