britain (2)

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Is Brexit Truly The End Of The EU Itself?

The vote has come and gone. A major European nation has chosen to leave the EU. The markets have had their obligatory decline. A weekend has passed. It is time to think about what exactly has happened… and what it means, if anything.

The real drive to leave had little to do with economics. It had a great deal to do with immigration. The EU’s economy has been in wretched condition since 2008.

The EU has been unable to forge a plan that would fix dire unemployment in southern Europe and revive the stagnant economy. The EU’s founding treaty promised prosperity. It has failed. Germany has the healthiest economy in Europe, but even it struggles to grow.

The case for staying in the EU was that leaving would ruin the British economy. This assumed, of course, that staying in a broken union would help the economy. The logic of that escaped me. It is hard to see any economic benefits that would be lost. As I put it in my book Flashpoints, “Britain will avoid the destabilization in Europe by pull

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Britain Declares Deflation

20150523_BRC337.png?width=300According to The Economist, in May 19th official statisticians announced that Britain entered deflation in April, with consumer prices standing 0.1% lower than a year earlier. It is first time since 1960 that annual inflation has been negative. Back then, prices pepped up again quickly. The Bank of England expects a similar rebound this time, on the basis that the recent fall in the price of food and fuel will be a one-off. But for inflation to return to the bank’s 2% target, sustained growth in wages is necessary. That means the bank is keeping a close eye on inflation expectations; if Britons start accepting lower pay rises on account of stagnant prices, deflation could persist.

Here in the U.S. fears of deflation still linger with strength in the U.S. Dollar continuing to quash any strong moves in commodities.  We've discussed it a few times before here and here. Tomorrow's GDP and PMI will be watched closely.  At least it won't be a boring Friday morning.

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