Discussion about three article I provided

INB 302 Report

Topic: “Brexit” (Britain’s vote to exit the EU) (2/7/2017)

Possible aspects

1. Impacts on the international businesses in Britain and possible future trends

2. Economic impacts on EU countries, Russia, the U.S., and China

3. Global market opportunities?

Articles & Summary (3/28/2017)

http://www.bbc.com/news/business-36956418

https://www.ft.com/content/fa1490f2-f909-11e6-bd4e-68d53499ed71

https://www.theguardian.com/business/ng-interactive/2017/mar/24/how-has-the-brexit-vote-affected-the-uk-economy-march-verdict

Article Summaries

Professor Hanek

INB 302

March 27th 2017

For this report we will be summarizing three articles and their coverage of Brexit. All three articles discuss the effect that Brexit has had on the Global Economy as well as the economy of a couple specific countries. They talk about how the effects, as of right now, are seen as mostly negative but that there is still room for optimism. The first article comes from the NY Times and talks about the uncertainty left behind the sudden exit of Britain from the European Union. The next article is from Business Insider and it takes a closer look at the effect Brexit had on the UK economy. The final article is from CNN and it talks about the effect Brexit will have on the US economy which includes growth and foreign exchange.

Article 1 - Turbulence and Uncertainty for the Market After ‘Brexit’

https://www.nytimes.com/2016/06/25/business/international/brexit-financial-economic-impact-leave.html

The article starts off by stating how Britain’s choice to leave the European Union has left Europe and much of the world questioning what is going to happen next. Following Britain’s exit the global market actually suffered significant losses. The article showed some optimism though as it said that many people feel that this will not have as great a negative effect as the Lehman Brothers banking collapse back in 2008. The exit also caused the pound to drop to it’s point since 1985. While British stocks dropped only 3.2%, stocks across the rest of Europe averaged an 8.6% drop. Upon seeing this drop, Mark J. Carney, who is the governor of the Bank of England, sought to relieve the pressure and flooded the market with 250 billion pounds. The article then states how many investors are not too sure what to expect in the near future as many economies slowed, as seen with the economy of China. It goes on to say how that nothing like this has ever happened before and it starves the market of the facts needed so it can respond accordingly. It then goes on to say how that the economy isn’t the only thing at risk here, that democratic countries may be at risk. Talk then shifts to how this vote may give momentum to even more radical changes to the world, as seen with Trump and his proposed trade/immigrant bans. Talk then shifts back to how Britain will still be part of the EU for the next two years which will give Europe and the rest of the world to adjust. The article then concludes that this whole Brexit movement has left the door open for other separatist movements which many see as a potential new risk factor in the global market and economy. The big take-away is that the world really doesn’t know what is going to happen after Brexit because nothing like this has ever happened before.

Article 2 - The Economic Damage from Brexit has been Fast and Widespread

http://www.businessinsider.com/economic-effect-brexit-article-50-reecssion-2016-8

The article starts off by saying how economics is slow when it comes to moving and that a typical economic cycle can take months or years to play out and that’s what makes Brexit such a strange case. It says how Brexit will show the world the effect a sudden, negative political shock can have on economy. The previous article also suggested that politics can have a drastic effect on what goes on in the economy. It goes on to say how the UK is heading to a recession at an alarming speed. It actually compares this recession to Christopher Lee and when he was staked through the heart in one of his horror movies (picture included). It gets into the actual data later saying how the UK was actually growing at about 0.6% but following the Brexit referendum it retracted to 0.2%. The article even has some graphs that show the sudden change when Britain chose to leave the EU and going on to say how the UK was experiencing record highs in employment and record lows in unemployment. As stated in the previous article, this one also touches on how the pound has been falling since the choice to leave the EU was announce. The article concludes with how lower income individuals may like the falling prices but that isn’t always a good thing.

