When will Sterling hit Euro parity?

I caught a good article in today’s Guardian about the British Pound. The question is: how weak will Sterling get? My answer is below 1-to-1 with the Euro. But before I tell you why, let me interject a blurb from the article

U.K. central bank does not follow Fed to ZIRP

The U.S. Dollar got more bad news today when the Bank of England (BoE) decided to not follow the U.S. Federal Reserve’s lead to a Zero Interest Rate Policy (ZIRP). The BoE was seen as the most likely to follow in the Fed’s footsteps as i suffers from the same debilitating economic problems a popped housing bubble and record writedowns followed by job losses, a lack of consumption, and economic stagnation. Most importantly, U.K. banks simply are not lending. But that does not mean they want to follow the U.S. to zero

U.S. Dollar: Cliff Diving

Zero percent interest rates mean a weak currency. The U.S. Dollar is getting hammered. See these charts from the last day and a half of trading. Even the British Pound is cleaning up!

UK: House price fall moderates, prices still down 13.9% in year

Today the Nationwide released their monthly UK-wide figures on house prices and the numbers were better. House prices fell 0.4% in the last month, bringing the annual fall to 13.9%, down from 14.6% in October.

Nevertheless, this is the 13th month in a row that house prices have fallen in the UK. Obviously, the UK is poised to have a sharp property fall that is worse than in the early 1990s

The unkindest cut: the BoE got it wrong

Below is a link to an article I wrote about the Bank of England’s aggressive 1.5% interest rate cut that appeared in yesterday’s Guardian newspaper. The unkindest cut, GuardianThe long and short of it is that I am very skeptical about the need for such a large cut. Many pundits felt the BoE was behind

BoE makes a dramatic 1 1/2 point cut

The Bank of England has cut interest rates to 3%, a 1 1/2 point cut. Just weeks ago, the BoE Governor Mervyn King was writing to the Government explaining how they had let inflation run out of control. However, with the economy tanking, credit short of hand and commodity prices plummeting, the Monetary Policy Committee

The GDP deflator

This post is a guide to understanding the GDP deflator, which the government uses to arrive at the economic growth numbers we all hear on TV or read about in the newspaper. This post is the product of a lot of background research and some good confirmatory side conversations on the topic with Jake at

Nationwide: UK house prices down 14.6%

The rate of decline in house prices in the UK is accelerating. Today the Nationwide released their monthly UK-wide figures on house prices and the numbers were fairly grim. House prices fell 1.4% in the last month alone, bringing the annual fall to 14.6% or nearly 20% in inflation-adjusted terms. This is the 12th month

Credit markets are easing again

Credit markets continue to return to less extreme levels. While we are nowhere near where we were before the onset of the Lehman-induced panic, we are well off the panic levels of the worst of the crisis. The Times of London is reporting that Libor rates in Dollars, Sterling and Euros are all coming down

The Last King of Scotland

In Scotland, one of the UK’s most venerated names, the Royal Bank of Scotland, a bank that prints its own bank notes as legal tender, has been eviscerated by the over-leveraging and risk-taking of its CEO Sir Fred Goodwin. Sir Fred, an accountant by training, started his career at Touche Ross, a precursor to the

Nationwide: example of how UK recap scheme matters

If you don’t think that the recapitalisation scheme by Gordon Brown doesn’t matter, then take a look no further than Nationwide Building Society. The mutual company is not under pressure in the equity markets like RBS, HBOS or Barclays. Yet, it too is going to take full advantage of the capital strengthening that the UK

The Swedish roots of the UK bailout plan

Gillian Tett makes a good point in today’s FT about the clear benefits of a systemic solution to crisis. Where the UK policy makers were bumbling along until today, they have taken the problem firmly in hand, finally recognizing the systemic risk. Tett sees this sensible policy as one hearkening back to the Swedish solution last decade. The U.S. would do well to take notice