A British flag hangs in the window of Myers of Keswick, a British grocery store, June 24 in New York City.

A British flag hangs in the window of Myers of Keswick, a British grocery store, June 24 in New York City.

Global financial markets show some signs of steadying this morning following Britain’s vote to leave the European Union. The vote last Thursday sparked a global market drop of $3 trillion. Yesterday U.S. Treasury Secretary Jack Lew offered assurances that although the U.K. and the EU is in uncharted waters economically and politically, the U.S. is not facing a related financial crisis of its own. Still, it’s clear that Britain’s likely more distant relationship with European Union countries leaves the U.S. more removed as well – as least temporarily. Please join us to talk about what the British exit means for the U.S. economy. global security and the 2016 campaign.


  • Ron Elving Senior Washington editor, NPR News
  • David Sanger National security correspondent, The New York Times; author, "Confront and Conceal: Obama's Secret Wars and Surprising Use of American Power"
  • Nell Henderson Global central banks editor, The Wall Street Journal.
  • Douglas Irwin Professor of economics, Dartmouth College; author of "Free Trade Under Fire"


  • 10:06:54

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. European leaders meet today in Brussels. Their first meeting since the stunning vote in Britain to exit the union. Despite a global $3 trillion sell-off in recent days, most economists say financial repercussion for the U.S. are not likely to be severe. But key strategic and political questions remain.

  • 10:07:22

    MS. DIANE REHMJoining me to talk about what Brexit means for the U.S., Ron Elving of NPR, David Sanger of the New York Times, Nell Henderson of The Wall Street Journal. And joining us from a studio at Vermont Public Radio in Norwich, Douglas Irwin of Dartmouth College. Throughout the hour, we'll welcome your calls, comments. Join us on 800-433-8850. Send an email to drshow@wamu.org. Follow us on Facebook or send us a tweet.

  • 10:08:00

    MS. DIANE REHMAnd welcome to all of you.

  • 10:08:03

    MR. RON ELVINGGood morning.

  • 10:08:03

    MR. DAVID SANGERGood to be with you.

  • 10:08:03

    MS. NELL HENDERSONHi, happy to be here.

  • 10:08:03

    REHMGood to see you all.

  • 10:08:05

    MR. DOUGLAS IRWINGood morning.

  • 10:08:06

    REHMAnd Nell Henderson, talk about the markets. They plunged immediately after the Brexit vote. Where are we now?

  • 10:08:17

    HENDERSONWell, it's definitely a shock to the system. You know, the markets are reacting. It's not a meltdown. It's not like 2008. We saw Treasury Secretary Jack Lew and his counterpart, George Osborne in the UK say yesterday, don’t panic, you know, please don't panic. I thought I could hear between the lines. It's a shock. It's definitely a negative for the global economy, which was already slowing.

  • 10:08:44

    HENDERSONFor the U.S. economy, it's another drag at a time when, you know, growth has been weak. You know, some of the net effects you can tick off very quickly, you know, stocks are way down. But I think they're actually not much lower than they were, actually, at the beginning of the year. We had all that China-induced volatility. And the dollar is up, but it's actually still down on net, compared to the beginning of the year.

  • 10:09:08

    HENDERSONSo both of these things cause hits -- disruptions to the system and we can talk about any of these in more detail. And also, I think that the three big effects for the U.S. economy is the dollar is up, the stocks are down and, um, the Fed is on hold.

  • 10:09:26

    REHMAnd the dollar being up sounds like a good thing, but, in fact, for trade...

  • 10:09:30

    HENDERSONWell, okay, mixed effects. So for a U.S. consumer, it means it's going to be cheaper gas prices, cheaper imports. If I had the money to go to London for a vacation, it would be really cheap because the pound has dropped. But this is really a hit to U.S. exporters. And they've been struggling already this year, as I said, because the dollar was up so much at the beginning of the year. And the dollar being up has ripple effects all around the world.

  • 10:09:58

    HENDERSONYou know, it's going to hurt a lot of the exporting countries that export commodities, such as oil, but also, you know, cotton and metals and other things.

  • 10:10:07

    REHMSo Ron, how does Jack Lew's statement -- does it go far enough to reassure people?

  • 10:10:16

    ELVINGProbably not because in the short run, people expect a bounce in the markets. People expect some pulling back from the panic moment. The administration has, in general, tried to encourage people not to take this as a moment for hysteria. The president, this morning, many of your listeners may have heard Steve Inskeep's interview with President Obama on "Morning Edition," just a piece of that, which will be on later on this week, but the president said, I think, the best way to think about it is a pause button for the project of full European integration.

  • 10:10:47

    ELVINGAnd he said he wouldn't overstate it and that there had been a little bit of hysteria post-Brexit and perhaps that is the view of the Obama administration and it will reassure some. But I believe the more underlying causes of all of this and the deeper anxieties that people are feeling will not be assuaged by statements from on high.

  • 10:11:07

    REHMSo you've got, on the one hand, David Sanger, the financial view and then there's the political question. Britain has been such a close ally to the U.S. both in political and in economic terms. What does Brexit do on the political side?

