SUMMARY
  • Bring On Brexit
  • Lending Hits A Lull
  • The Eurozone Still Isn’t Getting Enough Credit

In the time before Christ, Celtic peoples occupied most of Western Europe. They established a series of trade routes spanning from Great Britain in the northeast to Germany in the southwest. Lacking the organization of the Greeks that preceded them and the Romans that followed them, the Celts are not considered to be among the great civilizations of the ancient world.

The expansion of the Roman footprint into France and Spain forced the Celts to withdraw across the English Channel, where they set down deeper roots. The Celtic heritage is most keenly apparent in Ireland and Scotland, where forms of Gaelic, one of the Celtic languages, are still spoken. My recent trip to the region provided an interesting perspective on the United Kingdom’s pending withdrawal from the European Union (EU).

The British government is set to invoke Article 50 of the Lisbon Treaty next week, formally signaling its intention to separate from the EU. The final procedural hurdles were cleared last week, with approval from both houses of Parliament. Nine months after the fateful referendum, the march to Brexit is about to begin.

Outwardly, the U.K. economy and U.K. markets have held up well since last June, defying predictions of imminent demise. Forecasts for real growth this year have been upgraded several times, and the FTSE index of large capitalization stocks is more than 20% higher today than it was immediately after the balloting.


But a closer look reveals cracks in this reassuring veneer. Since the Brexit referendum, the British pound has weakened by more than 10% against the U.S. dollar and nearly 20% against a trade-weighted basket of currencies. This has caused inflation to rise, reducing the purchasing power of British consumers. Real personal spending, which makes up more than 60% of U.K. gross domestic product (GDP), may consequently grow more slowly in the coming quarters.