BREXIT – the Economics

brexit (2)
“Britain’s exit from the European Union is of less significance than the economists have contemplated” at least for the UK.


The economic pundits, always in sync with the status quo, have hopped on a new bandwagon! They shout “The evil English have separated from the EU and they will be punished.” Punished for what and by whom? Though the driving force propelling Brexit sadly seems to have been racial migration, perhaps the underlying economic need for exit makes Brexit an essential, if not commendable, action. Putting it simply, the EU, its banking, its sovereign capabilities, and its sustainability is in serious trouble. Yes, most of the worlds banking and reasonable governance is at risk but none so great as the EU, none so dangerous to the rest of the world. England cannot continue to afford being one of the pegs in the crutch of the Eurozone kicking the can down the road until the fall into oblivion.  (See “China? Oil Prices? Saudi Arabia? Iran? Why Volatility? The Grand Surprise Part Two” January 12, 2016 European section). It is made clear why, the longer the can gets kicked down the road the greater the disaster for the Eurozone and its influence on the world’s economy. It does not behoove the UK, which has mostly cleaned up its act to be a supportive party to EU foolishness. If the EU were to remain intact, as unlikely as that appears, will the UK suffer in its economic future? Yes – but a small dollop compared to its suffering as a “REMAIN”.


A few details (speculative) of the future UK – EU relationship
Let’s start with Banking; As almost every banking institution in mainland Europe is technically insolvent (See “China? Oil Prices? Saudi Arabia? Iran? Why Volatility? The Grand Surprise Part Two” January 12, 2016 European section) it is unlikely there will be a massive pull out of banking from the largest infrastructured banking community in the world, London. It would also accelerate the EU banking death spiral to exclude the British based banks from doing business in Europe.  Would a major banking organization move from London to Paris? Unimaginable to me – bureaucracy, corruption, political instability, – an incomprehensible at least to Anglo-Saxons, work ethic and expense. Not a likely move.


Switzerland? After the drubbing the Swiss banks received and continue to receive from governments around the world the hospitality towards American and British institutions would be limited at most, and more likely non-existent.


Frankfurt, Germany. It is not a great likelihood the US and UK banking establishment will put its future in the hands of the Germans – not to mention English speakers lack enthusiasm in both their lives and businesses to speak other languages. There are no other even remote possibilities for banking to move. Banking will stay.  Whether it will flourish is another matter but not one to do with Brexit.


Trading with the EU


It is unlikely the EU will inhibit its trading with the UK as the UK buys €77 billion more goods from the EU than it sells; the EU has trade surplus. From Germany alone the UK buys €89 billion of goods while selling only €38 billion. The importance of UK/EU trade to the EU cannot be over emphasized and will not be inhibited.


Borders and employment rules will not be severely impaired. The UK employs more than 2.0 million non-UK EU nationals. The likelihood that the EU would spitefully cut off free movement of labor between the two zones is analogous to “cutting of its nose to spite its face.”


The list goes on and on but, simply put, the UK will continuously benefit from being out of the yoke of a failing EU while losing little ground in the relationships should it so choose. My fear is only the acceleration and exacerbation of the EU’s demise, certainly an issue arising out of Brexit.
Asher Edelman


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