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Tuesday, December 01, 2009

IT'S NOT JUST DUBAI

Photo by Alan Murray-Rust

England is in trouble, just like Dubai?

England risks capital flight?

"It is true the UK is also in a multi-billion pound mess after embarking on an equally insane debt-fuelled splurge.

"And yes, we are planning to borrow three times as much as Dubai in this financial year alone.

"And yes, our politicians also have a tradition of burying bad news on public holidays.

"And yes, the Bank of England did lend HBOS and Royal Bank of Scotland more than £60 billion of taxpayer money without telling us.

"So we're not exactly innocent here." - The Emerging Market Built On Sand



According to a report on the UK by Morgan Stanley bank (Morgan Stanley fears UK sovereign debt crisis in 2010 ):

"Growing fears over a hung parliament would likely weigh on both the currency and gilt yields as it would represent something of a leap into the unknown, and would increase the probability that some of the rating agencies remove the UK's AAA status...

"In an extreme situation a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in UK government bonds.

"The Bank of England may feel forced to hike rates to shore up confidence in monetary policy and stabilize the currency, threatening the fragile economic recovery."

Morgan Stanley says sterling might fall a further 10% in trade-weighted terms.

This would complete the steepest slide in the pound since the industrial revolution.

It would be worse than the 30% drop around 1931.

UK equities would perform reasonably well. (Morgan Stanley fears UK sovereign debt crisis in 2010 )



Scotland, with its oil wealth, would be better off without England.

SNP outlines Scottish independence referendum plan

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