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Here’s everything you need to know about 'Brexit'

Publish date: Thu, 16 Jun 2016, 11:11 AM
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You may not have to worry about this for long. But through June 23, investors should devote a share of their attention to the European parlor game known as “Brexit.”
On June 23, British citizens will vote on one basic question: Should the United Kingdom remain in the European Union, or leave? If they vote to stay, global markets will breathe a sigh of relief and go back to business as usual. But if BRits vote toEXIT the EU – Brexit, get it? – it will trigger a realignment of Europe’s financial sector and cause the kind of uncertainty that makes markets manic.
The European Union is a group of 28 countries that have agreed, over time, to abide by certain rules that supercede each nation’s own rules and laws. This is mainly to facilitate trade and commerce in ways that make each signatory country better off. In principle, the EU supports “four freedoms”—the free flow of goods, services, workers and capital among all 28 countries. There’s no analog in the United States because all of those things can already move unimpeded from state to state.
The EU is different from the euro zone, which is a group of 18 countries that have adopted the euro as their currency, including Germany, France, Spain and Italy. The UK does not use the euro, nor do other EU countries such as Sweden, Poland or Hungary. Nations can still benefit from membership in the EU while retaining their own currencies.

Rising immigration levels

European governance can be arcane, but the main reason for the Brexit vote will be familiar to many Americans: concern about immigration. EU rules allow any citizen of an EU country to live in any other  EU country and enjoy most privileges of citizenship, including social services. In recent years, there’s been a sharp jump in the number of people coming to the UK from other EU nations, including newer entrants such as Romania and Bulgaria. Some native Brits feel immigrants are collecting an unfairly large share of welfare payments and child benefit payments, which has become a touchy political issue, much as it has here in the United States.
While running for reelection in 2015, Prime Minister David Cameron vowed to cut the net inflow of people to the UK to less than 100,000 a year. Last year, however, that number hit 330,000. Cameron, who staunchly opposes Brexit, also made a campaign promise to hold a referendum on the matter, which is what is happening on June 23.
Polls suggest the vote will be close, but polls have been wrong before. When Scottish citizens voted on whether to secede from the UK in 2014, many polls forecast a tossup and a few predicted Scottish secession. But Scots ended up voting 55% to 45% to remain part of the UK. Pollsters point out that voters tend to become more conservative, and side with the status quo, as voting on a controversial topic nears.
How will markets react?
If Brits vote to stay in the EU, markets could rally, since they’ve been falling on concern about what sort of turmoil a Brexit vote could unleash. The UK might stil try to renegotiate certain agreements with the EU, but markets would barely care.
The troubling scenario is a vote for the UK to leave the European Union, which would cause all kinds of unpredictable fallout. An actual departure from the EU would take a minimum of two years, with procedures worked out slowly. The impact on the US economy would be minimal, except for financial markets, which could stagger while investors try to sort out the implications. The dollar would probably strengthen as investors bought US securities as a hedge against European turbulence.
Once out of the EU, the UK would no longer benefit from free-trade provisions among EU countries or with other nations governed by EU deals. That means it could either negotiate trade deals one-by-one with its European neighbors and other countries, including the US, or do without trade deals. That's what President Obama was talking about when he said Britain would move to the "back of the line" if it left the EU. There would also be strong pressure from some domestic industries, such as steel, to impose tariffs on imports, which would push up prices in the UK and invite other countries to retaliate on imports from the UK. And trade wars rarely make everybody better off.
London is a world hub for finance, and there would be immediate pressure on big European banks to move investment banking, trading operations and other activities out of the UK and into other countries fully integrated with the EU. This might actually benefit financial hubs such as New York, which could gain a competitive edge if Europe’s financial capital splinters into several smaller ones.
Other EU nations, which have their own anti-immigration political factions to contend with, would probably make Brexit painful for the UK. “This will not be an amicable divorce,” Jacob Kirkegaard of the Peterson Institute for International Economic said at a recent conference. “The probability of punitive political actions by the rest of the EU is a very strong base case,” It could become much harder for Brits to work and live legally in other parts of Europe, for instance. Brits who retire in sunny locales like Spain or Cyprus -- the European equivalents of Florida or Arizona -- might find they’re no longer able to receive government-provided healthcare in their new locales, a perk of EU membership.
The consequences of Brexit would land a lot harder on the UK than on the rest of the world, however. “I have trouble fully understanding why some of the major economies think this is a systemic risk,” says Adam Posen of the Peterson Institute. Even in the worst-case scenario, banks, multinational companies and government regulators would have plenty of time to adjust. The Federal Reserve and other central banks would be able to intervene, if necessary, to keep markets stable.
If the Scottish vote is any guide, none of that will happen. Even the Greek financial meltdown, caused by profound economic problems, got resolved last year after familiar down-to-the-wire wrangling. So the 2016 Brexit vote may turn out to be nothing more than Europe’s annual scare. Just be ready in case this time, it’s real.
Source : Yahoo Finance


