Brexit Hits Fragile Global Economy, Putting Federal Reserve In A Bind

Investors Business Daily ^ | 6/24/2016 | JED GRAHAM

[expat_panama]

The unexpected U.K. vote to leave the European Union has predictably set off a flight to safety, sinking global equity markets and Treasury yields, while boosting the value of the dollar.

The immediate consequences are the opposite of what the weak global economy...

...the U.K. only accounts for about 2.4% of global GDP...

...Brexit vote will provoke "a crisis of confidence...

...For now, though, uncertainty about the future of Europe and concern about the disruption of trade are likely to weigh on investment and growth. IHS Global Insight, which had been forecasting 1.5% GDP growth in Germany in 2017, now sees growth of 0.4% to 0.9%.

U.S. economic growth also may take a small hit. ...

...The dollar's rise also could trigger bigger problems in emerging markets, especially China...

...Federal Reserve policymakers were divided earlier this month between those who wanted to raise rates...

...The Fed released the following statement Friday morning: "The Federal Reserve is carefully monitoring developments...

...As far as actually boosting growth, it's not clear...

..."Monetary policy ... may have become counterproductive at the margin," wrote Andrew Bell, the chief executive of Witan Investment Trust in London. "The next phase will need to create a source of demand" via fiscal policy...

...While the U.S. economy remains in relatively good shape because it is domestically fueled and services-oriented, he thinks the Bank of Japan is going to have to lead the way in a so-called helicopter drop: "transfer cash directly to the treasury, then the treasury would have a large amount of fuel" to propel the economy out of its funk.

[expat_panama]

imho this is no problem for the Fed in terms of monetary policy. If inflation goes above the 2% target they can raise rates, it hasn'nt, they shouldn't. Our so-called 'bind' are the two delusions that the fed controls the economy and that we got very low unemployment. Them that believe that (imho) bigger problems than Brexit...

[Paladin2]

"The Fed released the following statement Friday morning: "The Federal Reserve is carefully monitoring developments.."

That's what Hussein's flacks say quite frequently.

[expat_panama]

It's a beautiful Monday morning and stock indexes tanked!  Our 4% drop in ballistic volume put IBD's outlook at "market under pressure" and we begin the new week w/ futures traders expecting more YUGE -4.15% losses coming up.

Stat before the bell:  International Trade in Goods. 

News:

Brexit Is Anti-Market Rejection of Globalization - Larry Elliott, Guardian
Why Brexit Represents a Screaming Buy - Mark DeCambre, MarketWatch
Brexit Surprised a Lot of Hedge-Fund Moguls - Alexandra Stevenson, NYT
Brexit Won't Be 'Lehman Moment' So Many Fear - Ben Marlow, Telegraph
Why Brexit Is More About Entrance Than Exit - Roger Kimball, PJ Media
Friday's Dow Plunge Was 22% Brexit, 78% the Fed - Louis Woodhill, RCM
Trump/GOP Need Platform That Backs Brexit Gamble - Seth Lipsky, NYS
Trump/Clinton Push Radically Different Econ Cures - Al Hunt, Bloomberg
Anti-Deficit Lobby Cheers GOP Plan to Boost Deficit - Jonathan Chait, NY
Hillary Pleads for 4 More Years of Obama - Steve Moore, Washington Times
After You Paid Tab, Obama Wants to Hit You w/Tab - Tony Sayegh, RCM
We Need to Get Better About Selling Trade - Levy & McDaniel, Investor's

[arthurus]

Brexit is perhaps the dreaded “Black Swan?”

[Caipirabob]

If the economy was so fragile, why should Britain be compelled to participate and subsidize such a failed model?

[wastoute]

Because when Socialism fails it ain’t the fault of Socialism, it is always those pesky folks who need to be compelled. When that fails they need to be re educated. When that fails they need to be killed. When that fails...

Socialism never fails. Ask any Socialist.

[DCBryan1]

Thinking of buying KO, PM, D, GE, T, VZ, DOW, CSCO, for equities today.

Have any good suggestions on preferred stocks?

[sarasota]

Just the beginning as everyone panics?

[Buckeye McFrog]

They were in a bind long before this.

[tbw2]

Peter Drucker wrote in an 1990s update of his 1960s classic “Managing in a time of great change” that it was clear federal spending didn’t solve recessions, and borrowing to create spending didn’t help, either.
I think no one else has read the book, though the 2010s have proven that all the more true.

[cgbg]

The elites continue to rule—you want to buy the military industrial complex—Boeing, Lockheed etc.

Seriously—stick to the casino if you want to gamble.

[citizen]

This one little vote, unimplemented mind you, shows us - again - what a shaky house of cards the whole EU and EU financial system is.
Ditto the unsound financials in Greece and Portugal and Ireland and Spain and Italy and ...
I think Poland will vote to abandon the (P)EU quickly, within less than a year.