  • 10:11:32

    SANGERThe political relationship, the special relationship between the United States and Britain, will be unaffected in the bilateral relationship. But the fact of the matter is that Britain plays far larger role that's frequently unseen. It is essentially America's direct interlocutor with the Europeans because they are sitting in on the European Union decisions, discussions not only on economic trade issues, but frequently they are one of the stronger voices for free trade and Doug can talk about that a little more later on.

  • 10:12:11

    SANGERBut they are also usually the voice arguing for a more cohesive, integrated military and intelligence relationship and that's where the difficulty is going to come. Britain is still part of NATO. 22 of the European Union members are NATO members. And, of course, President Obama is going for the big, on his last NATO summit next week, right after the 4th of July holiday.

  • 10:12:42

    REHMNow, what about Germany as the ally that's still within?

  • 10:12:49

    SANGERRight. So Germany is the ally that's within. France, obviously, within. And so the question is can any of them be a one-for-one replacement for the role that Britain has played. And I was exploring this some with people over the weekend for a story that was in the times yesterday and the answer is that while no American official will admit it in public, the answer probably no. And the reason for that is quite simple.

  • 10:13:21

    SANGERThe relationship with France, while close, frequently has sand in the gears, sometimes for good reasons. They warned us against the war in Iraq and they ended looking pretty good coming out of that. Sometimes, we have differences on Middle East peace. There's a significant difference now on how one would go about the Arab/Israeli relationship and because France's trade views and frequently its military views are much different than the U.S.

  • 10:13:48

    SANGERSo could you go to Italy? Too broke. Could you go to Poland? Still a relatively new and developing member of NATO. Netherlands, too small. I mean, everybody's got something where, you know, the porridge is just a little too hot or a little too cold.

  • 10:14:06

    REHMAll right. Let's turn to Doug Irwin and ask you, if you would, to really explain the challenge the UK faces in terms of reestablishing global trading terms if and when the exit takes place. And I am putting a little emphasis on that "if" because of all the turmoil that's going on in Britain today.

  • 10:14:39

    IRWINAbsolutely. The UK faces an enormous challenge in figuring out how exactly it's going to move forward in terms of its economic relationship with Europe. You know, Mick Jagger, actually, studied at London School of Economics and he learned the most important lesson of economics, that you can't always get what you want.

  • 10:14:55

    REHMYeah, right.

  • 10:14:57

    IRWINWhat the Brexiters want is full trade integration with Europe, but no labor mobility. And the European leaders, Angela Merkel and others, have already made clear there's no cherry-picking. Either you're part of Europe or you're not. You have to buy into everything. And so either the Brexiters are going to have to, you know, fall back and say, well, I guess we're going to have accept the labor mobility to keep our market access, or we're going to have to renegotiate all sorts of trade agreements not just with Europe, but with the rest of the world in terms of getting the market access that we used to have as a partner with EU.

  • 10:15:31

    REHMYou know, I don't quite get what's going on in Britain today. Huge demonstrations by younger people who were very opposed to Brexit. How much can they really accomplish?

  • 10:15:51

    IRWINWell, demonstrations can certainly get people's attention and they can call attention to the difference between what younger Britains feel and the way some, not all, of their elders feel. Their elders recall another sense of the UK, another sense of Great Britain that's more so shaded, if you will, with all those movies we saw romanticizing World War II and our finest hour and so forth. And that is not really the experience of people who have been born since, let's say 1990. Certainly not since 2000.

  • 10:16:20

    IRWINAnd yet, we have large numbers of young people who identify with the European idea who want to think of themselves culturally as integrated with the United States, surely, but also with Europe, culturally. And they suddenly feel betrayed by a vote that they didn't understand and which turns out to have been more consequential than they might have imagined.

  • 10:16:40

    REHMDavid Sanger.

  • 10:16:41

    SANGERBut just look at the breakdown of the vote results. London voted to remain, 60-40, which told you something. The most international part of it, the place where most young people end up migrating to and certainly where all of -- not all of, but many of the elites, you know, live. And the more you got out into English countryside, it was for leave and then you got up to Scotland and it was to remain because their view is they want to be part of Europe. And there is a theory afoot under which the Scots could still throw a wrench into this whole thing. I mean...

  • 10:17:22

    REHMExcept, couldn't the British parliament overrule that?

  • 10:17:26

    SANGERThey could and the politics of that three days ago, I would've said, were impossible. And today, I'm not quite sure. And the reason is, Diane, that a British friend of mine was saying to me the other day, if we held a second referendum tomorrow morning, she said, I think it would go the other way.

  • 10:17:44

    REHMAnd that’s why I put the emphasis on the word "if." David Sanger, he's national security correspondent for the New York Times and author of "Confront and Conceal: Obama's Secret Wars and Surprising Use of American Power." Short break, we'll be right back.

  • 10:20:02

    REHMAnd before we get back to our discussion on the relationship with the -- with Britain, if in fact it does actually carry out Brexit, one of our first questions is, is Brexit actually going to happen? And I wonder, Doug Irwin, how you see it. Do you believe there is any possibility of a do-over?

