The Brexit splash will cause different kinds of waves — financial, historical, political and psychological – but it’s hard to know which will have the most force.
More than anything, the vote to secede from the European Union is a break with the past and it’s hard to say exactly how dramatic – or permanent – the break will be, say experts. The immediate impact is as easy to see as a glance at the stock market – and as unpredictable.
“Short-term, if you are in an index fund, today is not a good day,” said Robert Ahdieh, vice dean and professor of international law at Emory University. “But it’s not impossible that Monday, people will say, hey, there’s an opportunity to buy.”
But the greatest effect is because we don’t know what the effect will be.
“It is a huge unknown and in economics and finance, anything unknown is bad,” said Tom Smith, also from Emory, a professor of economics. “People do not like uncertainties and the human mind seems naturally to think about what could be the worst of all possible situations.”
In the United States, the economy should be strong enough to navigate through the Brexit bump. Yet, the perception of the economy may be the economy’s biggest vulnerability, he said.
“We have been in an economic recovery that doesn’t feel like an economic recovery. So we have been waiting for some other shoe to fall. This gives us an excuse to think the worst. We can handle a little freak-out, but we are on a razor’s edge here.”
Smith called his perspective, tempered pessimism
And with only slightly more emphasis on the second element, was Marcus Marktanner, an economics professor at Kennesaw State University’s Coles College of Business.
To predict a Brexit outcome would mean knowing the answer to so many questions, he said: What happens to the exchange rate — up or down and how much? Will London remain a financial hub? What will happen to the movement of workers, goods, services and capital?
And ultimately, how will all the other players – individuals, companies and countries – respond to what Britain is doing?
“I cannot imagine that trade and investment activity between the UK and the rest of the world, including Georgia, will not be negatively affected,” he said. “Economic crises are like the flu, they are contagious.”