The Brexit vote adds uncertainty to an already turbulent global environment, says money manager Adrian Day, and has helped gold resume its rally.
The decision of the British people to leave the European Union in the face of extreme fear-mongering shook the markets initially, but they turned up at quarter end. The vote does not end the uncertainty, of course: the negotiations on Britain’s exit, increased agitation against membership in other countries, the change of political leadership in Britain, as well as the potential break-up of the United Kingdom, all add uncertainty to an already turbulent global environment, and markets do not like uncertainty. Brexit also provides yet another reason—excuse—for the Federal Reserve and other central banks to keep interest rates excessively low for longer.
Brexit disaster scenario overdone
No doubt, the decision by British voters to leave the European Union opens up some uncertainties about the future, some of which will be around for some time. But much of the fear-mongering ahead of the vote was nonsense on stilts. Judging by the frenetic reaction of the political elite and the markets, you would think Armageddon was upon us.
Their reaction no doubt was aggravated by their clear inability to get the outcome right, to imagine that anyone—other than ill-educated, anti-immigrant hoi polloi—could possibly even think of leaving their club. Based on the reactions, you would think the British had voted to return to their caves, not simply to leave a bureaucratic, statist, closed-shop (closed, that is, except when it comes to North African “refugees”).
The economic consequences for Britain need not be so bad, even in the near term, though a punitive attitude in Europe, particularly among the French, the Dutch and the Brussels bureaucracy will make a sensible withdrawal more problematic. And why would Europe not be hostile? After …read more