Sterling Crisis Looms as U.K. Unraveling Points to Budget Cuts

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If this guy's thoughts come to fruition, my thoughts on a housing market trough today in another thread would be blown away, yet I reckon less than 1% of the country has any idea about this issue.

June 30 (Bloomberg) -- The state of the U.K. economy fills British financial historian Niall Ferguson with foreboding.
“The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one,” the Harvard University professor says.
Ferguson’s concern stems from the deterioration in the U.K.’s public finances, which prompted Standard & Poor’s to warn on May 21 that the country could lose its AAA debt rating. The firm estimated the cost of propping up Britain’s banks at 100 billion pounds ($166 billion) to 145 billion pounds and said government debts could double to almost 100 percent of gross domestic product by 2013.

I thought this quote was particularly alarming.

“We’re not Iceland or Ireland, but we’re closer to them than we are to the U.S.,” says Ferguson, author of “The Ascent of Money".

http://www.bloomberg.com/apps/news?pid=20601102&sid=aptnrMueIerQ

Degenerate

Well he's written a book, must be true then.

StevieJ

Your on form tonight AD, never mind you will have your beloved Tories in soon :eek:

Generali

StevieJ wrote: »

Your on form tonight AD, never mind you will have your beloved Tories in soon :eek:

What do you dislike about the Tories, StevieJ?

treliac

Generali wrote: »

What do you dislike about the Tories, StevieJ?

He's a socialist.

Trouble is Labour MPs, nowadays, aren't!

PasturesNew

So, what is a sterling crisis? (short, simple words please)

Generali

PasturesNew wrote: »

So, what is a sterling crisis? (short, simple words please)

Traditionally it's been when the Government has tried to maintain a fixed exchange rate and markets have decided that the pound is worth less than the Government would like it to be. In the end (as Mrs Thatcher famously said) you can't buck the market and Governments have been forced to devalue the currency.

Outside a fixed exchange rate system, I guess a Sterling crisis would be a fall in value of the pound by enough to make a material difference to British peoples' standard of living.

StevieJ

Generali wrote: »

What do you dislike about the Tories, StevieJ?

What I dislike is the assumption that things would have been so different if they had been in power, even though people claim we should have more regulation of the finance industry which is anathema to the Tory party.

StevieJ

Generali wrote: »

.

Outside a fixed exchange rate system, I guess a Sterling crisis would be a fall in value of the pound by enough to make a material difference to British peoples' standard of living.

I bet the Irish wished they had a Punt crisis

StevieJ

How goes it Gen? where are you up to in the job stakes? I am a little confused.

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Degenerate wrote: »

Well he's written a book, must be true then.

Why do you come to this point of view, I don't think I read in the article that it was true, he was just looking at the facts as he sees them and making a calculated guess, pretty much like everyone else is, including, rather worryingly the government.

I also didn't post the article because I'm absolutely convinced that this will happen, I posted it as a point of debate.