Article 3 - Brexit Triggers a Strong Dollar, Which Hurts U.S. Trade

http://money.cnn.com/2016/06/24/investing/brexit-impact-on-american-global-economy/

The article starts off by saying how the U.S. should expect a hit to its economy. It follows up by saying how that the only 0.5% of the U.S. economy is made up from trade between the two nations but the connections they share go far beyond just trade. The first reason the article gives for the U.S. getting hit is that there is fear about the EU falling apart. It says how Britain could be the first of many countries to leave the EU, as France called it’s own referendum after the announcement of Brexit and there is talk that Italy and the Netherlands will too. The article does say however that many experts believe that this fear is overblown. The next reason the article gave was that a volatile market is bad for growth. The previous articles have stated that a volatile market can be bad for growth, and this one is no different as it says that a volatile market can hurt the spending of consumers and that is always bad, especially at this moment. The next reason given was that Brexit has strengthened the dollar. The previous articles have also talked about this but they were talking about the weakening of the British pound. The article goes on to say how a strong dollar can seem good, especially for those traveling overseas, but it’s bad when it comes to exporting U.S. goods. It says how products from the U.S. become more expensive and therefore are sold less. It does state that the strong dollar can offset the volatile market fears but that isn’t the case as of right now. The last reason the article gave was that Brexit is going to make the Fed “rewrite its rate hike playbook”. The article says that the Fed projected that it could raise rates four times this year which shows that the U.S. has recovered from the financial crisis. When Brexit was announced this changed as the fed believed they could only raise rates once. The article then goes on to say how a lot of other central banks around the world have decided to lower their rates and the Fed might want to do the same. That was the end of the article.

Work Cited

Goodman, Peter S. (2016, June 23). Turbulence and Uncertainty for the Market After ‘Brexit’. New York Times. Retrieved from https://www.nytimes.com/2016/06/25/business/international/brexit-financial-economic-impact-leave.html

INB 302 Report

Analysis

Discussion

Evaluation

As previously mentioned in this report the main points of focus are the state of the European Union following Brexit, the future of the global market and how other countries have been affected, and how other countries may now leave the European Union. Brexit is still fresh in the minds of many people, especially those in EU countries. The implications that Brexit may bring about are mostly unknown as nothing like this has ever happened before. So the questions are, who cares and why?

Since the UK has left the European Union the state of the EU is very much unknown. This is because nothing like this has ever happened before and it is leaving many experts at a loss as they have no precedent to go off of. This event, while not as violent, can have a similar effect like the World Wars. Here we have countries that are at peace with each other and have even formed a union but then one decides that it no longer wants to be a part of this union and leaves. This could rub some countries the wrong way or they can see that they needed to leave because them being together was worse than if they were apart. Leaving the EU has thrown a wrench in the system and how many things operate over in Europe. Those who like to travel will have to take a few extra steps, those who work for certain companies may have to leave and move, and then there is the whole global market as the UK is now a stand alone market and not part of the EU market which makes things much more difficult when it comes to trading and investing.

Brexit was had a huge impact on consumer and investor confidence. With many people not knowing what’s going to happen next, global market took a significant hit along with the growth of many countries, specifically the US and the UK. The idea of globalization is very big in the minds of many, especially those on the business side of things. Globalization will help with the world coming together and the growing of every country's economy. With the UK leaving the EU, however, this was stopped/put on hold. When the UK left the EU it hurt the economy of many countries, including the US. The US saw a slower growth rate when the UK left and this was because US based investors and consumers no longer had the confidence in EU products and investments. This meant a significantly lesser outflow of cash from the US which does hurt the growth of the country (spend money to make money). The same can be said for the UK as they were also thrown through a bit of an economic growth loop.

Then there is also the possible domino effect that Brexit may cause as there has been talk of other countries possibly leaving the EU too, Italy has had a vote on it already. Since no one had ever left the EU before it came as a bit of a shock when the UK voted for it and it actually passed. With the UK leaving it brought some problems with the EU to light with the most significant being that not all countries in the EU want to be there and may want to leave. That’s why the UK may have initiated a domino effect when they chose to leave the EU. The countries in the EU may have known they had the ability to leave but they didn’t know if they would be able to utilize that ability and actually leave. This was all confirmed when the UK voted to leave and when Italy called for a vote on their place in the EU.

Long story short, everyone should care about Brexit because it has had some pretty major impacts in the short amount of time since it’s announcement last July. The impacts that we are talking about all deal with globalization. While that may seem like a broad generalization, it breaks down into much more specific aspects that have already been discussed earlier in the report. Should the EU actually crumble because of this whole Brexit situation the world may be facing further setbacks. The EU acts as a single market and makes trade and traveling between all countries involved much easier. As stated earlier, the EU is significant when it comes to growth in other countries too and should it no longer exist because of Brexit than the rest of the world could suffer from it as well. So everyone should care about Brexit and the problems it has brought with it because it could make things much more difficult for everyone in the near future should things go south.