  • 10:20:38

    IRWINI think there's a chance. But I was a little discouraged when Prime Minister Cameron said yesterday, no, we're going to respect the will of the voters and this is going to happen. In some sense, it's a poison chalice. He doesn't want to pull the trigger and invoke Article 50, which will actually sort of start the negotiations to -- for the U.K. to exit. I think he wants to leave that to some of the Brexiters. So there will be a change in the Tory Party and they'll have to deal with the consequences of what they have wrought.

  • 10:21:05

    REHMWhat do you think?

  • 10:21:07

    ELVINGHe is thinking probably down the road a bit and hoping that perhaps Boris Johnson or someone else -- that is, Boris Johnson being the person who is now considered most likely to succeed Cameron as the head of the Tory Party, the Conservative Party.

  • 10:21:19

    REHMAnd who has made all kinds of promises to the Brexiters but will not carry them out.

  • 10:21:27

    ELVINGWell, has already begun to back off a few of them. But he is still the leader, if you will, of the movement, along with the Independents Party and so on. But right now David Cameron seems to be saying, all right, fine. This is what you wanted. You negotiate it. And when people get unhappy with it, maybe we'll have another vote. Maybe we'll have, and perhaps not another referendum on leaving the EU, but perhaps we'll have another vote within the Conservative Party and see whether or not you, Boris, really are what we want. So he's looking down the road. Now I'm not saying months here, I'm -- perhaps he's thinking in terms of years.

  • 10:21:57

    ELVINGIt's not unlike what you see happening in the Republican Party in this country, where some people are beginning to position themselves in the Republican Party for what they think might be the post-Trump era. Now that's getting ahead of ourselves but it's not unlike that maneuvering.

  • 10:22:11


  • 10:22:11

    HENDERSONCan I just say, part of the reason -- for people who are wondering why stocks are down, their 401 (k) s have taken a hit -- and, you know, and it's really because of the uncertainty. There is just tremendous, not just economic but political uncertainty. The New York Times called the situation -- the political situation in the U.K. as chaotic paralysis right now. I mean, really, we don't know who's going to be leading the Tory Party. So when is the Brexit going to begin? Is it going to begin?

  • 10:22:37

    REHMIs it going to begin?

  • 10:22:38

    HENDERSONWhat are the terms going to be. But more broadly -- oh, and also, you know, the Labour Party is in the state of civil war, so we don't even know, you know, who is even fighting for control there. But then, more broadly, there's this broader question, is this going to open the doors to other countries leaving the EU? Or is this going to encourage the breakup of other countries, like Spain or Belgium? Are the Scots going to have another referendum upon...

  • 10:23:01


  • 10:23:02

    HENDERSON...whether to leave. And so it really creates this state of uncertainty. And so for, you know, an American company, if you were thinking about expanding, building a factory or opening an office and hiring people, it just -- you're going to put everything on hold for now.

  • 10:23:17


  • 10:23:18

    SANGERWell, first of all, on the point that you made about Boris Johnson and David Cameron, don't underestimate the importance of the fact that these two people really can't stand each other. And that goes back a long way, to their university days I think.

  • 10:23:34

    SANGERSecond, I think it's very possible that you could end up, since it was a nonbinding referendum, with no one wanting to take the responsibility for pulling the trigger on the Article 50 declaration because, at that moment, you start a two-year clock. And if you're worried about a big market hit, it would come, you would think, the day that they did that. Because then people would say, this is for real. So I think you'll see a lot of maneuvering to see whether or not they can negotiate another way around that and all that...

  • 10:24:02

    REHMBut don't the leaders of the EU want this to begin right away?

  • 10:24:08

    SANGERWell, that's part of the difficulty now. Because the EU leaders are saying exactly that. They're going to say, look, if you're going to -- it -- it's -- if you're going to leave, let's not like have a languishing divorce here where we're all living in the same house...

  • 10:24:19


  • 10:24:20

    SANGER...while the judge is...

  • 10:24:21


  • 10:24:21

    SANGER...sorting this whole thing out. So they're going to be under pressure to go do that. And I think the more that happens, the more people are going to be reluctant to invest in Britain. You've already heard some of the auto manufacturers who make cars in Britain and export them tariff free throughout Europe say, look, if the tariff's going to come back on, if you're not going to be able to negotiate a free trade arrangement with them, please let us know. Because our next factory may not be going into Britain.

  • 10:24:50

    REHMSo, go ahead, Ron.

  • 10:24:51

    ELVINGWhat were the words to the old song, I don't want to see you go, but if you got to go, darling, you better go now. I believe that was a British pop song from the '60s. Are we think -- are we talking about the Hollies here? I think we are.

  • 10:25:03

    REHMWell, but the question really in my mind is, if there is sufficient objection to how this vote has gone and so much regret from those who actually voted for Brexit, might we, before any further drastic action comes around, think again, Ron?

