On Rethinking The Dollar (RTD), Mike and I discuss that the impact of Brexit on the global economy will be limited. Rather than causing mayhem, the outcome of this referendum will likely be used by central bankers as an excuse for prolonged loose monetary policies. Also, Brexit can be blamed by politicians in the EU for the weak economy across the zone. In that sense it might actually be very welcome for the policy makers to have a scapegoat for the turbulence that’s inherent to the bubbleconomy in the Euro-zone (ECB!) and it might even serve as such for the Federal Reserve in the US.
The Referendum Outcome Does Not Equal Brexit
In the period up to the actual referendum a lot of fear has been spread that an exit of the UK from the EU would have a strongly negative impact on the local economy. However, there are two things one must realize before jumping to conclusions. One is that Brexit has not happened yet. See, although the British people have said “no” to the EU, the referendum is not legally binding. So even if Brexit is now presented as a stated fact, this is definitely not the case.
According to Article 50 of the Lisbon EU treaty, a country can only leave the Eurozone after negotiating the terms. This process may take up to two years, starting only after the exiting member state kicks it off. The UK is actually not in a hurry to do so. We’re looking at probably another 2+ years before the UK’s termination of its EU-membership becomes fact.
Weak Economic Circumstances Regardless
The other thing to realize is that the projected turbulence in the economy has also not happened. True, the Pound has dropped significantly in value. And the markets in Europe fell, but they have already largely recovered. And as I have been saying on the Janssen Report for years now, the fundamentals of the global economy have been very weak for quite some time now. The central bankers like to embrace any kind of “crisis” to explain the bad economic circumstances. This is how the game is played.
It will be interesting to see how Mario Draghi (ECB) and Janet Yellen (Federal Reserve) will smooth talk their way out of the next rounds of near-zero and negative interest rates (ZIRP and NIRP) using this excuse.
Topics discussed on this interview are:
- The Brexit from a European perspective
- The UK withdrawal process from the EU
- Devaluation of the British Pound
- The resignations of Nigel Farage & David Cameron
- The impact of the sovereign debt on the global economy
- The Presidential Election of 2016 candidates
- The role of Gold and Silver in the days ahead
Watch this episode of Rethinking The Dollar here:
I appeared on Rethinking The Dollar before:
RTD Ep:13 “The Death Of The Current Dollar”
For more information on Mike’s program, have a look at his YouTube channel and website:
Cheers,
Marco Janssen
Host of The Janssen Report
