A few years ago, when Grexit was the EU crisis du jour I explained why Greece just didn’t matter to the world’s economies or the US stock markets in articles like this one called, “Apple is bigger than the entire Greek economy.”
Did you know that Britain’s GDP is ten times larger than Greece’s? Unlike with Apple vs Greece’s entire GDP, at $2.7 trillion per year, Britain’s economy is equal to the combined market cap of Apple, Google, Microsoft, Exxon Mobile, Berkshire Hathaway, Amazon and Facebook.
The total market cap of the DJIA is only(?) about $5.5 trillion, or twice Britain’s GDP.
Clearly, Brexit has a much bigger potential to impact the broader economy and the financial markets than Greece ever did.
Which is a good thing. See, Greece’s economy has shrunken 20% since the great Greek Financial Crises Du Jour were hitting the markets and the country chose to stay in the EU rather than getting out. Staying in the EU has created Great Depression kind of declines in the economy there.
Now I don’t think Britain has ever been positioned nearly as poorly as Greece has been inside the EU, so I certainly don’t think Britian’s economy was about to crash 20% in the next two or three years whether in or out of the EU. But the prospects for Britain to unwind the cumbersome red tape and regulations and control from the EU’s central powers thereby unleashing entrepreneurship, innovation and free-er trade,
One of the great ironies that Brexit has highlighted is that the EU’s “free trade zones” have become classic Orwellian nomenclature. Flip it: Free Trade Zone means Unfree Trade Zone. As LunaticTrader put it in a discussion about all of this on Scutify:
“The EU worked well until the late 1990s when it was mainly a free trade zone. It has gradually morphed into an ‘unfree trade zone’ because that ‘free’ has been gradually replaced by 80000 laws and regulations, combined with the Euro, which took away the weaker countries’ (Greece , Italy, Spain…) main tool to manage their own economy. This doesn’t offer any economic benefits to the weaker EU members, as has become abundantly clear.”
Britain’s leaving the EU gives the nation itself a much high probability of creating economic growth and prosperity for its citizens than staying in the EU ever did. That new upside potential, plus the fact that Britain’s economy is large enough to impact the global economy and US economy nets out to Brexit being a positive, despite all the handwringing in the media and Chicken Little politicians, economists, pundits and traders who are basically begging you to freak out about it.
This analysis doesn’t mean I’m changing much to my portfolio just now. I’m adding a new Revolution Investment stock to the portfolio tomorrow, but as always, suggest being patient and moving slowly with your money, matter whether people are freaking out about Brexit, Grexit or Texit.