  • 10:25:36

    ELVINGThere is a moderate position out there that says, all right, this was a great protest vote. Let's not take it as an actual final consequence. Let's take it as a great protest vote and use it to leverage some concessions from the EU. Because, after all, everybody knows there are problems with Brussels, there are problems with the way the EU works. It's probably disadvantageous for any individual country, at certain times, to be in the EU, even as they all enjoy the benefits of it.

  • 10:26:01

    ELVINGSo let's just say that the U.K. got a chance, because of this referendum, to sound off and we're going to take that under advisement. We're going to change some of the rules. We're going to change some of the ways that we operate. Perhaps we're going to cede some of the faults of Brussels and we're going to try to renegotiate the whole idea of it at the margins, without breaking it up at the base.

  • 10:26:23

    ELVINGBecause if the Brits do go, then they're going to have more pressure for France to leave. You're going to hear about other countries wanting to leave and the entire enterprise, which is not only about economics and trade, but also ultimately about political union, military, defense, security, and not being at each other's throats, the way European countries were, nationalistically thinking, were in the first half of the 20th century.

  • 10:26:46

    REHMDoug Irwin, do you believe there is any, any indication from the EU that they might be willing to adjust things at the margin in light of this protest vote?

  • 10:27:03

    IRWINI think, publicly, they're taking a very tough line.

  • 10:27:05


  • 10:27:06

    IRWINBecause they don't want to encourage this behavior. They do -- have said, you know, if you're out, you're out now. Let's make this go quickly. But you wonder, behind the scenes, the economic costs are not just to Britain, which have already been shown to be the case, but a cost to the EU. And you would think that, if there was room for some sort of negotiated settlement or behind-the-scenes bargaining, where the U.K. can stay in, that they would work in -- to that direction.

  • 10:27:36

    SANGERIt's very possible. And you're going to see more people show more political creativity in the next two or three weeks than I think they've shown in the past two or three years on this issue. You know, this was one of those ideas that sounded wonderful in the theoretical. You already had people who advocated Brexit backing off saying, well, we didn't really mean it when we said that all the money that was being saved that we were pouring into Europe would now go to the National Health Service, which was one of the big arguments.

  • 10:28:08

    SANGERAnd so, you know, there's an argument to be made that at least some of the case here was made on false pretenses. And suddenly you've got pensioners who voted for this discovering that their pensions have declined in value dramatically. You've got a lot of their kids calling them up and saying, you know, mom and dad, I really did want to have a job. And I think that that, over time, is going to have some political effect.

  • 10:28:33

    REHMOkay. Now, let's turn to the links between the economy and security, between the U.S. and the U.K. and the EU. What do we find there, Ron?

  • 10:28:52

    ELVINGThe United States depends on the EU not so much for our defense, as to make it not necessary for us to do in the 21st century what we had to do in the 20th century. We want the EU to be secure within its borders and also to deemphasize those borders, so that they are not in competition with each other economically and politically as they had been in centuries before World War I and then, of course, as they were through World Wars I and II. This is the most important thing to us.

  • 10:29:20

    ELVINGThen the second most important thing is to hold NATO together so that, in the event of further adventurism by the Russians, if Putin were to sort of revive the Cold War threat that drove our policy for decades after 1945 as we feared, you know, this great influx of Russian tanks just suddenly pouring across what we used to call the Iron Curtain, that too was something that we depended on Europe on, to be the first line of defense, although we always assumed that we would have to go back and fight the Russians there for World War III if they came in. Now that's faded in the last generation or two. But ultimately that's in the back of our minds as well.

  • 10:29:59

    REHMDavid Sanger.

  • 10:30:01

    SANGERWell, I think that merely holding NATO together in the old form that we had in mind is not enough. And it's not enough for basically three reasons. First, if the fight is about terrorism, and you've heard Donald Trump make the point that NATO isn't organized for terrorism -- and he's right, it never was -- that's largely a battle of intelligence sharing. And even before the vote happened, there were American intelligence officials who were saying to me, you know, what we learned from Paris and what we learned from the attacks in Brussels was that the European intelligence organizations don't share. And within Belgium, even the Belgian intelligence organizations don't share.

  • 10:30:46

    SANGERAnd they were thinking about some kind of intelligence version of NATO, which the British would lead. Well, the British obviously can't lead a new organization in the midst of this going that would be pan-European.

  • 10:31:00

    SANGERSecond, in the next great conflicts, if we have any, with Russia, it's not going to be tanks coming through Fulda Gap. It's going to be the kind of cyber war that you're already seen Russia execute, first, in Estonia and Georgia ten years ago, in Ukraine a few months ago when the power went off, and so forth. I just spent some time over at NATO to look at where they are on cyber. And the answer, to put it bluntly, on defense of their own systems, they're a little bit of the way. On figuring out how to counter this, they're no place. So they've got huge, new challenges to deal with new technologies that they're no place close to right now.

  • 10:31:45

    REHMAnd from you, Doug Irwin, what do you see as the effects of Brexit on the security relationship between the U.K. and the U.S.?

