One year has gone by since the Brexit referendum shocked the European Union and, to some extent, the whole world. The results of the referendum yielded a series of political and economic developments for Britain. Additionally, it had traumatic consequences for the EU. Britain has aggravated the discussions on other countries possibly following it.
While it was believed that 2017 will be filled with disputes on the dissolution of the EU, Donald Trump's election as the 45th president of the United States and then the quarrel concentrated on his identity has caused the EU not to fall apart, but, on the contrary, to become more interlocked. The unpleasantness of Trump's first meeting with EU German Chancellor Angela Merkel in Washington has carried away Trump's criticism of EU countries on NATO and defense spending to a very different point. The divergence of Trump's policy choices and the EU's, the differences of opinion on the Paris Climate Change Agreement, Emmanuel Macron's election as France's president and the rapprochement of France-Germany at the last G7 Summit have, so to speak, made everyone forget the discussions on the disintegration of the EU on the union's front.
Until now, despite the political economic turbulence it caused at the global level, arguments provoked by Trump can accelerate the efforts toward a different future for the EU in the beginning of next fall after Merkel's possible election victory in Germany. In the meantime, the EU Commission is undertaking some financial precautions to protect the euro and ensure stability in the economy.
According to the new legal regulations, additional inspection will come to companies that trade without taking the euro as the basis. Many companies who will return to the pound-based system after Brexit in England will face many risks. EU Commission's Vice President Valdis Dombrovskis stated that they are focused on the separation of London, that is right now the biggest financial center in EU, and of the U.K. from the market, and this in turn means that they are working on protecting financial stability and bringing clarity to the economy.
According to the new regulations, companies have to be in EU borders to be able to perform large scale bank transactions. However, for now, EU laws grant a privilege to the Bank of England, the U.K.'s central bank. Richard Hunder, an expert from Wilson King, on the other hand, stated that the negotiations between the EU and the U.K. over the next couple of months are viewed as a political testing process, however, the consequences of this will reach the U.S. as many American companies have the right to impose terminations in Europe. This is why, instead of moving to Europe, many companies can move to the U.S. after the annulments. After Brexit, if euro-based contracts are terminated, experts predict that companies in the U.K. will lay off approximately 80,000 people.
Warnings from Jimmy Rogers for G7
The statements of one of the leading investors in the world, Jim Rogers, have probably caught your attention. For a while, I have been explaining the regression of the G7 and the rise of the E7, which includes Turkey, with their reasons in my column. In my previous article, I mentioned that a serious collapse might be experienced for the ratio of debt over national income with the G7 drafting away from its sustainable growth trend. Jim Rogers emphasized that, in most of the Western economies, governments such as Iceland are dragged into bankruptcy, the new "stock" bubble can burst anytime, and that a collapse will stem from the nation least expected. Now, we should ask if international rating agencies like S&P, Moody's or Fitch have the intention or the guts to notch down their ratings in relation to the risk of economic collapse in leading Western economies. Unfortunately, not. However, shouldn't they warn the investors?
Legendary investor Jim Rogers said in an interview with Business Insider that he foresees the biggest crisis of all-time by the end of this year or the next. With the fastest diagnosis method he has grasped over his career, he said that he observed some stocks in the U.S. that have turned into a bubble and he warned that the system will collapse. This is why he moved to China and his kids are learning Chinese. Rogers warned that we will see the biggest collapse we will ever experience in our lives, where many governments, as in the case of Ireland, will go bankrupt and Western civilizations will fall. Rogers who emphasized that, primarily for the U.S., the size of debt has never been this bad, and pointed out that this debt is dragging Western economies into a disaster. Let's see if Trump's plan to make the Gulf countries pay for this debt burden will work.