“Brexit.” There, I said it. “Brexit, Brexit, Brexit”. I really dislike the overused catch phrases that get thrown around these days. But this one is important to the world economy, so here we go. Brexit is the short way of referring to Britain leaving the European Union (Britain exit). In a little over four weeks, on June 23rd, UK citizens will vote on whether or not to leave the European Union. This vote will be more important to their country than their general election.
The European Union (EU) was conceived of after World War II in order to make trade between the member nations easier. The idea was that countries that are economically dependent on each other are less likely to go to war with each other. Evolving from a six nation agreement called the European Economic Community, the current EU includes 28 members and covers economic, social, healthcare, and environmental policies.
Over the decades, the EU has grown in power and importance. It is run by a legislative body with representatives from each of its member nations. Policies on such things as trade and tariffs, healthcare, and immigration are created by the EU and apply to all members. To that end, each individual country has given up much of its own sovereignty in return for inclusion in this “single market”. Perhaps the largest advantage is the free flow of capital, goods and people within the EU. This single market has evolved to the point where it has its own currency, the euro, which is used by 19 of the 28 member nations. Importantly, Britain is not one of them.
So, what is this Brexit business all about? Because of the large number of policies that the EU now controls, there are many in Britain that want out. And, to fulfill a campaign promise made by current Prime Minister David Cameron, there will be a vote on this issue. (Ironically, this significantly mirrors the vote taken in 2014 for Scottish independence). Brexit supporters feel that Great Britain has given up too much power and that seceding from the EU is the only way to control its own destiny. Brexit opponents feel that the benefits of being in a single market trade region outweigh the costs (both economical and political).
By staying in the EU, Britain would remain under the influence of the EU treaties. These include, most importantly, the free trade within the EU. This means that goods and services can be bought and sold within the EU without tariffs. It also means that capital investments can be made as easily in Britain as in any other EU nation, and vice versa. But, it also includes policies on healthcare, migration, and global warming. David Cameron has negotiated some favorable concessions in the EU treaties on the condition that it stays, however their significance is unknown. It would also still have to pay annual membership dues which amounted to about £8.8 billion (before rebates paid directly back to private sector companies and universities).
By leaving, Britain would need to negotiate trade agreements with the EU as an external entity. These treaties would undoubtedly be less favorable than the current situation. It’s easy to imagine that the remaining EU countries would not be too accommodating to its deserter. However, it would no longer have to abide by the current EU legislation and would be able to decide how to approach many issues that we take for granted. Arguably, the largest issue for pro-Brexit is the mass emigration to Britain from the poorer EU nations over the last couple of decades (Note: this is different than the refugee problem that Europe is now experiencing). As long as Britain is part of the EU, it cannot close its borders to other member nation citizens. Another big, long standing issue is one of currency. Britain has always been resolute in its use of the pound sterling (i.e. not using the euro). However, when it comes to EU legislation there is the concern that the 19 eurozone countries would draft legislation that favored the euro over all other currencies. This hangs over the Brexit situation even though the eurozone has stated that it would not gang up on the pound.
So, what does this mean to us? Well, regardless of the long term result, a British exit from the EU would cause immense short term uncertainty. Even with the proposed two year minimum transition period, Brexit would cause turmoil in European economies and markets. This would definitely affect our economy and markets as the world tries to figure out the consequences. Even the Federal Reserve has cited the Brexit vote as a concern as they contemplate a June rate hike. And, the reality is that we don’t know how this would play out in the long run. As you can imagine, the pro-Brexit and anti-Brexit camps have vastly different projections of possible economic outcomes. One scenario is that the whole EU falls apart. If Britain leaves and is able to get good trading terms, why wouldn’t Germany do the same thing? A German exit? “Gexit”? Coined it!
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
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A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.
*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.
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