One benefit of the Brexit Americans will see. Photo via Flickr user Mark Rowland
On Thursday, the UK voted to leave the European Union, and on Friday everyone woke up with the kind of hungover fear that hits you when you're worried you've done something really bad.
Prime Minister David Cameron abruptly announced his resignation. World markets took a nosedive, the pound dropped in value, and the UK's credit outlook suffered. One voter who was interviewed on TV said he was "shocked" at the result and is now "quite worried"—even though he voted Leave. Nigel Farage, the most prominent Brexit advocate, admitted that the backbone of his entire campaign was a misrepresentation. Britons frantically googled "what is the EU," a few days too late. Donald Trump thought everything was going great.
To Americans who may not have been following the transatlantic drama all that closely, this brings up a lot of questions, including the most American one of all: Am I supposed to care about this?
For some insight into what the vote means for the common American, VICE called up Miron Woinicki, who is a professor of international economics at Vanderbilt University. He didn't seem to think we had much to worry about stateside, but we still talked about how Brexit will affect both our stock market and the price we pay for whiskey.
VICE: How is the Brexit going to affect financial markets over here? I know the Dow fell a lot because of this news.
Miron Woinicki: For the United States's financial markets the effects are going to be temporary, because we are going to be looking at the other markets to see how they are going to behave. There is no root cause for the United States to be concerned that the economy is going to be affected.
What will happen is that Britain will have to renegotiate many financial rules with the European Union, and that will affect the financial markets in the long run. The markets will settle in a few weeks, but the long-term consequences are going to have to do with US companies that operate in Britain, how they are going to be taxed. Nobody actually knows what is up the sleeves of the British legislators.
George Soros is expecting that the British pound will lose at least 15 percent of its value. And it is possible that the rate between the euro and the pound will be one to one.
A falling pound is going to be good for Americans going to the UK on vacation, but does it affect us in any other way?
Remember that British goods are going to be less expensive for Americans to buy. So in a sense it's a good thing for the British exporters.
What does Britain export, anyway?
What they manufacture is very high-end clothes and whiskey. They sell under the Scottish labels. All of the trade in commodities is evaluated in US dollars. But 50 percent of the British export goes to the European Union, about 10 percent of the imports that come to Britain come from the European Union. A lot of what they import is oil from the Middle East.
Now that cost of importation, when it comes to dollar price in pounds, will be a higher price for the British. So the British will actually get a beating on imports when the pound is devalued.
Also, remember that Britain has to renegotiate many of the financial services deals with the Europeans, and it's expected Europeans will try to discourage other countries from leaving the European Union. And they will be pretty tough negotiators. They will try to punish them. They are not going to be lenient with that.
How will they try to punish them?
More stringent regulations for the British. They will have to pay tariffs, they will have to pay much higher fees on financial transactions. The conversion costs on commissions will be much higher. There will be stricter regulations on British commodities entering the European market. will say, "OK, I will have to scrutinize your goods." So they will start dragging their feet and say, "OK, it appears to be a British product, but we will have to re-inspect it." And they will do it just to make a case, I am pretty sure about that.
How else would a damaged pound hurt Britain?
It's obvious that this currency is not going to be as fed by the investors. , they knew the financial liquidity flow between Europe and the British financial system would be very, very easy thanks to the European Union. Now if somebody who wants to place money—let's say Russian oligarchs—in British banks, that money will be in British pounds. And they are thinking, "Wait a moment, maybe now I will have a problem with converting this money into other currencies, maybe I will have to transfer my capital or make an investment from Britain, because I will come under greater scrutiny." So Britain is not going to be, as attractive, as sexy, a destination for the world's richest people.
You've said that Brexit won't affect the US much, so I'm assuming if Scotland decided to rejoin the EU independently, as some have suggested it won't matter at all to Americans. You mentioned whiskey prices before, will those at least change if that happens?
Whiskey prices will be cheaper. When the pound is going down in value in relative terms, the dollar will appreciate against the pound. So British goods will be less expensive. Scotland doesn't import anything to produce whiskey. So their prices at home will stay constant. If they imported something, like barrels, from the United States, it would make whiskey more expensive. And actually, they do import barrels from the US. But still, booze should be less expensive in the US.
This interview has been edited and condensed for clarity.
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