That’s very, very interesting. I would say that the UK economy has some of the same issues facing the US economy (housing bubble, trade deficit). Their housing bubble is just as bad if not worse than ours; their deficit is much smaller, though. I can’t quite see why the Bank of Italy would pick the sterling (over the yen or the swiss franc, let’s say).

Speaking of UK, I should probably bring into discussion that the true RE “canary in the coal mine” is not San Diego, but London (and also Sydney, down under). The RE cycle in the national US market is about one year behind SD, and two years behind London. London last year was exactly like San Diego now: pretty slow. But this year it surprised most analysts by going even further ahead. “Dead cat bounce?” I guess we’ll see. The Bank of England just started raising rates (again), and their governor has been much more vocal against the property bubble than our Fed.