Jun 24, 2016
Britain says goodbye to the European Union
By Andrew Bell
“We have fought against the multinationals, we have fought against the big merchant banks, we have fought against big politics, we have fought against lies, corruption and deceit” – Nigel Farage, leader of the U.K. Independence Party (UKIP)
On this day in history, Britons are coming to terms with their decision to quit the European Union – a move that The Times says will make the country “poorer and more unequal.”
U.K. stocks have dropped almost five per cent (although they’ve recovered from an earlier slide of nearly nine per cent) and the pound touched US$1.3229, the lowest since the mid-1980s. Investors abandoned British banks, sending Lloyds and Barclays down as much as 30 per cent.
The surprising vote for Brexit, which for many observers echoes the rise of populist Donald Trump, looks this morning like a frustrated reaction to years of slow economic growth despite unprecedented lashings of stimulus in the form of low interest rates.
As Fortune puts it, “the success of these campaigns reflects a global political shift that is much bigger than Brexit or the U.S. elections, and it is driven in large part by economics. A glut of global resources has rung the death knell for traditional business cycles in the developed world, creating fertile ground for populists across Europe and the U.S. who are angry about rising inequality and are anti-globalization, anti-immigrant and anti-elite.”
The left-wing Guardian derided the victory speech by UKIP’s Mr. Farage, implying clearly that it contained notes of fascism. “Head rocking rhythmically back and forth as though banging in a nail, he spoke the language of new beginnings… The dawn is golden and tomorrow belongs to him.”
Our coverage on BNN today is Brexit wall to wall. Our guests include Jeff Rosenberg, chief bond strategist at investment giant BlackRock, at 2:20 p.m. ET. He must navigate a shaken fixed income market today in which Japanese bonds have crashed deeper into negative yields as investors seek havens. Investors, oddly, have been grabbing British bonds too, sending yields on benchmark 10 years to a record low of 1.02 per cent. That’s despite confirmation from S&P that a rating cut is likely. Gold has topped US$1,316 to hit two-year highs.
“Some market and economic volatility can be expected,” says Bank of England governor Mark Carney.
Well, that’s one consolation for the Brits. They’ve got an ice-cool Canadian at the helm of the monetary system as their sceptered isle embarks on its next chapter.
