The reason why the Britons might enter a recession because of the Brexit.

in #news8 years ago (edited)

Introduction
The Brexit is finally going to happen (I'm not a supporter by the way). Therese may has announced that article 50 which will exclude Britain from the European union will be triggered next week 29th march. After the activation there's no way back and the Brits will start negotiations for the upcoming 2 years to discuss new trade deals and adapt to the new changes.

Why the Britons might enter a recession
The reason being is because of the Brexit, their national currency the pound/sterling has lost around 17% of its value. That means that for each 100 pounds that a Brit had in its savings account he has lost 17 pounds from one moment to another. We can clearly say that this has a huge impact on the purchasing power of an average Brit. You might think that this doesn't have an impact on the domestic market because everyone is paying with sterling anyway but it does indirectly.

effect on imports
When your national currency loses value it means that it will be more expensive to import goods from countries with other currencies. Take an American company for instance. tvc_8092c22bb8793bd207a2ce5a8e03e2ad.png
SOURCE: https://www.investing.com/currencies/gbp-usd-chart

They sell their goods to the Britons and the Britons have to exchange their pounds for dollars to buy those goods but since the pound has lost value against the dollar they will have to pay a greater price to buy those goods.

example:
-initially: they imported an iphone for 500 pounds
-Now: they import iphones for 600 pounds a piece.

effect on the domestic market
Because of an increase in prices of imports, consumer goods that are sold in the domestic market are also increasing in price which makes inflation rise out of a healthy interval. As a result this will make a cut in the purchasing power of consumers and that will slow down consumer spending. A slowdown in consumer spending will cause a slowdown in economic activity and this could possibly lead the Uk into a recession.

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Also feel free to reply what you think about this whole topic.

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It could probably be slightly influenced by the brexit for a short time. Bitcoin is a rollercoaster ride all the way.