Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Sterling Sinks as Britain Teeters on Brink of Bankruptcy

Currencies / British Pound Jan 22, 2009 - 08:48 AM GMT

By: Mike_Shedlock

Currencies Best Financial Markets Analysis ArticleThe British Pound has imploded on fears of bank nationalization and Prime Minister Gordon Brown's plan to give the Bank of England unprecedented powers to buy securities. This chart paints the not so pretty picture.

British Pound vs. US$ Monthly Chart

That is not a surprise to me.
January 22, 2008: Global Decoupling Myth Shattered In Equity Selloff .

Kiss goodbye the idea that the UK would decouple from the US credit crunch.

British Pound vs. US$ Weekly

The technical picture of the British Pound is weak. There has been a major trendline break, the 50EMA seems to be rolling over, and there is a big cross under the 50EMA. A pullback to the 200EMA seems likely. There is a good chance the entire runup from the April 2006 low is retraced.

We got that retrace and then some. Dollar bulls were right much of 2008, especially against the Pound. The UK is one country hell bent on outdueling Bernanke and the US in foolish activity.

Pound At Lowest Level Versus Dollar Since 1985

Bloomberg is reporting Pound Falls to Lowest Versus Dollar Since 1985 on Bank Concern .

The pound fell to its weakest level against the dollar since Margaret Thatcher was U.K. prime minister and dropped to a record against the yen for a second day on speculation the government will nationalize banks.

“The U.K.'s imploding,” said Jonathan Gencher, Toronto- based director of currency sales at BMO Capital Markets, a unit of Canada's fourth-largest bank. “You have all the concern about the financial sector and which banks are going to be nationalized. You have expectations that the Bank of England is going to be moving toward zero interest rates. That's weighing on the pound.”

Sterling dropped as much as 2.2 percent to $1.3622, the lowest level since September 1985, before trading at $1.3740 at 1:43 p.m. in New York, Against the yen, the pound fell 2.8 percent to 121.59 after reaching the all-time low of 119.42. The pound fell 1.1 percent to 93.61 pence against the euro.

The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to the median forecast of 28 economists surveyed by Bloomberg News.

Bank of England May Start Buying Assets

In news that rightfully should sink the pound, King Says BOE May Start Buying Assets Within Weeks

Bank of England Governor Mervyn King said officials may start buying assets in the next weeks to loosen credit markets as the lowest interest rates since 1694 fail to avert a “marked” recession.

The U.K. central bank may acquire securities such as corporate bonds and commercial paper to bolster lending to companies and consumers as banks rebuild balance sheets damaged by the global financial crisis, King said today. He said interest-rate reductions to the current 1.5 percent won't prevent a contraction in the first half of the year.

“Despite those big cuts, there remains a risk that inflation will fall below 2 percent,” the target rate, King said in a speech in Nottingham, England. “It is sensible for the Monetary Policy Committee to prepare for the possibility -- and I stress that we are not there yet -- that it may need to move beyond the conventional instrument” of the bank's benchmark interest rate.

King backed Prime Minister Gordon Brown's plan to give the Bank of England unprecedented powers to buy securities, unveiled yesterday along with a 100-billion pound ($140 billion) bailout for banks. Those tools may later be expanded to fight deflation as the British economy faces a recession this year that may be the worst since the aftermath of World War II.

“The bank is almost ready, but very willing, to engage in unconventional monetary policy techniques,” Philip Shaw, chief economist at Investec Securities in London, said in an interview. “There is still some room for interest rates to come down. But there's a good chance they'll use this facility.”

Notice how the big fear is that inflation will fall below 2 percent. How stupid can you get? The fear ought to have been about asset bubbles, speculation, and inflation, not low prices.

Britain On Edge Of Bankruptcy

Inquiring minds are reading how Gordon Brown brings Britain to the edge of bankruptcy

Iain Martin says the Prime Minister hasn't 'saved the world' and now faces disgrace in the history books.

They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious.

The Government's bail-out of the banks in October with £37 billion of taxpayers' money was supposed to have "saved the world", according to the PM, but now it is clear that it has not even saved the banks. Our money kept the show on the road for only three months.

It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. Unfortunately, the Treasury is pledged to honour those liabilities because it has guaranteed not to let a British bank go down. RBS has liabilities of £1.8 trillion, three times annual UK government spending, against assets of £1.9 trillion. But after the events of the past year, I wager most taxpayers will believe the true picture is worse.

And they come piled on top of the rocketing national debt, charitably put at £630 billion, or 43 per cent of GDP. The true figure is much higher because the Government has used off-balance sheet accounting to hide commitments such as PFI projects.

The PM and the Chancellor , both looking a year older every day, tell us that for their next trick they will buy more bank shares, create a giant insurance scheme for bad debt, pledge to honour liabilities without limit, cross their fingers and hope it all works. The phrase "bottomless pit" springs to mind for a reason: that is what they have designed.

Gordon Brown's nightmare, in which we are all trapped, is going to get much worse.

Iain Martin is thinking clearly. Unfortunately no one in the UK with any authority is. This is a known quirk of the Fiscal Insanity Virus , now rapidly spreading the globe.

FIV always seems to strike those with the power to do the most damage. Prime Minister Gordon Brown, Bank of England Governor Mervyn King, and the Chancellor of the Exchequer Alistair Darling, all seem to be in the late stages of FIV.

Hope of recovery is slim.

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in