Wednesday, January 21, 2009
Great British Kroner is a goner
Seriously Alarmed
The slide in sterling has turned "disorderly". We can argue over whether or not the first phase of devaluation acted as a shock-absorber for the economy, providing a cushion against debt deflation and the housing crash. But the latest dive has a very malign feel. For the first time since this crisis began eighteen months ago, I am seriously worried that British government is losing control. The currency has fallen five cents today to $1.39 against the dollar. The danger is blindingly obvious. The $4.4 trillion of foreign liabilities accumulated by UK banks and guaranteed by the government are twice the size of the British economy. We have only £0.06 trillion in foreign reserves. There is a real risk that Britain may have to default on its debts for the first time since the Middle Ages
Posted by little professor @ 01:23 AM (1776 views)
15 thoughts on “Great British Kroner is a goner”
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little professor says:
See also:
‘Sterling is finished’ claim after 6 cent slump
Jim Rogers, co-founder George Soros’s main hedge fund, declared: ‘I would urge you to sell any sterling you might have.’
Speaking to Bloomberg news agency, he added: ‘It’s finished. I hate to say it but I would not put any money in the UK.’
P. Riddy says:
Gold hit record high of $620 today, not fully pricing in the RBS crash because gold was £610 just after Christmas. A default would bring us closer to the crash of the 1340’s:
Six hundred and fifty years ago came the climax of the worst financial collapse in history to date. The 1930’s Great Depression was a mild and brief episode, compared to the bank crash of the 1340’s, which decimated the human population.
The crash, which peaked in A.C.E. 1345 when the world’s biggest banks went under, “led” by the Bardi and Peruzzi companies of Florence, Italy, was more than a bank crash—it was a financial disintegration. Like the disaster which looms now, projected in Lyndon LaRouche’s “Ninth Economic Forecast” of July 1994, that one was a blowup of all major banks and markets in Europe, in which, chroniclers reported, “all credit vanished together,” most trade and exchange stopped, and a catastrophic drop of the world’s population by famine and disease loomed.
nopensionnohouse says:
I feel a little bit sick.
techieman says:
£ starting to look oversold now. Gap downs and big daily moves are of little surprise toward the end of a downmove. Re Jim Rogers – Jim is long commodities by his own admission his timing is awful. He is a long term investor – he holds Gold long term but also holds all agri commodities and oil.
Take a look and you tell me! – http://www.rogersrawmaterials.com/page2.asp
techieman says:
. and for daily values…… of all his indexes : http://www.rogersrawmaterials.com/dailyupdate.asp
bystander says:
Agreed techieman – Jim Rogers is commodities, and when currencies look weak where does the money go – into commodities. Yet another vested interest talking down one market to capitalise in another. Sterling will fall and then rise again, as it has done for years. Just now it is touching the lows of the 8 yearly cycle against the dollar, and the euro economies are looking decidedly at odds with the euro valuation. In addition Rogers is co-founder with Soros – the man who made ‘big’ on the collapse of sterling in 1992 – what a surprise he smells another opportunity to talk the market down – ably assisted by our very own PM.
techieman says:
bystander – am not saying hes wrong about commodities long term btw, am just saying that he is not someone i would listen to when anticiapating market moves. What he is wrong about is always being long the whole commodity complex – IMO. I think long term he is prob right – oil is very cheap, and specific commodities are more oversold than others.
This is actually a good “blood on the streets” headline.
bellwether says:
TM I can’t make up my mind if there is an element of hysteria in the rise of other currencies against sterling and crash in finanicals (which are inveresly corelated) or whether it is a rational response to the insolvency of the UK. I am begining to fear it might be the later.
inflation is eating my savings says:
What happens after a default in the UK?
Argentina defaulted in 2001- they rich ran off with their cash- and the poor rioted (violently repressed by the police) and turned over 5 governments in a few days.
We’re not as macho as the Argentinians.
Matt_the_hat says:
UK debt is in sterling, a default as mentioned in this thread will not happen, the defaut is a devaluation of the currency as has happened and through inflation (printing presses running hot). The UK will lose its reserve currency status and have to borrow in dollars, that is the real risk.
sold 2 rent 1 says:
Welcome back P. Riddy
I knew you couldn’t keep away
sold 2 rent 1 says:
Gold has risen 50pc in GBP terms in 5 months.
It could be time for a correction in G?BP terms
http://www.bullionvault.com/gold-price-chart.do
rm96696 says:
Pound of rubbish…
Britishblue says:
Many speculators tried to get pound to Euro paroy in thin trading around new year. When it was obvious that this want going to happen sterling rose sharply the following week. Now with the obama bounce dollar and the news that our banks are worse, the vultures like Jim Rogers see the chance to do this again. You can be sure that if he and other speculators achieved this, they would make a fat killing and buy back sterling at much lower prices.
The UK economy is dire, but so it much of the world economy. Countries like Ireland, Italy and Spain are at breaking point. There is a very good chance one of them will exit EMU shortly. Remember how quickly we exited the ERM all those years again. If this happens by default sterling could rise. Remember the US economy has got gradually worse but since Lehmans the dollar has risen sharply. So there are many more factors to the rise or a fall of a currency than meet the eye.
Jim Rogers knew that the dollar would rise yesterday because of the inauguration. What a surprise he made his announcement yesterday.
P. Riddy says:
S2R, I’m looking at £700/ounce by March. I think the rebound you refer to already happened. Pound went from almost Euro parity to 10% stronger after the raft of post Christmas info. Rally’s now are fiat, vis-a-vis fiat as each currency races to the bottom. I’m nothing but bullish on Gold. Silver will fall first, once deflation kicks in, then you get the final gold bubble you refer to. Tho, consider this, gold will be worth nothing in fiat terms, not because gold is worth nothin, but because nobody anywhere will exchange fiat for gold. People will have to work to get it. This final decoupling would see gold and other commodities unsurping fiat as defacto free-market mediums for barter, e.g. currency by natural law. The first step of this process would see nobody accepting derivatives for fiat, that undermines fiat, which will then no longer be accepted for gold, or other goods, but I don’t see that until about 2010 or 11.
Re: Argentina, Did you see clashes between police and protesters about Isreal? The police couldn’t hold their line. The one example I saw of Police brutality, saw a police man attacking a protester, only to be thumped to the ground. The marchers carried onwards, unabated, unaffected. We are a tough lot, lets just hope that sites like this make people aware of the real culprits so that when protests happen, we see organised decorum in our protests against the system, rather than the sort of useless anarchy of the Brixton riots.