  • 10:32:02

    IRWINYou know, ironically, this is sometimes portrayed as an anti-globalization vote or something like that. But I think this actually helps the Obama administration push forward two major trade agreements it's trying to reach. One is with Europe, the Trans-Atlantic Trade and Investment Partnership, and the other is with the Pacific Rim, the Trans-Pacific Partnership. And the reason is, is because there's not a security dimension to each.

  • 10:32:23

    IRWINWe don't want Europe to fall apart. Russia and Vladimir Putin are very much in favor of Brexit and want to see TPP or, yeah, TTIP not go through. And in Asia, China is not a big fan of TPP. So now they can say, not only is this good or bad on the economics, but they can say this is very important for solidifying our alliances and our relationship with our partners in Europe...

  • 10:32:47


  • 10:32:47

    IRWIN...and the Pacific. And it transcends just the economics. We need to do this.

  • 10:32:51


  • 10:32:52

    HENDERSONI guess, I think that this is a backlash against globalization. And, you know, I think we spend maybe too much time worrying about the, you know, Brussels rules about how long the cucumbers they can grow in, you know, the countryside. You know, global capitalism for the last 20 to 30 years has helped lift millions of people around the world out of poverty, in poor countries, in China and Asia and Latin America. But in richer countries, in America and Europe, the working-class households have seen their incomes fall or stagnate in, you know, after accounting for inflation.

  • 10:33:29

    HENDERSONAnd then the financial crisis and the recession since then I think convinced a lot of people that the elites, the experts, the economists, the pro-trade, the people who run the country, you know, who run the parties, don't know what they're doing. Or that what they've seen is that the people who really benefit from a globalized economy are people who are highly educated, highly skilled, and the others have borne a lot of the brunt.

  • 10:33:54

    REHMAnd you're listening to "The Diane Rehm Show." So for those trade agreements still under negotiation, what's this going to mean?

  • 10:34:09

    HENDERSONI was going to say the opposite of what Doug said, which is, I think actually this is going to hurt Obama's effort to get any trade deals through. Even in a lame-duck session of Congress after the election, and I think for whoever his successor is, you know, Trump has really tapped into a lot of anti-trade sentiment. You see even Hillary Clinton, who had been originally in favor of the Asian-Pacific deal, has gone against it, in part because there's a sense out there -- you know, Trump has talked a lot about bad trade deals. You know, there's this idea that trade can be good if we get the right deals.

  • 10:34:43

    HENDERSONAnd I think even in Britain you see a lot of people who are actually free traders, but people who see their job opportunities diminished, their salaries haven't increased, they want to blame it on something. And this has been sort of a way to focus that anger.

  • 10:34:58

    SANGERYeah, I think I would agree with Nell here. I think that no matter what happens in Brexit, whether they end up executing this fully or not, I think the era of these big, giant trade deals that take years to negotiate -- by the time you've negotiated them, technology and trade conditions frequently have changed -- is pretty much over.

  • 10:35:26

    REHMSo what does that mean? Does that mean that each country withdraws into its own borders?

  • 10:35:33

    SANGERIt may mean that they simply go do what the Chinese do and do many more bilateral deals. We've had some bilateral free-trade deals. We have one with Jordan. You know, we've had others around the world. And frequently these are designed to also bolster a relationship, a defense relationship or a broader alliance. But the big trade deals, it gets very difficult to explain to people what the benefits are...

  • 10:36:01


  • 10:36:01

    SANGER...even if they are there. And it's very easy to see what the downsides are.

  • 10:36:04


  • 10:36:05

    ELVINGAnd the upside is not equally distributed. It is simply not. And in our country we have seen, in the Donald Trump candidacy and the popularity of his ideas, this sense that global trade has been great for some. It's been great for Wall Street. It's been great for the elites of London and some other world capitals. But it has not been great for the Akron, Ohios, of our country. And it has not been great for people who do not have any particular purchase on global trade. Now they may be paying much lower prices for many consumer goods and they may appreciate that. But people have a tendency to think that lower prices are something they're entitled to.

  • 10:36:42

    ELVINGAnd at the same time, they don't want to see their wages stagnating.

  • 10:36:45

    REHMSo Donald Trump has come out saying, hurray for Brexit. What, if anything, has Hillary Clinton said?

  • 10:36:56

    SANGERShe has been very careful so far because, as Nell pointed out, she is one of the three remaining presidential candidates, all of whom have come out against TPP. But she also has gone and reassured people that the alliances are so important. And that's something different from what Trump has done.

  • 10:37:17

    REHMDavid Sanger of The New York Times, Ron Elving of NPR, Nell Henderson of The Wall Street Journal and Douglas Irwin of Dartmouth College. All are here for your questions, comments. Stay with us.

  • 10:40:01

    REHMWelcome back, and we're going right to the phones, to Dallas, Texas. Hi Daniel, you're on the air. Go right ahead.

  • 10:40:13

    DANIELHey Diane, thanks for taking my call.

  • 10:40:13


  • 10:40:15

    DANIELIs there any country or company poised to gain financially if Brexit goes through?

  • 10:40:21

    HENDERSONWell, I'll jump in on that one.

  • 10:40:22

    REHMAll right, Nell.

