First there was Grexit. Now there is Brexit. I feel one of my responsibilities of running a financial institution is to keep up with the current Wall Street lingo. It reminds me of one of Robin Williams’ lines in “Good Morning Vietnam” referring to then-Vice President Richard Nixon, “Seeing as how the VP is such a VIP, shouldn’t we keep the PC on the QT? ‘Cause if it leaks to the VC he could end up MIA, and then we’d all be put on KP.”
Grexit and Brexit are word mashups meaning Greece’s and Great Britain’s exit from the European Union (EU), which was known as the European Economic Community (EEC) and European Community (EC) in previous decades. Greece wanted to leave the EU because they didn’t like outsiders telling them how to finance their country. Of course, the EU didn’t like Greece’s escalating debt and growing entitlement payments.
Great Britain, also known as the United Kingdom (UK), has always had one foot in and one foot out of the EU. While they allowed the group trade agreements and free travel of their EU partners in and out of the island country, they insisted on keeping their own currency, the Pound, and eschewing the one-continent legal tender, the Euro.
The EU is not that much different from a bank or credit union. They have good members who pay their bills and balance their budgets and not-so-good members who are delinquent on their loan payments and have increasing debt. The EU’s bad members were not so sensitively known as the PIIGS (Portugal, Ireland, Italy, Greece and Spain). Essentially, the good members have had to subsidize the PIIGS since at least the Great Recession began in 2008. All of the PIIGS are still having severe financial difficulties.
Needless to say, the British vote shook up a lot of people, primarily the political elite who have been living off the taxpayer trough and speculative investors whose financial bets sunk into the North Sea. The political elites in both Europe and the United States have been trying to smear the British who voted to leave the EU, but the fact remains that it’s about the economy. If people are unemployed or feel their salaries are stagnant, they will vote to replace the status quo every time. Besides, if it were just a trade issue, there is nothing stopping the UK from having separate trade deals with the EU and other countries. The one-world economy was tried, and it failed.
What the recent vote means to our economy and economies around the world won’t be known for at least a few years. The UK will feel some pain in the short term, and it will be interesting to watch what happens in the long term. The U.S. will have to renegotiate their trade pacts with the UK, but our economy should not be significantly affected either positively or negatively.
Now that the British have spoken, I guess we can start expecting Frexit (France), Hollexit (Holland), Scotlexit (Scotland), and Swedexit (Sweden) but hope the word mashup experts can come up with something that is easier to say.
David M. Green