The British economy is mortally wounded, and Gordon Brown is quite frankly not the man to fix it.
Britain faces the real risk of a crisis in the pound that will be worse than its euro peg crisis made famous by George Soros and the gnomes of Zurich chanting "Sell 100 quid! Sell 100 quid!"
Will investors flee from currency to currency in search of a safe haven as the global financial system collapses? Who can say. But it is certainly past time to hedge one's bets with sources of alternative wealth protection.
The Independent (UK)
Run on UK sees foreign investors pull $1 trillion out of the City
By Sean O'Grady, Economics correspondent
Saturday, 7 March 2009
Banking crisis undermines Britain's reputation as a safe place to hold funds
A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (£700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London.
Some $597.5bn was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5bn hemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter.
The revelation will fuel fears that the UK's reputation as a safe place to hold funds is being fatally compromised by the acute crisis in the banking system and a general trend to financial protectionism internationally.
This week, Lloyds became the latest bank to approach the Government for more assistance. A deal was agreed last night for the Government to insure about £260bn of assets in return for a stake of up to 75 per cent in the bank. The slide in sterling – it has shed a quarter of its value since mid-2007 – has been both cause and effect of the run on London, seemingly becoming a self-fulfilling phenomenon. The danger is that the heavy depreciation of the pound could become a rout if confidence completely evaporates....
