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British voters shocked the world and brought down the government of Prime Minister David Cameron by voting Thursday to leave the European Union in a result that will have a global impact.
Around 52 percent of British voters supported the so-called Brexit in a special referendum, sparking a selloff on Friday morning worldwide that saw markets quickly lose $2 billion. The German stock exchange lost 6 percent of its value, and French stocks fell by 8 percent. Stocks in three major banks — Barclays, Lloyds and RBS or Royal Bank of Scotland — lost 30 percent of their value.
Gold prices rose by 4.57 percent to $1,318.92 a troy ounce, and bitcoin prices shot up to $677 before falling to $644.24 in the hours after the vote. Stock, currency and commodity prices were affected because Britain’s currency, the pound sterling, lost 8.7 percent of its value after Brexit.
“This is an historic event and will not be swept under the rug very quickly,” Dominick Chirichella, a senior partner at the Energy Management Institute, told Reuters.
The effects of Brexit will be long-lasting. Here is what you should know:
1. Nobody knows how long it will take Britain to leave the EU. Article 50 of the Treaty on European Union outlines a procedure for leaving, but it provides no timeframe. Most experts think it will take Britain around two years to negotiate an exit from the EU, although it might take longer, The Independent reported. The process will take so long because the UK will have to negotiate a series of new treaties with the organization on a wide variety of issues. That means Britain will stay in the EU for at least two years, or longer.
2. Britain will still work with European countries. The United Kingdom will still conduct most of its trade with EU countries. It also will remain part of NATO, the organization responsible for Europe’s defense. A number of European nations, including Switzerland and Norway, are not part of the EU.
3. Brexit might cause the breakup of the United Kingdom. The Telegraph reported that 62 percent of Scottish voters and 55.7 percent of people in Northern Ireland voted to stay in the EU, while 53.2 percent of English voters and 51.7 percent of the people in Wales voted to leave. Scotland’s leader, First Minister Nicola Sturgeon, is already urging an independence referendum in her country, The Telegraph reported.
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“The vote across England and Wales was a rejection of the EU; and it was a sign of divergence between Scotland and large parts of the rest of the UK, and how we see our place in the rest of the world,” Sturgeon said.
Scottish voters rejected independence by a vote of 55-45 percent in 2014. Sturgeon wants another vote so Scotland can join the EU.
“Scotland will seek independence now,” Harry Potter creator J.K. Rowling, who lives in Scotland and opposed independence in 2014, tweeted.
4. The effects of the Brexit on the United States are unclear. Although pain is being felt on Wall Street, where the Dow Jones average fell by 500 points Friday morning, it is hard to tell if that is merely a correction or the beginning of a bear market.
Stocks were down because traders did not expect Brexit to pass, and had assumed all week it would fail.
The major immediate economic effect in the US will be on the dollar, which is expected to gain in value because the pound and the Euro will lose value. A strong dollar can hurt average Americans by making US exports more expensive.
That could mean higher prices and lower sales for agricultural products and manufactured goods, which might eliminate some US jobs. It will be good news for Americans planning a European vacation, because their dollars will go farther.
A long-term benefit for America might be that more international banking and financial activity will move to the US from London. That might benefit cities like New York and Chicago.
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