There is a great deal of distress in the wake of Britain's decision to exit the EU. The pound has fallen to a 31 year low against the greenback, over $US2 trillion has been 'wiped off' extremely inflated global stock markets, and so on.
Various shocked commentators — including George Soros, one of the main progenitors of financial market attacks on currencies and governments, which became the motive for forming the euro — are forecasting the demise of the Union. That is far from inevitable.
What seems to have been lost in all this noise is that Britain has a separate currency and an independent financial system. Had Greece decided to exit the EU last year the consequences would have been far greater than Britain's exit, because Greece uses the euro as its currency.
Britain has the pound, which means that it has an independent monetary regime. British interest rates are not set in Brussels, they are set by the Bank of England. And it has an independent fiscal and budgetary system, to the extent that it is possible.
The British government has been imposing 'austerity' measures because the government subscribes to the neoliberal orthodoxy, not because it is being told to do so by Brussels, or the Germans.
To see the difference it is worth reading Yanis Varoufakis' description of his 'negotiations' with the German finance minister Wolfgang Schäuble. They were not negotiations at all. Varoufakis had prepared what he thought were intelligent proposals to deal with Greece's debt. He was told in no uncertain terms what would happen; there was no attempt at reasoned debate.
As he commented later, 'we don't even agree to disagree'. The need to protect German and French bank loans was far more important than secondary concerns like respect for the Greek nation, or Greek pensions, or the nation's social fabric.
It is the kind of well dressed thuggery that characterises the EU elite and will continue to do so. Calls for the EU to 'reform' are almost certainly fanciful. It is run for the banks and powerful corporations. Many of the economic losers are starting to work that out and are voting accordingly.
"Claims that Britain will be locked out of the world's largest market are fanciful. Britain and the EU need each other."
Britain, however, experienced none of that financial pressure. Its exit will only have an economic effect, especially on trade, and on the movement of people. Television shows featuring Britons relocating in their retirement in southern Europe will almost certainly be shelved.
Many of the ensuing gaps will be dealt with by establishing treaties, which will probably resemble what was already there. There will be an effect on industries in the UK that have received subsidies from the EU. But both Britain and the EU need each other. The EU accounts for half Britain's trade, and a substantial proportion of Europe's trade is with Britain. Claims that Britain will be locked out of the world's largest market are fanciful.
Likewise, the European banks that have their headquarters in London will not be relocating. The capital markets are global and will remain so; the banks will simply do a deal to continue business as usual. Neither are tax differences between Britain and the EU countries much of an issue. Most large corporations pay negligible amounts of tax anyway.
The development to watch is how countries in the Union that have the euro as their currency will react. Greece decided to stay and, even if it had left, the country was probably not big enough to have imperilled the EU itself. But if Spain, Italy or the Netherlands start their own version of an exit the currency and the Union will collapse.
This would be a time when journalists' various overused adjectives — 'seismic', 'cataclysmic' etc. — might suit. The euro was established when traders, especially Soros, over-rode the central banks of Spain and England and created massive currency volatility. The reasoning was that a united currency could withstand the pressure of attacks by Soros clones. That proved to be true, although there was still a great deal of currency volatility that was unconnected to the economic behaviour. The cross rate between the US dollar and euro, for example, has swung in a wide arc since the euro's establishment and it rarely has had much to do with underlying economic performance.
The most important financial issue, the 'big game' as it were, is the dominance of the US dollar. This was not directly threatened by the euro because over four fifths of the euro trade has the US dollar on the other side. But if a third major currency emerges, notably the Chinese yuan (which at the moment is fixed to the US dollar), then the era of American dominance of the global financial markets would be threatened. If that happens the feverish journalistic adjectives would actually be appropriate.
David James is the managing editor of businessadvantagepng.com