By Carolyn PrevitiDespite objections from Scotland and Northern Ireland, the United Kingdom voted on June 23 to exit the European Union (EU). This political action has been dubbed “Brexit,” which is short for British exit. The vote gave British leaders the go-ahead to negotiate leaving the EU, a partnership of 28 nations that allowed for the creation of one single, European economic marketplace. By lessening regulations on the buying, selling, and movement of goods, the alliance encourages trade between member countries. For example, the 28 member nations agree to cut back on customs, tariffs, and border control within the EU. In exchange for these rights, each nation is required to pay membership fees. Though the UK’s currency (the pound) differs from that of other nations in the EU (those countries using the Euro are collectively known as the ‘Eurozone’), as many use the Euro, the ease of trade was greatly increased by the UK’s position in the EU. However, the lack of border controls, and therefore unrestrictive immigration, and Britain’s disproportionate share of EU membership fees were major factors that lead to the Brexit vote. Politically, the EU was originally created in the hopes of discouraging war and substantial disagreements, among other reasons, amongst member nations. The June referendum signaled a shift in political and economic ties between the UK and other EU nations. When the UK negotiates the Brexit, it will most likely face increased trade regulations with the rest of Europe. The referendum will likely also increase border control for people who relocate from other European nations to the UK for employment. Because the EU was founded on mutual agreement, the vote has signaled to nations outside the EU that the alliance in Europe is unstable. In response, the UK and other European investors have increased the buying of relatively safe investments in the U.S. government. This surge in Treasury Bill investments has in turn lowered American mortgage rates to 3.41%, a three-year low. Additionally, the number of filings for unemployment has decreased. Both reports point to a future increase in spending, as more Americans find themselves employed with lower monthly mortgage payments. Thus, in the short-term, American households have seen positive changes as a result of the Brexit. The long-term implications of this major shift, however, remain to be seen. As American consumers face positive short-term results and unclear long-term outcomes, the Brexit’s impact on U.S. businesses is demonstrated in the Labor Department’s June employment outlook. Increased hiring indicates the Brexit has encouraged, or at least failed to discourage, business confidence in America. So what does the Brexit mean to Americans? For now it’s lower mortgage rates and increased US employment. For the future, only time will tell.
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