Saturday, May 15, 2010
Falling dominos
MSN MOney: The UK could drag the US down
The reason why interest rates haven't spiked as the govt. debt has been bought by BOE via printing money (or what I call social taxation by the back door). When that stops they will have to go the private market and who will ask for reasonable rates. Hence interest rates going by one to two percentage points. Pushing UK into inevitable recession. Failure of a major financial player will have it's consquences on US economy as UK is the hub of all activities which can't be done in US.
Posted by deepak @ 11:18 AM (1239 views) Add Comment
6 Comments
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1. alan said...
Does anyone think we will keep out AAA rating beyond 31st July?
If so, why......
Alternatively, If we are likely to lose it, what should individuals do now?
2. tom101 said...
I've been looking for the cheapest forreign currency bank accounts. Not much luck as of yet. Love some advice on this too...?
3. Nod2glod said...
answer to one and two above.... simples, buy gold
4. miken said...
Does this guy in the video know something we don't? Though I agree one has to be cautious about printing money since it is correct to say that there will come a time when foreign investors will not be interested in lending money to the UK if they know that the BOE will continue with its money printing scheme. I think 200bn is far enough and that there should be protests if it restarts. Not only are savers being shafted by money printing, but the long term investor centre status of the UK is being thrown away. Our children will inherit very little!
5. alan_540 said...
I assume the BoE will be forced to raise interest rates to prevent a downgrading of the UK's credit rating. But will savers see savings rates increase in line with base rates?
6. sureseam said...
Wrt 1. and 3.:
In partial answer to what to do - check out ETFs that are made out of Short Dated Government Bonds from a suitable country.
The pendulum has swung a long way towards the dollar already, so probably late to jump in that direction though some experts suggest $1.30 by year end.
Some would suggest precious metals but the sentiment indices suggest a possible reversal in the near term.
Central banks in the US and the UK will struggle seriously hard to avoid interest rate rises. Especially here where low interest rates are the last defence against widespread home repossessions. My guess is that the US will jump first - their growth rates can handle it better than ours.
And just think - so - you preserve your capital by putting it into another currency (also inflating) and when you bring it back: you pay Capital Gains Tax on the extent to which our government has trashed Sterling in the mean time.
Time to stop worrying about CGT and start looking for a G&T.