My friend and fave policy bear Peter Boockvar has some unanswered questions worth considering in the wake of the historic events of this week…
Ok, so let’s now deal with what’s next. I acknowledge the chaotic response and the shock on the part of many to what took place. The disruptions will be plentiful. For the UK, businesses will reign in investments and decision making may get paralyzed but I believe this would only be short term in nature. The UK will adjust, deals will get redone, lawyers will have a field day and at some point in coming years the UK will deal with the EU just as Switzerland and Norway do today. Of course what becomes of the EU in coming years is now the vital question. Is this the needed wake up call to a EU Parliament that has 40,000 employees doing god knows what except implementing rules and if some of those rules get broken, like debt and deficit limits, there are no consequences? Does this expose the European social welfare state as hitting its limits of excessive debt and too little growth? Does the ECB realize that all they’ve done was bought time and that time is now up? Will the poison of NIRP be revealed for what it really is, a tax on capital and a deprivation of yield that is damaging the entire European financial system. Will QE be revealed as a massive bubble blower of assets that will at some point reverse? Will Hollande and Renzi, to name a few, follow thru on their attempts to liberalize their economies? Will the onset of this potential crisis be the force that tells the bureaucracy that business as usual is over?
Peter Boockvar Managing Director and Chief Market Analyst The Lindsey Group LLC