Implications of the Brexit

While filling in for Frank Gaffney on Secure Freedom Radio this week, Jim Hanson spoke to Dr. Desmond Lachman about the Brexit. Lachman is a resident fellow at the American Enterprise Institute and formerly served as Deputy Director of the IMF.

Hanson started their conversation by asking Lachman what kind of impact the Brexit will have on global markets. Lachaman responded:

“They decided that they wanted to leave Europe, go their own way and that has already caused big political consequences in Britain itself and it has roiled both Pound Sterling and global financial markets. And what’ve seen over the weekend, for instance is that the conservative party, the ruling conservative party is deeply divided, there’s already a really big fight over who’s going to lead that party, while the head of the Scottish National Party has indicated that Scotland might very well want a referendum of its own, so there are huge reverberations of this already, and my expectation is that we’ll continue to see a lot of political and economic noise coming out of Britain going forward because they’ve injected great uncertainty as to what their relationship is with Europe and this will persist for the next two years and that’ll be very bad for the British balance of payments.”

Lachman went on to say that voters were clearly more concerned with maintaining sovereignty and control over immigration than with warnings from experts about a possible recession.

Hanson asked Lachman if any policies could have been put into place ahead of the Brexit vote that would have eased some of the market uncertainty and prevented currency fluctuation. Lachman suggested that the Brexit hos thrown all of Britain and even Scotland into political turmoil and therefore, any policy which had assumed the correct outcome would have been useless:

“We’re entering a political vacuum and in Europe their populist wave of its own that could be fanned by what is going on in Britain, I’m thinking about places like Italy, France, the Netherlands, there’s moves afoot there to have referendums on Europe as well and there’s not very much support for Europe in those countries right now.”

Hanson asked if the Netherlands could be the next domino to fall but Lachman said while that would be significant, he is more concerned about Italy.

“What is at issue isn’t simply the immigration question in Europe, but it’s the very poor economic performance that we’ve had over the past decade that has seen unemployment levels at very high rates, very sluggish economic growth, great disaffection among the population against the political elites and the Brexit incident could really put wind in the sails of those who really want to be out of Europe.”