Uk Buying Us Treasuries By The Lorry Load?

[Randall Herbert]

http://news.bbc.co.uk/1/hi/business/4669778.stm

What was that harold wilson said in 67 as he devalued the pound

"The pound in your pocket is not devalued in britain" aye right

Man Its gonna make the lira look like a sound currency………….

Somedays getting prepared for something

http://news.bbc.co.uk/1/hi/uk_politics/4673398.stm

Of course it could be the yanks buying their own currency behind the mask of London finance

We wait and watch and wonder………..

Edited February 3, 2006 by Randall Herbert

[Guest consa]

This is probably one of the most interesting things I have read lately, can you get those links working.

http://www.ustreas.gov/tic/mfh.txt

We buy Dollars and the US buys Pounds and we both keep printing money to do it, and hope no-one notices, what was it Al Greenspan was up to with GB???

Edited February 3, 2006 by consa

[DEATH]

I think the figure for UK just means entities domiciled in the UK.

The City of London is a financial centre, one of the biggest in the world, so it could be any entity buying it from here. Hedge Funds, Arab Governments (not wanting to be seen supporting the good old US of A), etc

I doubt it's the UK Government, we are already in debt, where would we get the money from to be buying 50bn+ dollars a month?

[Numani]

I think the figure for UK just means entities domiciled in the UK.

The City of London is a financial centre, one of the biggest in the world, so it could be any entity buying it from here. Hedge Funds, Arab Governments (not wanting to be seen supporting the good old US of A), etc

I doubt it's the UK Government, we are already in debt, where would we get the money from to be buying 50bn+ dollars a month?

i reckon your right.

i know though off that same us govt website that you can get figures that breakdown buyers into government, corporate and private individuals buyers

[leefam83]

i reckon your right.

i know though off that same us govt website that you can get figures that breakdown buyers into government, corporate and private individuals buyers

Sorry to go off at a tangent here, but can anyone explain to me the effect of the US interest rate rising to 4.5% on a parity with UK interest rates. Historically I understand we always have been 1-2% higher so as to make the £/ UK attractive. I'm a total novice on this so please forgive my naivety

[timmy_30]

what was it Al Greenspan was up to with GB???

I don't know Consa, but what's got me worried Mr Greenspans retirement job...... Gordon Brown has just appointed him as a special advisor to the UK Treasury with responsibility for macro economics and competitiveness.

Leefam83..... in a nutshell FX rates and IR rates are linked in a phenomenon referred to as the Fisher effect. All things being equal if the US raises rates either the UK must follow suit, or the £ will fall versus the $. This matters bacuse commodites are priced and traded in $, as are many other goods, so a weaker £ will mean inflation.

30 years ago that didn't matter so much as we had our own manufacturing industry, plenty of coal and gas, and N sea oil all in effect domestically priced.........today we have a world leading call centre industry.......hmm I could cheerfully ring the neck of comentators who blather on about the UK not needing a resource and maufacturing base because we are a service economy.

Edited February 3, 2006 by timmy_30

[Biriani]

I think the figure for UK just means entities domiciled in the UK.

The City of London is a financial centre, one of the biggest in the world, so it could be any entity buying it from here. Hedge Funds, Arab Governments (not wanting to be seen supporting the good old US of A), etc

I doubt it's the UK Government, we are already in debt, where would we get the money from to be buying 50bn+ dollars a month?

You're right. A large proportion of the UK figure is thought to be purchases on behalf of East Asian exporters and Middle Eastern governments flush with oil revenues.

60% of European demand for US treasuries came from the UK in 2005, and since we're running a current account deficit they certainly weren't all bought for us to keep. In contrast, recorded demand from emerging Asia was weak in comparison to the size of their current account surpluses. It's all being channeled via the UK and the Carribean.

See pages 5-7 of this document for more analysis.

[bears all]

Sorry to go off at a tangent here, but can anyone explain to me the effect of the US interest rate rising to 4.5% on a parity with UK interest rates. Historically I understand we always have been 1-2% higher so as to make the £/ UK attractive. I'm a total novice on this so please forgive my naivety

I'm a near-novice too, so don't take this too seriously. The obvious thing is that parity of rates makes the pound less attractive vis a vis the dollar, so it should in theory make the value of the pound dip. In practice however the markets will have long expected the Fed to push up dollar rates to this level and priced the value of sterling accordingly.

The interesting point ought to come when we get into the zone of uncertainty, that's to say when the markets no longer know for sure which way the Fed or the MPC will jump. Most commentators seem to think that the new Fed chairman, Ben Bernanke, will add on at least one more point to dollar rates, just to show he means business, and that from there rates will gently decline as the slow down in the US housing market starts to take a grip on their economy. But no-one quite knows, and it would seem that for this reason more volatile times might lie ahead.

If the Fed goes up to 4.75 about the time the MPC votes for a cut to 4.25 that could lead to a much weaker pound; but the UK govt might not mind that too much, at least at first, because it would help exports. On the other hand it would make import prices dearer, which would push up inflation.

[Realistbear]

The herd are short on US $ at present which may mean some smart investors are going to blindside the pound to the benefit of cheap $. George Soros and pals again? The UK can't handle a high pound because of the damage to exports and the economy is already fragile. The Golden Rule seems to be to follow the money--if that much dosh is going into US denominated instruments it will be reflected in the markets soon.

[MarkG]

The UK can't handle a high pound because of the damage to exports

Why do people keep saying this, when we import vastly more than we export, and are about to go from a net oil exporter to a net oil importer (if we haven't already)? Trashing the pound to 'help exports' would be insane.

[Realistbear]

Why do people keep saying this, when we import vastly more than we export, and are about to go from a net oil exporter to a net oil importer (if we haven't already)? Trashing the pound to 'help exports' would be insane.

A cheap pound would make imports expensive and exports cheap--something Gordon may have no other alternative than to follow. The pound is around 1.77 at present and for many years it has ranged between 1.45-1.60. Low US IR are now history and along with it the high pound vs. the US $.

[MarkG]

A cheap pound would make imports expensive and exports cheap

Exactly: so why would any sane person do that?

Or do you really think that the pound at $1.40 would magically make British workers competitive with Chinese workers on $0.50 an hour?

[oracle]

Exactly: so why would any sane person do that?

Or do you really think that the pound at $1.40 would magically make British workers competitive with Chinese workers on $0.50 an hour?

depends what you offer for the money,if you can offer wealthy chinese punters a way to make a bucketload out of their fellow countrymen without being spotted then the premium is worth it...well for the wealthy anyway.

...and as to UK buying up US treasuries,it looks like a home banker if our HPC is going to be brutal,it means that UK wins on currency exchange....yield isn't that big a deal.