The people have spoken and snubbed the elite. The UK has voted for Brexit! Economists will be in high demand now to predict what comes next, but we should remember that economists (aka “experts”) are pretty bad in predicting the future, except in the most general terms. The economic and political future of the UK and Europe will depend on the negotiation process between the UK and the European Union and the reaction of the Scottish government and people. Though I would dare one prediction: 23 June 2016 will enter the history books as a watershed moment in both UK and European history. My gut feeling tells me that it will enter history books with a negative connotation, though I sincerely hope I am wrong! A second, easy prediction is that the uncertainty will negatively affect financial markets throughout the world for days if not weeks to come and will most likely trigger a recession in the UK, with consequent monetary and fiscal policy reactions.
Many will now discredit betting markets as bad predictors; but careful, they might well have been right in predicting this outcome, we might simply have stared at the wrong number: while the volume was in favour of Remain, the majority of recent bets were in favour of leave, even if for smaller amounts! Something to be kept in mind for the future.
The Brexit vote also emphasises the need for further strengthening of the Eurozone! More on this later today!
24. Jun, 2016