Brexit will have far-reaching consequences
Updated: 2016-07-04 08:02
By Raymond So(HK Edition)
|
|||||||
The shockwaves of the Brexit referendum - the biggest international news in the past couple of weeks - continue to reverberate. According to the European Union exit mechanism, there are provisions for member countries to exit. The exit of the United Kingdom from the EU is an issue that has significant implications to the world. It is not merely a UK event as it will have a profound impact on global political and economic developments.
As shown by the reaction of global financial markets, Brexit has caused many uncertainties in investment markets. The fall in asset prices is anything but surprising as many investment funds scrambled to sell their assets. When compared with "Black Wednesday" 24 years ago, the drop in the value of the pound sterling is more severe this time. This suggests that the development of the foreign exchange market over the past decade has reached a point at which it is impossible to prevent drastic movements in the value of currencies because of the existence of a huge volume of derivatives in the market. The British referendum has provided a good excuse for foreign exchange speculation, which could cause considerable financial risk. This will mean many new challenges for global regulators.
In addition to causing immediate fluctuations in the financial markets, the British referendum also exposed so-called inter-generational conflicts. In Hong Kong, we have noticed that different generations embrace different values. In the UK, the Brexit referendum has exposed a more obvious inter-generational divide. An analysis based on the results of public opinion polls reveals that the Brexit supporters are mainly from northern England, where traditional industrial areas are located. They did not benefit from European integration; rather, they suffered from it because of stronger foreign competition.
The younger generation understands the benefits and significance of European integration, and they are its beneficiaries. When Britain exits from the EU, the interests of the younger generation are adversely affected; it is no wonder young people are frustrated by the outcome of the referendum. Young people in the UK now complain about the "selfishness" of the elderly, whereas elderly people claim young people do not understand the real situation. Hong Kong is also facing a similar divide in public opinion between the young and older generations, and Hong Kong's experience show that such divisions will be harmful to the society.
The British referendum also triggered many chain reactions. Pandora's Box has been opened and things are now hard to predict. Will there be similar referendums over the future of Scotland, Wales and Northern Ireland? As we all know, Scotland had earlier held a referendum on independence. Scotland wants to remain in the EU, but England does not. Will this difference lead to a new wave of campaigns for Scottish independence? Wales has also considered independence for a long time, and there are voices wanting Northern Ireland united with Ireland. If these things happen, the implication will be a disintegration of the UK. Needless to say, the political and economic situation in the UK is extremely uncertain and future political and economic uncertainties can be expected.
US interest rates are expected to rise this year. Will the Brexit event make the US Federal Reserve more cautious on its interest rate policy? The quantitative easing policy has been in place for a long time. Low interest rates, while helping avoid a meltdown in the financial system, have led to a strong rally in asset prices. Those who have assets on hand benefit from the regime of low interest rates. But most ordinary people do not benefit from it. As a result, an already divided society is further polarized. Brexit has made an interest rate increase unlikely, at least in the short term. There is no sign that the big issue of a widening gap between the poor and rich will be resolved any time soon.
There will be more significant events after the British referendum. The global political and economic environment will have many uncertainties in the coming years.
(HK Edition 07/04/2016 page10)