  • 10:40:23

    HENDERSONI wouldn't name a country or a company, but certainly whenever you see big drops in stocks, somebody else is on the winning side of that bet. And I know that in the UK, there are a bunch of hedge funds that took that contrary bet when everybody else was betting that Brexit was not going to pass. And so they've done pretty well, I think, in the whole process. And then as I said before, you know, for American consumers, the Fed's going to be on hold, it's not going to raise rates, so that's good for borrowers. If you want to refinance again, go ahead.

  • 10:40:51

    REHMDo it now.

  • 10:40:52

    HENDERSONYeah, exactly. You know, interest rates are not going anywhere anytime soon in the U.S.

  • 10:40:55

    ELVINGAnd Diane, could I just for one moment?

  • 10:40:57

    REHMSure, oh, please.

  • 10:40:59

    ELVINGSay that one should always check Google before quoting '60s song lyrics. That was, of course, The Moody Blues who made "Go Now."

  • 10:41:05

    REHMThe Moody Blues.

  • 10:41:07

    ELVINGThe Moody Blues, yes.

  • 10:41:08

    REHMGot you, okay. And here's an email from Barry in Ashburn, Virginia, who says, an American stock market expert said investors should ignore all the current market turmoil because the U.S. trade with Britain is such a small part of the U.S. economy. Our major trade is with Asian nations. He suggested the market turmoil is due to stock brokers, day traders and news media, who both make money from panics. Investors in for the long-term growth should do nothing at this time. Is he right?

  • 10:41:56

    HENDERSONWell, I don't give stock advice, but I would say, first of all, the EU, the 28 countries including the UK, are in fact America's largest single trading partner. We do more trade with the EU than with Canada or Mexico, and for that group of countries to be in turmoil and uncertainty is bad for American businesses. As I said before, that means American businesses are not going to be expanding as much as they might have otherwise. They're not going to be hiring as much as otherwise.

  • 10:42:27

    HENDERSONAlso the U.S., because we trade with Asia and everyone else, we're very much affected by the global economy, and the global economy was already slowing before this happened. And this is really causing problems for Japan, which has been dipping in and out of recession for years, for the EU, which is really struggling to get growth going, China, which is slowing and has its own problems, in part because its currency is tied to the dollar, so when the dollar goes up, that hurts Chinese exporters.

  • 10:42:56

    SANGERAnd as I said earlier, you've got emerging market countries that are really going to be hit by the collapse in commodity prices.

  • 10:43:03


  • 10:43:05

    ELVINGThose are all important factors. We should also remember that on Thursday, the day before, or the day actually of the vote in Great Britain, the stock market in the United States had pretty much its best day of the year. The stock -- stock prices had gone up across the board. They were up by that much largely because people were speculating that Brexit was going to fail. That was the smart money at midweek.

  • 10:43:28

    ELVINGAnd so a little bit of what happened on Friday, the huge drop that we saw Friday and Monday, came from the fact that we'd had a huge run-up on Thursday in anticipation of the opposite result, so the shock and the natural ground to be recovered led to this exaggerated and sort of panicky-looking reaction.

  • 10:43:47

    REHMAll right, to Holland, Michigan. Hi there, Tom, you're on the air.

  • 10:43:50

    TOMHi, thanks for taking my call.

  • 10:43:55


  • 10:43:55

    TOMSo I feel like a part of this discussion that has been missed is that the 40-year obsession with supply-side economics has meant that whoever the big winners would be in globalization, and in this case it has been sort of rich people, the fact that they no longer have to pay a fair share of taxes means that those who have been the losers in globalization do not get the services, support, roads that are drivable, good education, those sorts of things. And if they -- they or the corporations were taxed at previous historic rates, then maybe these countries would be in better shape, and people would be less prone to the sort of pro-Brexit rhetoric or from rhetoric from the likes of Donald Trump.

  • 10:44:40


  • 10:44:41

    IRWINWell, I think that's absolutely right in the sense that, you know, the economies of Europe and the United States, after the financial crisis, we have recovered, but it's been a very incomplete recovery and a very poor one. And that underlying economic resentment about the state of the economy I think is driving a lot of what's going on. You know, but I think this also shows that if you say, okay, let's buy into this idea that if we get out of the European Union, things will be better, well, there's going to be more fiscal austerity now in the UK, there -- you know, they're going to have to cut expenditures, probably. Their debt has been downgraded. They're not going to get transfers from the EU in some of the depressed areas of the UK.

  • 10:45:26

    IRWINYou know, anti-globalization is not an answer. There's going to be a very hard time in the UK, which may be facing a recession.

  • 10:45:32


  • 10:45:33

    HENDERSONAnd on that point, I'd just like to point out that it's really very poignant how many people interviewed said that they voted for Brexit because of the promise that more money would go to the National Health Service.

  • 10:45:43


  • 10:45:44

    HENDERSONAnd that really tells you that, you know, we've had all of these austerity programs since the crisis, you know, more aggressively in the UK than in the U.S., but we also had, you know, budget cutting here. And what people are saying when they talk about that is that they need that, or they want that safety net. They want, you know, more funding for their health service. And that to me tells me that that may be part of what was out of whack there.

