(Dis)union Jack? – Whether the euro has tumbled in recent months to pass under the American dollarthe case of pound sterling British seems even more dramatic. To the point that the Bank of England (BoE, the Central Bank of England) will increase its “interventions” (manipulations?) to try to save the situation.
The pound isn’t even worth its weight in pudding anymore
The economic situation of UK will not have needed “nasty cryptocurrencies” to be violently destabilized. While central bankers are worried about the “threat” to financial stability that would be Bitcoin (BTC) and its ilk, it’s once again – and as always in history – a loss of trustworthy in the fiduciary currency which is at the root of this new crisis.
Since the beginning of 2022, the pound sterling (GBP) thus depreciated by $1.36 (USD) only $1.06 today, September 28. A fall in an almost straight line of more than 22%which is huge for such a currency.
A situation so alarming that, in a press release, the Bank of England speaks of “significant risk to financial stability”. Indeed, the British debt market (government bonds) is experiencing dysfunctions. The solution ? Printing magic money: the BoE announces that it will do so buy government bonds itself.
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The Bank of England promises “temporary and targeted purchases” long-term bonds. And as the Financial Times reports, the manipulation seems (so far) to work.
Indeed, after the announcement, the interest rate English bonds (“gilts”) at maturity of 30 years have finally stopped exploding upward. These rates had reached a 20 year high exceeding the 5%and are “magically” lowered a little above the 4% after the intervention of the BoE.
It must be said that high bond rates, especially with such a speed in their rise, could strangle the households and companies British wishing to contract bank loans. And again, if they can already evenget some.
And who says reduction in the flow of credit, says risk of economic recession. Sacred vicious circle in perspective, in short. And that the taxpayers be reassured (no, not at all in fact): the redemption operation will be “fully indemnified by the British Treasury”. Understand: by their taxes. On the side of the European Central Bank (ECB) and the euro, however, it is not much better, since Christine Lagarde prefers to let inflation runrather than protecting European households from rising prices.
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