Friday, June 24, 2016

#Brexit: A Referendum on Elites and Immigration

At the headline and on Twitter, that pithy little snippet comes closest to nailing what happened.

At Politico, "British voters unleash a trans-Atlantic tsunami: And it's headed for American shores":

LONDON — British voters didn’t just shock the world and the financial markets by voting to leave the European Union hours ago: They also ignored President Barack Obama, handed Hillary Clinton a potential economic burden and injected new energy into the populist currents roiling politics on both sides of the Atlantic.

The surprise 52 percent - 48 percent result in favor of leaving the European Union — which British networks projected just before 5 a.m. local time — came after a tense night of vote-counting throughout the United Kingdom. British Prime Minister David Cameron later announced he's resigning, citing a need for "fresh leadership." The British pound rose and fell rapidly as the anti-EU “Leave” movement piled up big margins in the northeast, swamping wins by the “Remain” camp in London, Birmingham and Scotland.

In addition to driving down the pound by nearly 10 percent, the vote slammed global markets, with shares in Asia down well over 3 percent in early trading. Futures markets also indicated a big swoon coming on Wall Street early Friday morning with shares expected to drop more than 3 percent. That would amount to a Dow drop of close to 600 points, a plunge frighteningly reminiscent of the 2008 financial crisis.

Market analysts struggled overnight to reckon with the potential global impact of the Brexit vote. "Massive institutional uncertainty is now being superimposed on economic fragility and financial fluidity," said Mohamed A. El-Erian, chief economic adviser at Allianz.

Central bankers and heads of state around the world sought to calm the financial markets and limit the damage from the vote on Friday morning.

But make no mistake: A Brexit represents nothing less than the partial splintering of the world’s largest political union and trading bloc — an $18 trillion economy. Many fear that other European countries will now hold their own exit referendums, leading to a chain reaction that will reverberate across the Atlantic. The Brexit vote could also break apart the UK, scramble transatlantic political unity amid growing tensions with Russia, and complicate U.S. trade ties.

It will almost certainly hit the U.S. economy, warned Harvard professor and former Treasury Secretary Lawrence Summers.
"The economy is more fragile to a negative shock than at anytime since the second World War," Summers told POLITICO. "Always before when had a downturn there was room for monetary policy action to counteract that. Today there is essentially no such room."

In addition to volatility hitting U.S. markets, the surprise win for the Leave side is likely to ripple through the 2016 presidential campaign....

In addition to volatility hitting U.S. markets, the surprise win for the Leave side is likely to ripple through the 2016 presidential campaign. The Brexit vote became largely a referendum on elites and immigration, the same themes likely Republican nominee Donald Trump has put at the center of his bid for the White House.

Trump, who spoke favorably of Brexit, applauded the U.K.'s decision to leave the EU Friday.

The result could also suggest that polls showing a lead for Clinton are underestimating the extent to which voters across Western democracies are fed up with career politicians and concerned about Islamic terrorism and immigration. UK polls and online betting markets heading into the Brexit vote appeared to show a small but solid leave for Remain, similar to the leads Clinton holds in most U.S. surveys.

"Polls consistently underestimating right-wing support," Weekly Standard editor BIll Kristol tweeted. "Cameron & Bibi, now Brexit. So if polls show Clinton up 5, could Trump be even?"

The larger issue for the Clinton campaign will be potential economic fallout from the UK's decision to leave the EU. Indeed, if the apocalytpic economic predictions leading up to Thursday’s vote turn out to be accurate, get ready for a Brexit-fueled economic slowdown that could bleed into the presidential race...
Still more.