First Thoughts On Brexit:
- The immediate effect of the Brexit vote is through fear on financial markets. Falling stock and bond markets are not carefully considered revision of expectations for future economic activity because nobody really has a good handle on how Brexit impacts future economic activity. This is simply fear of the unknown.
- The exit from the Common Market will take years. The U.K. will negotiate terms of the separation with the EU - that will take a while. Parliament will debate the terms of the exit, then pass legislation. So don't hold your breath. The true impacts on trade flows, production, spending and employment will take years to develop.
- When the exit finally takes place, Britain will see some real positives to offset reduced access to the Common Market: ability to negotiate trade deals with other countries, and relief from EU product and commercial rules.
- For Europe, benefits are less. European companies will face reduced competition, which will help them in the short run but hurt them in the long run. It turns out that exposure to international competition is necessary to have a highly productive industry. Just look to India if this point isn't obvious.