Brexit Rules The Week

The Brexit vote is this Thursday, so nothing else matters until then. And polls, just to make it even more stressful, have it neck and neck. See Brexit poll tracker back to even at 44-44.
While we’re waiting, let’s consider some related questions:
Would leaving the EU be good or bad for Britain in the short run? A lot of definite-sounding opinion is being tossed around on this count – see ‘Negative and substantial’ impact on UK if it leaves EU: IMF – but it’s important to take such things with a grain of salt. No one has the slightest idea how such a divorce would go and if its immediate impact would be positive or negative.
Government agencies in particular view official statements as a tool for herding the masses in the proper direction. But they demonstrably suck at actual prediction. Go back through the history of Fed or IMF or ECB or Congressional Budget Office reports – here’s classicBernanke on the previous decade’s housing bubble – and you’ll see that their predictions aren’t even random: Because their purpose is to shape public opinion rather than express truth, they’re right even less than half the time. So question number one can only be answered with a shrug and a ‘who knows?’
Would Brexit be a big deal in the long run? Here it’s easier to speculate, because market forces come into play. If one country leaves the EU then several more might do so in short order, and that might unravel the whole organization. This would produce ongoing chaos as each new election risks installing an anti-EU government and the Brexit drama is repeated continuously – though with new names like Frexit and Sprexit. The resulting uncertainty would be bad for the value of financial assets that depend on faith in governments and central banks. All those negative interest rate bonds would behave like junk, dropping to 70 cents on the dollar as buyers demand some return to go with their risk. Equities, which trade in part with reference to bond yields, would probably also behave like junk, falling in response to uncertainty instead of rising on the expectation of central bank salvation. So bad in the long run for the current irredeemably corrupt financial system – which is to say probably good for most regular people.

This post was published at DollarCollapse on JUNE 19, 2016.