  • 10:46:07

    REHMAnd yet it was the older people who, in the greater numbers, voted for Brexit. Let's go to Indianapolis. Ryan, you're on the air.

  • 10:46:19

    RYANHi Diane, thank you for taking my call.

  • 10:46:22


  • 10:46:23

    RYANI had a question regarding -- a few people have kind of used the word if the UK were to leave the EU. How -- what mechanisms are in place for them to reverse this? I don't think they could do another referendum. So I was just curious how that would take place if this were to get reversed. Is that a possibility?

  • 10:46:42

    REHMDavid Sanger?

  • 10:46:43

    SANGERWell, they could do another referendum, but the referendum is not binding. So the first thing...

  • 10:46:48

    REHMSee, I don't get this. Wait a minute. Help me understand the referendum is not binding.

  • 10:46:56

    SANGERIt is politically binding in that having put their stakes out for this, having declared -- having David Cameron declare that he was going to have the entire country vote on it, it's a difficult thing to walk back, which is why Cameron has taken the position that he has, just as he's also announced his resignation.

  • 10:47:14

    REHMBut did the British people understand it was a non-binding resolution?

  • 10:47:22

    SANGERIf you believe the Google searches, some British people didn't fully understand what the European Union was or what would happen when they left. So what they understood I think depends on what part of the electorate you're talking about, which is true in every election on every subject. But to the caller's question, so a few things have to happen. Parliament would basically have to take a vote and invoke this Article 50, which starts a two-year clock for negotiating withdrawal from the European Union. So supposing that vote...

  • 10:47:58


  • 10:47:59

    SANGERJust -- or supposing nobody brings it up, I mean, the good American thing to do would be to keep it from coming to that, you know, say we're working on it, it's complex, we don't want to be jammed by the time, now that would of course extend the pain and extend the uncertainty that Nell referred to at the beginning of the show. So I'm not sure that's necessarily a good thing. And of course the Europeans have made the argument, as we said before, that if you're going to go do this, just go do it, but that's one possibility.

  • 10:48:31

    SANGERA second possibility is they could try to see if they could negotiate new terms, in some way, somehow change the relationship and then go back and say oh, now we need a second referendum because we've made modest changes to our relationship with Europe. Now I'm not sure the Europeans are going to go along with that, but that might be the way out. It's also Hillary Clinton's way out of opposition to TPP is to say, well, if we went back and changed just a few things, even though the trade agreement has actually gotten better for the things she was worried about since the days when she supported it as secretary of state.

  • 10:49:07

    SANGERSo there are all kinds of political games one can still play here.

  • 10:49:10

    ELVINGA lot of the leave people were suggesting through this campaign, and even to some degree in the days immediately since, that you can have your cake and eat it, too, UK, you can have what you want from the EU relationship and not all that stuff from Brussels that you didn't like. We can get rid of all of the downside, and we can control our own borders. Now we haven't talked a lot about immigration yet, but clearly this was the emotional heart of the argument.

  • 10:49:36

    REHMSure, sure.

  • 10:49:38

    ELVINGAnd it is largely the emotional heart of the argument for many Donald Trump supporters, not all, but many of them. Always the line at his rallies that gets the biggest roar from the crowd is build that wall. And who's going to pay for it? You know, you've seen all this. And this is very similar in the situation in Great Britain, where they suddenly are realizing, oh, well, wait a minute, you mean we still can't completely control our own borders, that this doesn't mean the end of immigration, that it doesn't mean that all these people I'm worried about are going to be deported from the British Isles, and of course it doesn't.

  • 10:50:12

    REHMAll right, to Manchester, Missouri. Hi Steve.

  • 10:50:16

    STEVEHi Diane, how are you doing today?

  • 10:50:18

    REHMGood, thanks.

  • 10:50:21

    STEVEMy question is, okay, with UK leaving the EU, does this -- does this mean Germany takes on or will have to take on a little more political leadership, security leadership of the EU? And I realize there's maybe some nervousness about that because of history and all that, but I was just kind of curious.

  • 10:50:45

    REHMWhat do you think about that, Doug Irwin?

  • 10:50:47

    IRWINWell, I think that's sort of the worry from the U.S. perspective is that as I think David was pointing out earlier, obviously there's a special relationship between the U.S. and the UK, but the UK was also sort of our agent, if you will, or thought very similar to the way we did in the EU. And now we see the EU saying okay, we don't need English as a language as much, we'll use French and German. So both France and Germany will have to take more of a leadership role, and the U.S. -- UK, rather, is going to be diminished.

  • 10:51:19

    SANGERYou know, it would be great if we thought that Germany could step into all of that, but I think there are several reasons that that won't happen. First is on the military side, they are still culturally and constitutionally limited. They will not send combat troops into many of the places where Britain or France were certainly willing to go do so, and that goes back to all kinds of legacies from World War II.

  • 10:51:45

    SANGERSecondly, in the intelligence world, they are not a member of what's called the Five Eyes. Those are the United States, Britain, Canada, New Zeeland and Australia, who are the true sharers of all intelligence. And after the Snowden revelations and everything about whether or not we were listening in to Angela Merkel's cell phone and all that...

