Friday, June 24, 2016
"A Fire Across the River"
- by New Deal democrat
I see where Bonddad has already waded in with his opinion re Brexit, so I thought I would add a few words.
1. The title of this post is the english translation of a Japanese proverb, which succinctly describes a crisis that does not much affect the locals. Earlier this morning the stock market futures in the US were off 5%. Does anyone really think that the UK potentially leaving the EU means that the US economy is suddenly worth 5% than it was yesterday? If Wall Street insists on putting US corporate stocks on sale, well . . . . .
2. The British had the cajones to do what the Greeks did not. The EU has all - or at least the lion's share - of the negotiating power, until the weaker player gets up and actually leaves the negotiating table. The Greek government and via polling its people made clear they were never going to leave the Euro, hence they were squashed like bugs. Now that the Brits have actually pulled the trigger, it is the EU which has the most to lose.
3. Which means that it is premature to assume that this is "Game Over" for the UK's participation in the EU. In the US there is a high bar to enacting a Constitutional Amendment -- 51.9% support ain't nearly enough. Apparently the actual Parliament, which must approve Brexit, is opposed. Meanwhile if Brexit moves forward, it appears likely the UK itself will see Scexit and Noirexit. Which leaves lots of room for Parliament to delay carrying out the results of the referendum to see if the EU can come up with a package of reforms that will satisfy the British while keeping them inside the fold. If that were to happen, a second referendum might well have a different result.
4. If Brexit does occur, it will certainly be a shame for Europe. The EU is perhaps the best thing to happen to Europe for peace in 100s of years, and anything that unravels that is a big loss. But the fact remains, from the North American point of view, it is a fire across the river (or Pond).