An Economic Three-Ring Circus

Joel Ross

Only three of 50 economists got it right this month on their UK economy predictions for the third quarter. GDP grew 0.5%, versus the average prediction of 0.3%  The UK has grown 0.6% over the past 60 years, so last quarter was pretty good proof that Brexit has so far not impacted their economy. Economists continue to predict problems in housing and employment, but at the moment that has not shown up. While it might, and probably to some degree will for a bit next year, I continue to believe the UK will get through this with nowhere near the damage predicted by many. We will know a lot more by next summer but until then, it is just speculation by everyone.

Just yesterday the EU was able to pressure Belgium to force the one holdout province to go along with the Canada trade deal. We don’t know what concessions were made to the dairy farmers who were holding up the whole deal, but the fact that some farmers in Belgium had the power to derail such an agreement for the whole EU just magnifies the dysfunction of the group. There are nine more contentious trade deals lined up for approval so we will see if they get approved without similar resistance by others. There seems to be a rapidly growing realization by many that the EU is in real trouble.

Investing in Europe now is full of real risk, and until we see 2017 play out with Brexit and these other issues along with pressure from Russia, it is not a place to put money unless you understand how at risk your money will be. Chances of a bad outcome are far in excess of a good outcome. Ignore all the noise by the banks and others about getting ready to move to Frankfurt, etc. Right now it is noise to try to get May to make concessions, which she probably will not do on immigration. We won’t know what the negotiations will yield until late next year and there is no reason any bank is going to move before then. Otherwise they might suffer the massive disruption to their business if they move early only to find there was no reason to go.