One of the triggers for the 'Leave' vote in the UK had been images such as this showing migrants near Calais, France ready to bolt across the 'Chunnel" to England.
Back in July, 1978, on my first trip to the UK and London (where we stayed with a friend of Janice's) the character of "old England" was ubiquitous. The beauty of the London transport system was that one could take the "underground" wherever he or she chose, from Piccadilly Circus, to Earl's Court (where we watched a medieval jousting match) to the Royal Albert Hall where we were privileged to see (and hear!) a fantastic performance of Tchaikovsky's 1812 Overture. Along the way foreign tongues were seldom heard, either in the tube stations or the venues themselves.
There were no mullahs standing in any area we went (and we covered a lot of London) ordering women to shield their faces with burkas or whatever. The only terror incidents were carried out by the IRA, including one bombing which killed several London police and some of their horses.
Now, flash almost forty years later and all that's changed, the whole UK landscape. Migrants have been pouring in from many nations - particularly Middle Eastern and African - for decades, and the character of the place has altered. One will now often hear as many foreign tongues as native Brit (whether Cockney, Yorkie, or whatever other dialect).
This altered character of the nation, coupled with loss of what is perceived as a British identity since the Maastricht Treaty - otherwise known as the 'Treaty to Integrate Europe' - ultimately drove the "Leave" majority yesterday (winning by 52% to 48% in the "Brexit" vote). Despite London and Scotland voting to remain, most of the rest of the UK and especially rural or working class areas saw things differently.
Many on the Right, including the odious Nigel Farage (who use scare tactics such as thousands streaming through Slovenia) to depict a direct migrant threat to the UK, are now cheering about "Independence Day". But as Richard Haas pointed out on MSNBC this morning, it is more akin to dissolution day, given Ireland and Scotland (which voted remain) will now themselves likely call referenda to leave England to itself - dissolving the UK.
Despite the Farage exaggerations, it is true that migrants have been making their way into the UK in greater numbers, often gathering near Calais in France before attempting to bolt across the Channel tunnel otherwise known as the "chunnel". The spectacle of this happening, added to the existing tensions with mainly Islamic immigrants (recall one of them running amok and chopping off a head barely two years ago) has enraged many to the point they'd had enough.
Economics was the other rallying point though not as passionately framed as arguments from the anti-migrant segment. Those on this side were basically tired of Brussels calling the shots regarding trade despite the fact the Brits were allowed to keep their own currency (the pound) as opposed to using the euro. The econ leavers insisted they would carry on just fine, thanks, and no need to worry about repercussions.
But that may be akin to whistling in the dark as the wolf comes to the door. The fact is the UK had been sending 44 percent of all its exports to the single EU market. That can simply no longer happen any longer since the UK will not have that privileged advantage. They will now have to "go to the end of the line". German Finance Minister Wolfgang Schรคuble put it bluntly barely three days ago in The Financial Times: "In is in and out is out". Meaning if the UK votes 'out', they are out of the EU market - no special benefits or advantages conferred. The extreme case? The EU, if it really wanted to be punitive, could force the UK to make separate deals with each of the 27 remaining EU nations.
This means exports will likely shrink and drastically, with whatever factories left shuttered and their workers laid off. This is what happens when your biggest customer is now effectively taken away, or at least its impact drastically reduced. It will be even worse if Ireland and Scotland themselves vote to leave England al alone, and remain with the EU. Then England will truly be "little England" with an emphasis on little.
This is what caused the global markets to react badly early this morning, with the German DAX (.GDAX) dropping 731 points and the Nikkei Index more than 1286. The DOW is expected to take a dump too, and I'd be amazed if is less than 700 points drop. Further, the turmoil could go on for months as the UK attempts to sort out its new position, and get a new government (David Cameron is now out as PM having called the Brexit vote)
In the end, the vote for Brexit means chaos in the short and possibly long term. It means European issues will be roiled and possibly other EU members now also emboldened to try to leave. We already saw last year the fomenting for "Grexit" or Greek exit, but the Greeks eventually came to their senses and realized they might be better in than out, even with a lot of debt. ('Out' and they likely wouldn't even be able to muster a loan)
For your 401k, as financial guest Melanie Hobson noted yesterday on CBS Early show, it will mean a lot of volatility. I myself expect to see massive dives in the stock market in the coming weeks until the issues are resolved to the markets' liking. Remember, that includes all the markets, not just the U.S. ones. Keep in mind also that Britain's economy is the 5th largest in the world - meaning a "sneeze" in the UK (as with Brexit fallout) could trigger pneumonia in some places. Pneumonia there (in the UK) could trigger....well, you don't want to know!
Anthony Mason, covering the Wall Street markets opening this morning stated a "pretty bleak opening is expected", which may be an understatement. The main barometer to watch, I think, is the extent of the flight to safety. Already we're hearing about foreigners buying up treasurys which will have implications for the bond markets, and it also could for money markets.
At the very least, given the low global GDP of barely 3%, the Brexit vote likely brings interest rates down further, and slows growth significantly. (Some even warn the UK could go into recession, but we will have to see what happens in any Scottish or Irish separate referenda to leave the UK.)
On the positive side, central banks are still propping up the markets around the world with their next to zero interest rates thereby providing a "balm" as the turmoil continues over the next few years. If nothing else, Janet Yellen will plausibly assert: "Well, because of the economic uncertainties inherent in the Brexit vote, no more interest rate increases for at least 3 years". This will make Wall Street's day and so provide a counter force to the Brexit negative influences.
So those with 401ks, while they will sustain some stomach-churning days, shouldn't go into hysterics. Yet.....
See also the related articles here:
http://www.theguardian.com/us
See also:
http://www.ft.com/cms/s/0/bbd593ee-39d4-11e6-9a05-82a9b15a8ee7.html#axzz4CWIGLKRv
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