The pound has collapsed to a 30-year low and the share prices of banks, estate agents and homebuilders are down sharply amid recession fears since the Brexit vote. A big house price drop seems inevitable, especially in London. The UK’s holdings in RBS alone are down by a third in a week; 9.1bn shares have dropped in value by about 80p a share, so that is a loss of more than £7bn. Add to that a drop of 17p in the value of the 15bn shares in Lloyds Bank the country owns, and, as a starter, Michael Gove, Boris Johnson and the leavers have already cost the country more than £10bn in losses.

The leave campaign said this wouldn’t happen, despite warnings from hundreds of economists who were dismissed as worthless experts. It was clear the Brexiters had no plan and, among other things, lied about £350m a week being available to fund the NHS. Those who voted for Brexit disproportionately, it turns out, will lose from it: EU funding for places such as Cornwall and Wales that voted to leave will inevitably dry up.

The rating agency S&P says the EU referendum result is a “seminal event” and has downgraded the UK’s credit rating from AAA to AA, while Fitch downgraded the UK from AA+ to AA, saying Brexit will be “credit negative for most sectors in the UK”, triggered by “weaker medium-term growth and investment prospects and uncertainty about future trade arrangements”. Recall how, in his Mais lecture in February 2010, the chancellor, George Osborne, claimed “we will maintain Britain’s AAA credit rating”. So much for that.

Barclays is forecasting negative growth in the last two quarters of 2016. Credit Suisse has cut GDP forecast for this year to 1.0% from 1.8% and its 2017 forecast to -1.0% from 2.3%. Goldman Sachs is forecasting the UK will enter recession. The governor of the Bank of England, Mark Carney, has warned that as a result of the Brexit vote Britain was already suffering from “economic post-traumatic stress disorder”. He hinted that stimulus was likely coming over the summer.

That is likely to involve rate cuts, certainly to zero and maybe even to negative, and a further burst of quantitative easing. It may well include the purchase of corporate bonds or other non-conventional assets to get the economy moving. Slasher Osborne criticised the last Labour government for its economic policies before and during the crash of 2008, but never told us what he would have done. Now he is going to have to react to essentially the same situation. A cut in corporation tax as Osborne has suggested is the wrong way to go as people are hurting more than businesses: it would be much better to cut VAT by 5%, which worked well in 2008.

This is the end of the disastrous experiment that was austerity, an ignominious failure from the outset

Osborne disappeared for several days after having admitted, astonishingly, earlier last week that he hadn’t had anyone at the Treasury working on post-Brexit plans. His scaremongering tactics backfired on him; nobody took seriously his claim that he would impose a £30bn austerity budget. Inevitably the fiscal rule of balancing the budget by 2020 has had to be ditched as the economy slows. We await new forecasts from the Office for Budget Responsibility to show how awful the state of the public finances is going to be as a result of Brexit. Believe me they are going to be bad.

This is the end of the disastrous experiment that was austerity, which was an ignominious failure that I opposed from the outset. Osborne told us in his budget speech of 22 June 2010 what austerity was supposed to do. “The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this budget.” In the same speech he even claimed: “There is no money left.” If there was none then, there is certainly none now. Hoisted by his own petard.

GDP per head is up just over 1% since 2008 and real wages are still 7% below their level at the start of the Great Recession in 2008. The problem is that many who voted leave thought this was all about immigration and EU rules, whereas in reality it was mostly about austerity. The Poles, the Czechs and the Hungarians came to the UK to work; they have higher employment rates than those born in the UK and pay far more into the system than they take out. It is clear that the rising number of immigrants has put pressure on public services but this was mostly because Osborne under-invested in services in order to shrink the state. They paid their taxes, but Slasher didn’t invest that money in new schools, houses and hospitals.

The Brexit vote represents a major negative shock not only to the UK but also to global output. Uncertainty is bad and markets don’t like surprises. On the day the Brexit vote decision was announced the French stock market, the CAC, opened 9.99% down. The Federal Reserve in the US had been expected by the markets to raise rates in 2016; now the markets are expecting a cut. The concern is that this may spread across the continent and there will be other votes to leave the EU. Over the past few days the president of the Czech Republic, Miloš Zeman, called for a vote to leave. Perhaps Czexit is next?

When a negative shock comes John Maynard Keynes taught us that fiscal and monetary policy has to work together to provide stimulus. That worked incredibly successfully in 2009 as governments threw the economic kitchen sink at the recession. Growth spurted only to be slowed by austerity in 2010. The same is needed this time. All hands to the pumps. Austerity is dead. At last.