Monday, June 18, 2012
Got sterling, got gold?! Devaluation announced, Argentina style.
Central Banks "Should Start Easing Soon", BoE Calls For "Large Sterling Depreciation", Greek Vote "Should Support" Gold Bullion
Well here we have it. Petrol prices fell nicely, but BOE wants to use that to pay of the structural deficit so will massively devalue your currency to pay off the national debt. This comment, also indicates what will occur as Eurozone debts are downgraded, as BOE prints to backstop losses. This part of the banking problem is largely a problem of government. They force banks to put a percentage of their capital in Sovereign debt. This is what creates the moral hazard because governments, not having to compete for borrowing sap it from the private sector without justification and, put cash in risky places. If banks had a choice where to put their capital they would no doubt start asking government questions about their investment decisions and the crisis would never have occurred.
Posted by libertas @ 11:06 AM (1974 views)
5 thoughts on “Got sterling, got gold?! Devaluation announced, Argentina style.”
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libertas says:
King also stated in his speech that “the big picture was, and remains the need to generate recovery while balancing our economy, supported by a loose monetary policy and A LARGE DEPRECIATION OF STERLING…and a gradual but steady reduction in the [government’s] structural budget deficit.”
Since the onset of the crisis in August 2007, the Pound has fallen nearly 25% against the Dollar. Sterling Gold Prices meantime have risen more than 200%.
Daveats says:
no no no please no more depreciation
nod2glod says:
you can understand the temptation when gilt yields are an record lows for the government to push forward with looser monetary policy. So far the bond markets of countries which can’t print have been attacked. It will be interesting to see what happens when UK, Japan or US comes under pressure, and who will be first. I’m guessing it will be the UK due to our exposure and political connection to europe.
bankster says:
If you can’t grow and can’t cut the only way out is to inflate your way out. The problem in Greece is they aren’t able to without leaving the euro.
The problem in this country has been that the banks are deleveraging faster than the BoE can print new money. M4 is still ~£160bn down from peak despite £325bn QE so far.
general congreve says:
I’m going to buy a house with mine anyway, so doesn’t affect me, apart from if they don’t let asset prices fall, by continually funneling money to the banks so they don’t have to realise the real value of their assets, which of course isn’t happening, la, la, la, la, la, I can’t hear you!!!