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Brexit Reaches “A Total Impasse” and Threatens Global Markets with Chaos
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This past week saw things take a serious turn for the worse with the slow drip-drop torture of Brexit. Only the past weekend, the negotiations effectively broke down between the United Kingdom and the European Union. Leaders from the two sides of the English Channel each blamed the other side for insisting on demands that are unrealistic and unfair.
This left European and global investors in a state of fear and dread over the impasse that has set in with less than six months between now and when the British quite possibly hard crash out of the European Union. It should remind you why you need gold in your investment and retirement portfolios. Gold makes sense in an IRA because it has always defended the value of physical assets in times of geopolitical confusion and economic chaos like that Brexit has brought for well over a year now.
What Exactly Went Wrong At the Now Infamous Salzburg EU Summit?
Theresa May the British prime minister traveled to Salzburg, Austria to present her formal Brexit plan to the EU leaders. In a meeting fraught with tension and uncomfortable moments, the cabal of 27 other EU national leaders turned down her plans for post-Brexit Great Britain. This left Prime Minister May with nowhere to go except that the EU leaders will now have to come up with a Brexit that does not inflict unnecessary financial, commercial, and economic pain on both sides. Prime Minister May defiantly stated:
“We now need to hear from the EU what the real issues are and what their alternative is so that we an discuss them. Until we do, we cannot make progress.”
May put a bold, brave face on what was a terrible setback for Brexit with less than six months till the U.K. officially is freed from EU entanglements one way or another. According to the Wall Street Journal, Investors' nerves are fraying as they watch the talks teetering on the verge of breaking down.
Such a result would mean the U.K. hard crashes out of the world's largest trade and economic block with no exit deal in place. That devastating setback day saw the pound plunge by 1.4 percent versus the dollar and a similar 1.2 percent versus the euro in the largest single day decline since November 2017.
Europe Blames the Whole Mess on London
Complicating any chances of a deal going through, Donald Tusk the European Council President blamed the British government (in a written statement) for all tensions and failures in Salzburg. He also did not agree to her demands to offer Britain a countering deal to the British Chequers plan. The goal of this plan was to obtain British companies' seamless access to European Union national markets for goods once Britain has exited the block. According to Tusk:
Britain's position on the issues were “surprisingly tough and in fact uncompromising.”
May's position right now is unenviable. She now faces an eager Brexiteer wing of the Conservative party that has been strengthened by the EU's decision to play hardball. The ruling party in the U.K. refuses to step down or call another round of disastrous elections. Her shame and humiliation across the political spectrum for the public put down by the EU in Austria has only emboldened rivals Boris Johnson and Jacob Rees-Mogg. Both of these men aim to succeed May and could launch a revolt against her as soon as the close of the Conservative Party conference.
May's near-admission of the defeat of her policies only opened the doors to more rivalry by those watching and waiting in the pro-Brexit wings when she stated:
“Yesterday Donald Tusk said our proposals would undermine the single market. He didn't explain how in any detail or make any counter-proposal. So we are at an impasse.”
The end-result of a dreaded “no-deal” Brexit would see the United Kingdom simply crash out of the European Union. This increasingly likely final outcome could cause financial markets' panic and economic pain not only in the U.K. but also across the EU financial markets in such important global centers as Germany, France, Italy, and the Netherlands. It also has the potential to kick off renewed problems in Spain, Portugal, Cyprus, and even Greece, all of which have significant trade, tourism, investment, and British expat links with the U.K.
Is Compromise on Brexit Likely At This Point?
A scenario where compromise prevails looks increasingly unlikely for the imminent Brexit. In order for Prime Minister May to stave off a revolt of the European Research Group led by Jacob Rees-Mogg and also of former London Mayor and previous Foreign Minister Boris Johnson, she has to play more to the hard line wishes of the hardest possible Brexit-backing contingent in the Conservative Party. This European Research Group (without the aid or involvement of Johnson) commands a good forty seats, nearly enough to force a vote of no-confidence in May's leadership and replace her with Jacob Rees-Mogg (or Johnson).
May has promised that her government will provide an alternate plan, yet offered no timetable for when this will happen. Meanwhile the Brexiteers are preparing their own alternative versions, as is rival Labor Party leader Jeremy Corbyn. In an effort to beat back her hungry rivals, May reiterated that any real compromise is not an option, with her pledge:
to not “overturn the results of the referendum” and that she is working literally “night and day” to come up with some deal that will take the United Kingdom out of the European Union.
If May survives the Conservative Party conference in early October, then she lives to fight the next battle against the increasingly hostile and inflexible EU. She (or any successor) will sit down with the other 27 leaders of the remaining EU national states at an upcoming October summit of the European Union. The block has ominously warned her that this is the final “moment of truth” for the Brexit negotiations.
The ultimate reason that things look hopeless for a final deal being reached comes down to the sticking point of Northern Ireland. This has become the intractable issue that simply can not be solved. The European Union continues to insist that Northern Ireland will have to follow all EU regulations on customs requirements and regulatory checks that would happen between Northern Ireland and Great Britain.
Yet Mrs. May holds the same position that she says any British prime minister would cling to— that Northern Ireland is an inseparable territorial component of the United Kingdom of Great Britain and Northern Ireland. Compromise is simply not an option for either side, neither of which can afford to look weak now.
French Response Shows the Tyrannical True Colors of the European Union
Meanwhile the French are determined to make their historical thousand year old rivals the U.K. bleed when they exit. President Emmanuel Macron has consistently laid out his heartfelt desire that there will be suffering for the British when they leave the EU. He states that if this is not the case then the integrity of the EU will be threatened. Macron warned starkly:
“Brexit shows us one thing. It's not that easy to exit the European Union, it's not without cost, it's not without consequences… There will be no blind deal. I am here to protect the interests of my citizens and also this common project.”
It was France that overturned the German-led proposal for the so-called “Blind Brexit.” In this scenario, German Premier Angela Merkel had offered to leave among the hardest arrangements of the post-Brexit details until after the Brexit to help May win a compromise. France is having none of it. It seems that all sides are staunchly determined to see the EU and British financial markets blow up.
The lone exceptions are the populist nationalists like Viktor Orban and Marine Le Pen the French nationalist. Both have not only defended, but celebrated, Brexit. Hungary's Prime Minister Orban shared with reporters in Salzburg his desire to obtain a “fair deal” for the exiting United Kingdom. Meanwhile Le Pen actually praised Britain and the Brexit in September for being a key part of the international movement to “restore nations.”
Hardest of Brexits Threatens Global and U.S. Financial Markets
There can be no doubt that this increasingly likely hardest of possible Brexits is a major threat to the stability of global and American financial and economic markets. The United Kingdom remains the world's leading center for international banking and bank transfers (21 percent of all bank transfers begin, pass through, or end in London compared to under 15 percent for Paris and New York), the world center for gold spot and Forex trading, the second largest financial center on earth (very close behind NYC), a critical G7 nation with the fifth largest economy on earth, and an international trading center and travel hub. This graphic from September of 2017 says it all:
The major British banks and financial markets are among the very largest on earth. Even leaving the EU effects of a bad Brexit aside, there is tremendous risk to all global markets from a British meltdown. It would be no exaggeration to say that if the world's global Forex center (London) catches a cold, the whole world will sneeze.
You need IRA-approved gold to protect you from this potential disaster in the making. Now is the time to carefully study the top five gold coins for investors as well as the top five silver coins for investors. You can also buy gold in monthly installments if you wish to cost average in to the greatest historically proven safe haven product in the history of the planet.