Brexit Would Create Domestic, Global Instability

People around the world can’t take their eyes off the train wreck that has become the 2016 U.S. Presidential primary season, but they are ignoring even more important event just around the corner.

On June 23 UK voters will head to the polls and cast their vote in a referendum that will decide whether the country remains part of the European Union or leave. A “Brexit” from the EU would have serious consequences on its domestic economy but also on the global economy that is teetering on the edge.

A Brexit could create major instability in currency markets as investors and traders reevaluate currency values. The pound sterling could take a major hit as a Brexit would have serious economic implications. At the same time the euro could also fall in the global currency market as a Brexit could motivate other nations to break away.

If you are interested at all in the gold market, now could be a good time to get in as it could be the best performing global currency this year; however, that is a topic for another day.

While does seem like a long shot that people will vote to leave the EU as there are significant benefits. We can’t underestimate the power of traditional nationalism. This sentiment is extremely power, and it is the biggest driver that is pushing Donald Trump to be the Republican Presidential candidate, and could have the same impact in the U.K.

According to the latest polls the “Remain” camp has a slight lead of 51% and the “leave” side is at 49%; however in the real world this is basically a statistical tie. With less than two months to do this vote is anyone’s game.

While nationalism has a nice ring to it -- creating jobs for regular citizens is a powerful campaign idea -- it is just a pipe dream. Nationalism is just another name for protectionism and the economic evidence that protectionism kills economies is overwhelming.

Last year the Centre for Economic Performance at the London School of Economics noted in a report that the UK exports about 15% of its goods and services to the Europe. They added that in the best case a Brexit would lower the country’s GPD by 1.1%, in the worst case scenario growth could call by 3.1%.

Another economic study noted that increased “isolationism” would lead to less competition among UK companies, leading to fewer innovations.

With the global economy expected to see anemic growth this year and next, now is not the time to rock the boat. But this is a domestic dispute within the U.K. Just look at the press coverage President Barack Obama received for weighing in on the debate.

I just hope the majority of UK citizens realize the importance of their EU membership before it’s too late

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