4 people like this. Showing 15 of 15 comments


As normal. No big deal. But some people take advantages.

2016-06-16 11:39

Jonathan Keung

it's still dollar and sense. Britain contributed close to 10 billion yearly to the EU ( behind Germany & France ) barely received less than < 10 billion between 2010- 2104. If a Yes vote @ remain. Britain would renegiotiate certain monetary terms

2016-06-16 11:50


end of world? if not...then continue buy stock

2016-06-16 12:58

Jonathan Keung

Cameroon promises to cap immigration at 100K . Now latest figs shows 300 K migrated to England. British are snobbish they think still they are the best & brightest. Just like football they think (in their mindset ) english football is the best. ha-ha-ha

2016-06-16 14:44


good article on brexit!

2016-06-16 15:05


in and put,just like children playing with sand

2016-06-16 15:14


Yup good article

2016-06-16 19:19


Had a dinner with a friend who came back from the UK for a visit. Shocked to learn of things under EU. Any EU citizen can go to the UK (or any other EU country), stay, get a job, unemployment benefit if no job, child care assist, etc. Good mah to help all the citizens in EU. On paper, yes. But in reality, it is distorted and abused. Reported a Greece man went to the UK, got child care assist, unemployment benefit etc. Guess what? He returned to Greece and used that money to renovate his house in Greece. I think that was reported in the newspaper in the UK.

If I were to vote, I will vote for exit! Why? Giving too much of the country away in the name of union, helping other countries.

Imagine that here in Asean. Anyone in ASEAN can go anywhere, settle down, get benefits, etc. ASEAN will be in a BIG mess in less than a year!

Please don't point a finger at me saying I am a heartless person with my views above. Heartless or realistic person?

2016-06-16 21:17


Please do watch the full movie on the real issues of BREXIT below.

2016-06-17 00:37


Won't happen, especially when employees received warning letter from employers like Unilever, Airbus etc...that they might lose their job if Brexit happen.

2016-06-17 12:51


This kind political agenda is merely intended creating panic in the market. Better spend more time focus in scouting better companies rather than listening to Brexit, Grexit....

2016-06-17 13:01


Even if majority of British voters voted for Brexit, will the upcoming referendum result for Brexit be legally binding on the British Parliament? If it is not legally binding then nothing will will be business as usual.

2016-06-17 15:22


British Parliament doesn't actually have to bring Britain out of the EU if the public votes for it.

That is because the result of June 23 referendum on Britain's EU membership is not legally binding. Instead, it is merely advisory, and, in theory, could be totally ignored by UK government.

There is no legal provision included in the EU referendum legislation that requires UK Parliament to act in accordance with the outcome of the referendum.

If the public votes for a Brexit on June 23rd, it will be purely a matter of parliamentary politics.

The British government could decide to put the matter to parliament and then hope to win the vote. In the scenario of Britain's EU membership being put to a Westminster vote, barring no dramatic change in allegiances, it is likely that MPs would vote to keep the country in the 28-nation bloc.

This is because the vast majority of the 650 MPs identify are Europhiles and would likely support a motion position to protect Britain' place in the EU.

2016-06-17 16:06


Yup this time is REAL

2016-06-24 14:05


Sama dengan Polisi Ekonomi Baru yang sudah lama dilaksanakan di Tanah Kankong land di mana Rob Paul pay Peter.

2016-06-24 16:42

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