Brexit Impact on US Economy

What is Brexit?  It is an abbreviation for "British Exit", which refers to the June 23, 2016 referendum by British voters to exit the European Union. Britain has already opted out of the EU's monetary union which means that they would be using pounds instead of Euro.

Per Stephen Pounds article published in Foxbusiness.com, June 29, 2016, he said that Chuck Fulkerson, director of education at Online Trading Academy, stated that it will have a short term impact on US economy. But Alan MacEachin, Navy Federal Credit Union economist stated otherwise.

"There could be a massive capital flight to safety, which implies a significant inflow of funds into the US Treasury securities which could drive interest rates lower in the US and also boost the value of the dollar", MacEachin says.

Patrick Gillespie of CNNMoney, June 24, 2016 stated that the chief of the US central bank and top monetary policy setting official, Janet Yellen, forewarned earlier this week that Brexit "wold negatively affect financial conditions and the US economy.

Volatile markets can slow down the US economy.  American consumers make up majority of the US economic activities.  If they don't spend, the economy will not grow.  Their spending usually depends on where the economy of their country is going.

It can also triggers a strong dollar.  A strong dollar will be good for American traveler since it will be a cheaper vacation for them but bad for businesses that sell products overseas. It makes their products more expensive overseas and less attractive to consumers.

In December, Federal Reserves projected that it will raise rates four times this year which will be a strong sign that the US economy has recovered from the recession.  But by June, several of their committee members were calling only one rate hike because of weak growth and slowing job gains.  As rates fall, it will be easier and cheaper for homebuyer to finance their home purchase. Steve Rick, chief economist for CUNA Mutual group said, " This would create yet another mini refinance mortgage boom at financial institutions as homeowners rush to lock in near historic low interest rates." This will be good for real estate industry.