Alan Greenspan (an economist has served as the Fed Reserve Chairman) has witnessed many challenging global markets crisis. However, the economist defined the market turbulence sparked by the UK’s decision to exit the EU as the worst period.
According to Alan Greenspan, “There’s nothing like it, including the crisis – remember 19 October 1987, when the Dow went down by a record amount of 23%? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away.”
Brexit is much more than a financial market disorder. The referendum has resulted in the leave vote winning by a narrow margin against the background of tremendous economic and political ambiguity.
The problem for other EU leaders is that the UK’s decision to leave the EU would trigger a domino effect across the continent. Several nations could witness the nationalistic forces and anti-immigration leaders gaining momentum and taking centre stage in active politics.
As far as the EU’s delicate economic recovery is concerned, this new period of uncertainty could restrict consumer expenditure, hinder business contracts, and possibly make the European Central Bank initiate unconventional measures to add money into the economy and boost investor confidence.
There is a possibility that the economic consequences of Brexit could result in the collapse of the nation’s vulnerable banks. The shock waves could spread across the globe. There could be serious consequences for the EU, the UK, and the global community.
In a complex environment, policymakers would find it difficult to identify and resolve issues. The global economy has relied on China for growth. The slowdown in China has always been witnessed as an international risk. Again, Brexit is expected to increase the economic problems in China because it has invested heavily in the UK.
A serious credit crunch and recession has triggered a wave of bankruptcies in Brazil. Though trade connections with the UK are modest, the nation’s currency and stock market have felt the pressure because of fears that Brexit could have a negative impact on emerging economies.
The US economy is also not immune from Brexit. The risk that Brexit would worsen the economic slowdown has increased the uncertainty associated with the US economy.
Brexit could restrict the decision making capability of global policy makers at a time when the global economy cannot afford it.
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