Despite all the hysteria from media and political elites that claimed the UK would stagnate if British voters passed Brexit to leave the EU, it turns out that UK stocks are higher a week later while the other stock markets are still down.
In perhaps the most arrogant establishment response on the first day after the Brexit vote, Harvard educated James Traub, wrote in the elite Foreign Policy Magazine: “It’s Time for the Elites to Rise Up Against the Ignorant Masses.” Traub demanded that elites use their power to nullify the vote by the “fist shaking” British rabble, because it represented an “utter repudiation of the bankers and economists and Western heads of state who warned voters against the dangers of a split with the European Union.”
But a week after the referendum victory for the “leave” voters, the British stock market index is up +2.6; while the French shares tanking -8.3 percent, German equities tumbling -5.3 percent and U.S. stocks down about 1 percent.
The UK remains a member of the European Union, and will do for some considerable time to come. Which means for the terms of trade, regulation, free movement and so on, the UK government and private sector are operating under precisely the same rules as they did a week ago.
Any “impacts” therefore are the result of expectations – or uncertainty – about what will change in the future. According to the stock markets where individuals put real money behind their expectations, the UK is financially better off from the Brexit; while France and Germany are worse off. For the United States investors, the Brexit is not financially a big deal.
As Breitbart News predicted, Brexit caused a 10 percent decline in the exchange rate of the British pound versus the euro. But this means that British exports are cheaper and more competitive in continental Europe; while the Continent’s goods are more expensive. This explains why UK stocks are up.
Breitbart News also predicted that the UK’s sovereign credit rating would be cut, but markets already expected the downgrade and UK bonds traded up as interest rates fell to the lowest point since the mid-18th century.
The Brexit vote has already slowed immigration to the UK and there appears to be the possibility of a sharp reversal of migration flows between the UK and the rest of Europe.
In first hours following the June 23 Brexit vote, the pro-EU establishment demanded that the United Kingdom pay a punitive economic price for having the audacity to threaten the EU’s viability. According to EU President Martin Schulz: “The British have violated the rules. It is not the EU philosophy that the crowd can decide its fate.”
The only punitive suggestion against the UK so far is that the European Parliament threat to eliminate English as the official government language. But English is the only language spoken by the majority of the other 27 nations of the EU. Despite Germany’s financially domination of the EU, few of the 26 other member states speak “Deutsch.”
Europe and the United Kingdom had already created a tariff-free-trade-zone across the western continent by the 1980s, through the European Economic Community and the European Trade Association. So Mikhail Gorbachev, the last leader of the Soviet Union, famously said in 2007, “The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe.”