I wouldn’t bet on the pound rising much soon, at least not in any long term or structural sense. England’s banking problem is almost as immense as Iceland’s. Its a small country, relative to the size of its banking industry. Its currency isn’t a reserve and its banks took even more risks than US banks.
I know its hard to imagine, but as this unravels you are going to see that many banks in Europe were FAR more leveraged than the US. The City competed over the last 20 years with Wall St by offering even more aggressive products. If Gordon Brown does end up going through with bank nationalization, the pound is really screwed. We could see parity or worse.
Just remember the deflation is global, the reflation is global and so currency debasement is relative. People running from the dollar have to run to something that isn’t being inflated even worse. Once the actual inflation makes it out from behind bank walls and people see the inflation, or we get enough inflation to counter the current deflation, get the fuck out of paper currencies. For now however its deflation ahoy!
Josh
