An Index of Uncertainty Surges After ‘Brexit’

Brexit or as I predict Breturn has had much less of an impact than the panic of the first 3 days after the Brexit vote. Brexit was tough but then the tough got going and the British politicians in the thick of the Brexit vote resigned or gave up on their fight. In the end the sun has not set on the British empire and the US economy remains strong.

The FRB should consider the appropriate global monetary strategy going forward.

The US economy is relatively healthy and far less impacted by the relative strength of the USD than most nations are to their own domestic currency.

The Fed's mandate of full employment and price stability are met.

Increasingly global central banks have been adjusting monetary policy to each new crisis, using a "beggar-thy-nation" approach of currency depreciation.

With real and nominal rates below 0% in many developed economies, we are in uncharted waters filled with sharks.

First and foremost, interest rates are reducing the cost of production far more than they are stimulating aggregate demand.

One could argue they are undermining aggregate demand through a tax on money and savings, and marginal productive capacity is no longer constrained (by the 0% lower bound) to be in constructive endeavors.

In other words, the central bank is now essentially managing resources by committee through monetary policy measures.

The economy will suffer the fate of all centrally managed economies - underperformance.

Post-Brexit, the BOE and the ECB have their hands tied. The BOJ is dealing with massive unwanted strength in the yen.

If the Fed is to avert a chain of "beggar-thy-neighbor" monetary policies, it must do what only it can do - begin the difficult but necessary process of rate normalization.

Otherwise, the world will sink into a quicksand of negative interest rates.

I realize this is no laughing matter. But after reading your first paragraph, I could imagine Gilda Radner, if she were alive today, reporting on Saturday Night Live that the British were becoming fearful they would no longer be able to afford a full English brexit with fried eggs, sausage, toast, tomato and beans, only a continental brexit with a croissant or buttered roll to have with their tea or coffee.

At the risk of increasing the "uncertainty" index in the short term, "Congress", the "White House" and the "Federal Reserve" should collaborate on "legislation" to stimulate the U.S. "economy" by investing in infrastructure at a time when interest rates and the "deficit" are lows not seen in decades. Such domestic "economic" stimulation would offset the loss of exports we are experiencing as the dollar strengthens against other currencies.

I don't believe that Brexit was the cause of uncertainty. Brexit appears to be the result of hyped uncertainty and anxiety that appears to be based on a lot of false statements made in the British press. As I understand the situation, the UK did not recover well from the global recession and their policymaker leadership assigned subscribe to an austerity prescription. That being said, I think the vote outcome was more of concerns about the immigration of job seekers into England than the economy.

Lot of new information in this article. Thanks.

The press sells sizzle. The some people confuse the sizzle for steak, an old story.

In the case of Brexit, neither the London (FTSE 100) nor the German (DAX) stock market indices suffered. The British pound and the Euro were immediately revalued, with little volatility since.

Apparently, the place to look for a real effect from Brexit is where the super rich will invest/hide their assets. And with the GB pound reduced in value, that will probably be London after the run to the US dollar slows.

I am continually amazed at the navel-gazing financial press that bemoans "uncertainty" and "volatility" while ignoring the role of the industry in creating the very conditions for anarchy.

The collapse of Lehmann, Brexit, rise of Trump all have their roots in regulatory capture mainly by the financial industry. We can only hope something will save us and them from themselves. If any of these privileged men can see past their noses, they would be begging for regulation and a financial transaction tax.

I suspect the market volatility was traders covering positions. The media coverage has been much greater in The Times rather than the Guardian, and probably more politically motivated than substantive, as Brexit was a rejection of American influence and globalization as much as anything else. Although it would be nice to imagine the bankers all decamped for say Austria or Greece, with all the right wing fervor I'm not sure they would be welcome there either, it would be great for apartment seekers however, perhaps average Londoners could actually afford to live in London again. Whatever the case, in the long term, I believe as that other famous Englishman said its" much ado about nothing".

The history of Europe since the fall of the Western Roman Empire through the end of WW II is characterized by almost constant warfare. The underlying objective of the Monnet Plan, the Schuman plan, the Common Market and the EU was to set Europe on a new path away from its bloody past. If the EU now dissolves, we should let this be Europe's problem and stop investing our wealth and the lives of our youth to save the Europeans from themselves.

I and many others are not interested in this continuing Brexit story that has been dramatically overstated. So what if your 401K goes down it will go up. Brexit is not the concern of the average U.S. citizen.

Watching the VIX is like watching gold.