Bailout II - The Return of the Insolvent

Thrugelmir

sabretoothtigger wrote: »

If they have lent money from abroad, the weak £ would make it worse. I think Lloyds has to renew more debt next year, just a stable pound would help most I presume

The £ is trading lower against all major world currencies ( compared to October 2008). So crystallised liabilities converted back into sterling have fallen. Remember RBS operated in 57 countries around the world and was the largest bank in 27 at its peak.

Kennyboy66

Thrugelmir wrote: »

The £ is trading lower against all major world currencies ( compared to October 2008). So crystallised liabilities converted back into sterling have fallen. Remember RBS operated in 57 countries around the world and was the largest bank in 27 at its peak.

This is the wrong way round - if you owe money in dollars or euros and the pound weakens against those currencies then your liability in sterling will increase.


Besides, all the weakening against those two currencies occurred between October and Dec 2008.

Sterling is actually a little stronger against those 2 currencies than it was in Dec 2008.

sabretoothtigger

If we owe something that cannot easily be gained control of its a problem. Euro banks had this problem with dollar debts recently apparently, the weakness in the Euro is just a broad measure of that and they printed more dollars anyway I think

A much weaker pound could make us like Iceland, unable to pay foreign lenders. Unless some work around came which is why people would like us to keep in with the EU I think, can be dangerous being isolated

This wouldnt be a problem if we did regular (balanced) trade with all our creditors, but if the main basis is finance not actual goods they want then they might direct their financial support elsewhere. That also ties into why City business might be important, its a reason for cash of various currencies to come pay a visit at least


Our Gilts are rated better because they have a timescale to renewal of 13 years where as USA has 4 years on average. Banks are much less, I think alot of it might be 2012 dated

gilt yields reached 3.88% in February, but have now nearly halved to 2.1%.

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