Surprise, surprise. Once more, Britain’s long national nightmare gets extended.
The Brexit deadline has been pushed back to Jan. 31. Prime Minister Boris Johnson has called for an election on Dec. 12. And anyone who thinks they have any clarity about what’s going to happen is deluding themselves.
Today, we’re going to take a quick look through all the goings-on… and what may come to pass next.
Why, you ask? After all — isn’t this more of a subject for mainstream news?
Well, yes — Brexit itself doesn’t belong in the unconventional investing world.
But the fallout from Brexit? That absolutely does. And it’s something most stories, busy breathlessly reporting the play-by-play of this political psychodrama, are completely missing.
So let’s rectify that. To do so, we need to go over a few of the facts on the ground — as they’re ever changing.
What’s Going on, Anyway?
To start, Boris Johnson was able to get a Brexit agreement hammered out with the EU. It looks an awful lot like the agreement former PM Theresa May negotiated — with a little more give on some of the provisions concerning Northern Ireland.
We don’t need to go into the details — the important thing is Johnson got an agreement to bring to Parliament.
The problem is he didn’t give Parliament enough time to review the deal. So the British legislature insisted on an extension — which Johnson reluctantly asked for, and got.
And yesterday, Parliament voted to have an early election on Dec. 12. But it’s quite likely no one will be happy with the outcome — just like after the last early election.
The Labour Party — the second-largest in Parliament — doesn’t look very good in the polls right now and could lose up to 10% of their seats.
The Conservative Party might gain seats… but they’d still most likely be well short of a majority. Even if you combine them with the Brexit Party when they enter Parliament.
Liberal Democrats — the fourth-largest party — may wind up gaining seats in an election. But the Lib Dems have taken on the mantle of being the anti-Brexit party, so they’re unlikely to do anything, which could make Brexit more likely.
The short and sweet of it — British politics is an absolute mess. And there’s no obvious way out of the quagmire. There were elections in 2017 that were supposed to clean things up… but they just further muddied the water. The election in December is likely to do the same.
All of which means we’re once again closing in on an indecisive Britain — with another deadline looming.
And at any point, any one of the 27 remaining EU countries can say “Enough!” and veto any more extensions.
In short — while an agreement could be reached in the next few months — a no-deal Brexit is again looking like the most likely outcome.
Oh, and here’s something no one is talking about…
Even the current Brexit agreement kicks the can down the road. It says that Britain will leave the EU, yes — but it will continue to operate under current rules and trade practices through the end of 2020. With further negotiations to determine what will happen after that.
It’s all one massive headache with no possible good ending.
Why does that matter to you? Glad you asked.
The Brexit Heard ’Round the World
During the Great Recession, between April 2008 and July 2009, U.K. GDP shrank 6%.
Estimates predict the fallout from Brexit could cause U.K. GDP to shrink 8% — almost overnight.
Creditors and ratings agencies like Moody’s are very worried about corporate debt defaults, as well as sovereign defaults by Britain on its government debt.
That’s not even counting the 39 billion euro fine for leaving the EU… PM Johnson has sworn the U.K. won’t pay — which every other country has said they’ll view as a default on sovereign debt.
And bear in mind — world economies were in good shape before the Great Recession. That’s not the case today.
Europe in particular is struggling. Germany — and many other European nations — is most likely already in recession. (It always takes a little while for official numbers to catch up to facts on the ground — recessions are usually declared six months to two years after they’ve started.)
Fully half of EU countries currently offer government bonds at negative interest rates, including cash-strapped Greece.
That’s a sign of deep, deep weakness. When interest rates have to go negative to get money moving and loans made, you know an economy is in trouble.
I believe the shock of Brexit — a no-deal Brexit or a softer version — is going to be enough to tip Europe into not just recession but a particularly painful and large economic contraction.
Which will ripple out into the world economy with huge speed.
People often forget — the U.S. is the world’s largest economy, with China not far behind. But taken as a collective, the EU slots right between the two.
There are a number of ways this could play out:
- We could see important businesses suddenly go belly up (with capital fleeing the U.K., British banks are prime candidates)
- We could see a wave of government defaults on loans — starting with the U.K., spreading to the least-healthy EU economies and then eventually taking down some large overextended countries no one is worried about yet (Germany, France — we’re looking at you)
- We could see world trade freeze up as the combination of U.S. trade wars and the U.K. losing all trade agreements creates an isolationist moment that shrinks imports and exports to the point of causing a worldwide recession
- Or we could find there are unforeseen crises to come out of this — that no one is prepared for.
Most likely, it will be some combination of the above.
What’s an Individual to Do?
Here’s the thing — no matter how this imbroglio plays out, it’s going to be bad. Even the best-case scenario is going to be worse than people are prepared for. All roads lead to one sort of ruin or another.
What you need to do — today — is prepare yourself for the coming storm.
In practical terms, that means you need to start putting more and more of your wealth into tangible assets — assets that will remain constant in value even as currencies and businesses are shedding it.
The best one out there? With a rich history of successfully serving as a backstop for wealth?
That’s easy — gold.
Silver works too — in fact, silver historically gains value faster than gold in emergencies (but also loses it faster during recoveries).
The important thing is to increase the precious metals in your portfolio. And start today.
Because sooner or later the world is going to wake up to this impending financial nightmare. When it does, precious metal values will skyrocket.
You want to get in before that happens. Which means well before the end of the year.
Editor-in-chief, Unconventional Wealth
P.S. The best way I know to buy physical gold and silver is through our partner company Hard Assets Alliance. Not only do they offer the best spot prices, make it simple to buy and sell (and store for free, if you so choose) and offer to insure your purchase at no extra cost. See what HAA can do for you here.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...