  • 10:52:02

    REHMYeah, that's the issue, yeah.

  • 10:52:05

    SANGERThere was a huge uproar. There's still a lot of anti-Americanism surrounding that. And there was a negotiation to go change the relationship, the intelligence relationship, with Britain and -- I'm sorry, with Germany. And that ended up in a new, unannounced accord, but it didn't change very much. So I don't think that that can happen, and many other EU members are worried about Germany's outsized economic power anyway.

  • 10:52:37

    REHMAll right, and to Baltimore, Maryland, Raymond, you're on the air.

  • 10:52:43

    RAYMONDHi Diane.

  • 10:52:43


  • 10:52:45

    RAYMONDI was wondering, where is the queen on this Brexit fallout. It seems to me that this is her empire, and she should speak up. And I don't want to hear that she's just ceremonial. Queens have spoken up in the past, and the British Empire is about ready to dissolve. The sun is going down, and she's going to lose some homes. So I want to get your opinion on that.

  • 10:53:05

    REHMAll right, and before we respond, let me remind you, you're listening to "The Diane Rehm Show."

  • 10:53:14

    SANGERI'll take that one if you want. The queen, the palace I should say, asked for a retraction when one of the British papers stated that she I think supported Brexit. Or maybe it was opposed. But either way, the palace immediately asked for a retraction, saying she has not taken any stand on it. And I wouldn't expect that she -- look at what a headache this is for the people who want to be involved in politics. If I were her, I would stay out.

  • 10:53:39

    REHMAnd she hasn't been involved in politics.

  • 10:53:41

    HENDERSONNo, she has not been involved.

  • 10:53:43

    SANGERShe hasn't, but the caller raises a really interesting question, which is if Scotland leaves, you know, does the queen need...

  • 10:53:49

    REHMIt's part of her empire.

  • 10:53:49

    SANGERDoes the queen need a visa to go to Balmoral?

  • 10:53:51

    REHMYeah. I don't think it's so funny. Let's go to Molly in Kalamazoo, Michigan. You're on the air.

  • 10:54:01

    MOLLYGood morning, Diane, thank you for taking my call.

  • 10:54:02


  • 10:54:03

    MOLLYI know this segment is more about the economic side of the Brexit, but I was wondering if you guys wouldn't mind talking about the immigration side. I read somewhere where that was a big reason why they decided to leave the European Union.

  • 10:54:18

    ELVINGYou could say really that the proximate cause of a lot of what's been going on in the last so many months in the West has been the collapse of Syria, the huge surge in refugees from Syria, but over a longer period of time the arrival of many Islamic people, Arabic-speaking people, who have been making their home in France, in Brussels, in many parts of Europe, very large numbers of them being accepted, I believe a million people, have been accepted into Germany, or they have committed to take a million immigrants. These are Middle Eastern people with very different culture, very different ideas, and that has been disturbing to many traditional-minded Europeans.

  • 10:54:58

    REHMAll right, we have a final email from Frank, who says, Nell nailed it.

  • 10:55:05

    HENDERSONThanks, Frank.

  • 10:55:06

    REHMFinally a reporter articulated the real point of Brexit and the populist movement within the U.S. and other European countries. I'm beginning to think no one in the media has any idea how angry the average citizen is in a Western country. We sit and watch globalization happen, which seems to make the rich richer and lift the poorest in the world at the expense of the middle classes. We rail against the obvious unfairness of how the system is rigged. And boy, have we heard that phrase over and over again.

  • 10:55:52

    HENDERSONWell I'll -- thanks, Frank. I would just say that, you know, some of the economic trends I was talking about earlier are coinciding with this immigration tide that Ron was talking about. And I think together this helps fuel this sense of loss of control, loss of national identity. It provides a target for a lot of the anger and frustration. And on both sides of the Atlantic, you know, it creates an opportunity for politicians to channel that anger and frustration in some ways.

  • 10:56:22

    HENDERSONAnd I think, you know, my colleague, my boss, Jerry Seib, had a column today about how some of the political anger we are seeing today is similar to what we saw in the '30s, this rise of nationalism, a retreat from international entanglements and flirtation with fringe parties. And he says, you know, you can't belittle or dismiss this popular anger. You really have to acknowledge the legitimate causes that underlie the anger and try and turn them in a positive direction.

  • 10:56:48

    REHMAll right, and we'll have to leave it at that, Nell Henderson of the Wall Street Journal, Doug Irwin, professor of economics at Dartmouth College, author of "Free Trade Under Fire," Ron Elving, senior Washington editor for NPR News, and David Sanger, national security correspondent for The New York Times. Thank you all so much.

  • 10:57:18

    ELVINGThank you, Diane.

  • 10:57:18

    SANGERThanks, Diane.

  • 10:57:20

    HENDERSONThanks, Diane.

  • 10:57:20

    IRWINYou're welcome.

  • 10:57:20

    REHMAnd thanks, all, for listening. I'm Diane Rehm.

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