Thursday, March 12, 2009


As bad as the US financial picture is, the UK financial picture may be worse. Unbeknown to most, prior to 2008, the consumer debt per capita in the UK was higher than the US. The real estate bubble, especially in London, was greater than US trouble spots in California and Florida.

Further, London has been challenging NY for the finance capital of the world this decade and as a result the banks were growing quickly through mergers and acquisitions. Well as of today, the bailout money that the British government has extended to the banking system is 16% of the UK's GDP.

You know how bad the US problem is, but for all the bailout money given out so far, it amounts to only 6% of GDP. And although neither government is done extending bailout funds, the UK problem may be a bigger problem relatively than the US problem. This argues for the British pound to continue to fall against the dollar and the euro. The only thing that keeps the pound up against those currencies is that the euro and the dollar are in so much trouble themselves.

Cheers, Mike

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