Brexit causes massive crash in global markets

Great Britain's vote to leave the European Union has resulted in more than 2 trillion dollars in stock losses around the world and currencies taking a big hit as well.


The pound fell as much as 10 percent against the dollar to touch levels last seen in 1985, on fears the decision could hit investment in the world's fifth-largest economy, threaten London's role as a global financial capital and usher in months of political uncertainty. The euro slid 3 percent.

World stocks saw more than $2 trillion wiped off their value, with indices across Europe heading for their sharpest one-day drops ever. Britain's big banks took a $100 billion battering, with Lloyds (LLOY.L), Barclays (BARC.L) and RBS (RBS.L) plunging as much as 30 percent at one point. [MKTS/GLOB]

The United Kingdom itself could now break apart, with the leader of Scotland - where nearly two-thirds of voters wanted to stay in the EU - saying a new referendum on independence from the rest of Britain was "highly likely".

An emotional Cameron, who led the "Remain" campaign to defeat, losing the gamble he took when he called the referendum three years ago, said he would leave office by October.

"The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction," he said in a televised address outside his residence.

"I do not think it would be right for me to be the captain that steers our country to its next destination," he added, choking back tears before walking back through 10 Downing Street's black door with his arm around his wife Samantha.

Quitting the EU could cost Britain access to the EU's trade barrier-free single market and means it must seek new trade accords with countries around the world. A poll of economists by Reuters predicted Britain was likelier than not to fall into recession in the coming year.

The EU for its part will be economically and politically damaged, facing the departure of a member with its biggest financial center, a U.N. Security Council veto, a powerful army and nuclear weapons. In one go, the bloc will lose around a sixth of its economic output.

Central banks around the world moved quickly to shore up their national currencies while issuing reassuring statements to calm the jittery markets.

This downturn was expected, but perhaps it is surprising that even though most of the jitters about Brexit were thought to have been wrung out of the markets in recent weeks, the extent of the losses was worrying.  Economists predicted before the vote that there was a 40% chance of Great Britain going into recession this year.  But after today's market bloodletting, the chances now may be closer to 50-50.

Short-term, there will be dislocations, job losses, and a a roller-coaster stock market in Europe.  But long-term, the picture could be a lot brighter for Great Britain.  Most of the individual trade agreements that Britain will sign are likely to be mutually beneficial to both parties, leading to a further weakening of the concept of a European Union.

While the future is clouded with uncertainty, the British people have spoken.  They like the concept of an independent Great Britain with unique culture, traditions, and history.  But it won't lessen the pressure from recent immigrants to adapt to their ways and reject the dominant culture.  Great Britain will be making compromises with Muslim immigrants until they realize that a vote for England to remain England means nothing without fundamental changes in their assimilation policies.

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