angus
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« Reply #5 on: June 25, 2016, 02:42:36 PM » |
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Yes, it is symbolic. According to the IMF, they have been pretty close for at least 40 years. Here are the 2015 numbers for the six highest aggregate GDP countries, in millions of US dollars.
United States 17,947,000
China 10,982,829
Japan 4,123,258
Germany 3,357,614
United Kingdom 2,849,345
France 2,421,560
France was last ahead of UK on the IMF list in 2012. There were a few instances of back and forth before then as well. Also, since their populations are also similar, they have similar per-capita gdp, and they have had for quite a long time.
The fact that "France has overtaken the UK to become the world's fifth-largest economy" is something you could have reported multiple times, and the next year you could report that "UK has overtaken France..." and they would continue to do so regardless of this vote. More interesting is to compare the value of the pound to the dollar or other currencies. In that aspect, there's a very clear and obvious effect of Thursday's decision. For a long time, it took about $1.50 to buy a pound. Now it takes about $1.36. That's a nine percent drop against the dollar. Oddly, the euro did not take a big hit. The previous month average value of the euro against the dollar was $1.12. Today it is $1.11. I guess the public is confident about the euro even after the UK vote to leave the union. This is a bit surprising, especially in light of all the articles written in the past two days about the probably demise, or weakening, of the European Union, but perhaps because it is so dependent upon the financial sector that the effects are larger for UK than for the euro zone.
How does one figure out whether the dollar has taken a hit? The only other big player against which to compare it is China, but they manipulate their currency such that the comparison is invalid, although to be fair they did allow the Yuan to fall about 8/10ths of one percent against the dollar after Thursday's vote. I guess you could look at the Dow Jones Industrial Average, but it only opened for one day after the results were announced so there's not much to go on. At the close of business on that day, the DJIA closed at 3.4% lower than it did on the previous day, which is significant.
We might have a better barometer when the Federal Reserve Board meets on July 26 of this year. Originally there was talk of raising the bank rate, for which I was thankful. Now, there are a number of writers speculating that the fed might actually lower the rate this year. There was also an article in Fortune this morning quoting the chief economist of DeutscheBank as saying that the fed will neither raise nor lower rates at its next meeting. I guess we'll see.
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