It is no exaggeration to say that the world economy has just entered into a new age of deep uncertainty. Britain’s decision to quit Europe has sent profound shockwaves around the world at a very bad moment. The world economy is hardly out of one global financial crisis and the odds are surging that another worldwide crash is about to begin.
Britain’s Brexit vote has far-reaching consequences with the potential to throw the world into even bigger economic chaos and disorder than the 2008 global financial crisis. The catastrophic collapse in the UK pound, free-falling global equities and a dramatic surge in market volatility is just the start of it. The lid has been lifted off Pandora’s Box of morbid fear. There is no end to the list of deep concerns in investors’ minds, bringing risk aversion and market panic to boiling point.
Global financial confidence is a fragile house of cards at the moment. Global policymakers have worked courageously and have been extremely inventive to keep the forces of global contagion at bay over the last seven years. Zero interest rates, creative monetary engineering and lashings of QE cash have held the line, but there is precious little left in the central banks’ kitty to deal with what may come next. The next crisis could be the one that breaks the central banks.
There is precious little left in the central banks’ kitty to deal with what may come next.