Tuesday, 20 January 2009

Jim Rogers: U.K. Pound Is Finished

"“I would urge you to sell any sterling you might have,” said Jim Rogers, chairman of Singapore-based Rogers Holdings, in an interview with Bloomberg Television. “It’s finished. I hate to say it, but I would not put any money in the U.K.”

Rogers correctly predicted the start of the commodities rally in 1999. In January 2008, he advised investors to sell the U.S. currency. The Dollar Index traded on ICE futures, which tracks the greenback against six major trading partners, rose 6 percent last year
.", Jim Rogers, 20 January 2009.

Would the UK move toward the Euro? it appears quite difficult after Central bank, Government action on the U.K. Financial System.


Andrew said...

Trichet mentioned some while back that the UK was the largest trading partner for the Eurozone and it was ahead of the USA.

I am not so sure the pound is finished but this kind of valuation will put a strain on the Euro area also.

Almost certainly we will get soon some ultra low Eurozone interest rates. How low will low actually be?

HousingFinland said...

My understanding, based on the last ECB press conference, March will be a very important if not historical moment for the ECB, at least hinted by Trichet.

2% has been an hitorical low for the whole history of the ECB as well as for the Bundesbank (ex- German central bank, that more or less represent the ECB today).

So my opinion is that they will go lower than this 2%, maybe 1.5% or 1% ... no lower.

In the same way when price rise, the ECB increase interest rate more than need to anchor inflation expectation. The same is in the other way round. You will see negative inflation going toward the summer- some kind of deflation - if it persist it could be disastrous for the European economy thus a shock is need i.e lower than the 2%.

Now if it doesn't do the trick and if the economy doesn't start to pick as all try to psychologically imply then we are heading for big troubles...but then psychologic + government intervention could help overcoming this situation.

We just have to wait and see after the summer... as everybody want to see the light at the end of the tunnel..hopefully this is not an electric one sponsored by fortum that can be turned off any time, if bills are not paid...

HousingFinland said...

For info: "The Bank of Canada slashed its key interest rate to the lowest since the institution was founded in 1934 and signaled that more cuts may be needed to jolt the economy out of recession and stabilize credit markets."

Just to show you that what we have is not a traditional recession as it seems that central bankers are plying fire fighters.

Unfortuntely, there is a limit on how low you can bring the benchmark interest rate, which is zero.

That's why it's easier to fight inflation than deflation... there is no upper limit...

In fact in the US, interest rates should be negatif but it's impossible...

Andrew said...

interest rates can be made negative. There are Fed discussion papers on taxing reserves and even introducing metal strips in money to tax it/devalue it to force peoople to spend the issued money.

I see no reason why the ECB cannot go to Zero and beyond. We already have had/still have negative real interest rates. if inflation falls then we need to go further and it can be done - if we wish to borrow from the future to save the planet as it exists today.

If we just want to have a sound monetary policy after the madness of the last years then most surely we will have global implosion and chaos and the evolution/revolution of something entirely new and probably anarchic.

If money is devalued then people will tend to move out of cash and into assets. And importantly if money is devalued then debt will be eroded. Savers are now the governments enemy as much as they are the banks friends. The bank guarantees were not wholey good ideas. The government risks saving its friends to destroy itself and ultimately everybody else.

If inflation spikes higher then the money borrowed from the future can be returned to the past by destroying it.

This seems to be the plan so far.