The better economists have not been crying ‘Wolf” in recent months.
The probvlem has been that Brown has been completely focuyssed on
winning his election and has taken dreadful risks with the economy in
the process. His gamble has failed and we’ll suffer the results for
years. Note below that if collapse came taxes would have to rise by
astronomical amounts to keep the country afloat. The burden would in
fact cause complete disaster.
xxxxxxxxxxxxx cs
=
TELEGRAPH 22.5.09
1. Labour must go if the economy is to be saved
Edmund Conway says Gordon Brown has failed to address fears about our
soaring debt mountain.
Edmund Conway
When the delegation of International Monetary Fund economists
finished their annual survey of the British economy this week, they
did not wait to be escorted out of the Treasury. The six men and
women simply packed their calculators into their bags, handed in
their passes and quietly walked out of the building, leaving an empty
room and a trail of bemused officials in their wake.
Given the chaos which ensued in the following 24 hours, this rapid
departure should have been taken as a warning. The IMF's verdict,
delivered on Wednesday, was pre-agreed with the Treasury: even so,
there was no disguising the organisation's concern about the state of
the economy and public finances. The recent Budget, it concluded,
hadn't done the trick. Alistair Darling's plans to cut public debt
were not ambitious enough, his projections of economic growth
unrealistic. It is one thing for a newspaper columnist to say this;
it is another for the world's leading economic authority to say it.
Yesterday morning, Standard & Poor's took its cue from the IMF, when
the prominent ratings agency issued a warning over Britain's
creditworthiness. Since 1978, when such ratings began, Britain has
been awarded an immaculate AAA – the mark of a healthy, leading world
economy. That golden run could come to an end. "Outlook negative" is
now emblazoned on every pound of debt issued by the Government,
meaning there is a good chance – on past evidence, a 37 per cent
chance – that Britain's debt will be downgraded within a couple of
years.
Given the responsibility borne by ratings agencies for the financial
crisis – they failed to identify the real risk surrounding mortgage-
related debt instruments – such organisations are hardly the most
popular or reputable outfits. But ratings on sovereign debt still
matter. They determine the behaviour of investors (including, for
that matter, the Bank of England). Should Britain be downgraded,
there will be an instant exodus of hot money from around the world.
This has been a horrible fortnight for Parliament, so it probably
ought not to surprise us that the Treasury was unable to issue a
particularly convincing response to S & P. It muttered about how the
decision may be rescinded if the public finances start to improve,
but this is pie-in-the-sky stuff. No sooner had S & P made its
announcement than the Government admitted recording an £8.5 billion
deficit in April – the worst ever for that month.
Britain's secret economic weapon – the one that has fostered growth
and expansion since before Victorian times, and which has kept
foreign and domestic investors paying funds into the public purse –
is double-pronged: a strong and stable rule of law and governance,
and a history of paying our debts back.
Parliament's existential crisis over the past fortnight has raised
faint questions over the first of these; this week, the IMF and S & P
raised official concerns over the second. As I understand it, the
Fund's economists were horrified when they set eyes on the Treasury's
Budget figures. It isn't merely that the Government is set to borrow
so much over the next few years – so, after all, is every other
country – it is that much of what that borrowing is intended to fund
could conceivably be cut. Most of the extra spending is not caused by
the so-called automatic stabilisers which kick in when recession
bites, but is down to Labour's stubborn commitment to continued
annual increases in budgets for health, education and its other
priorities.
Even were these to be chopped back, as the IMF recommends, any future
government will still be left facing a stark dilemma: accept stagnant
economic output for years as debt is repaid through higher taxes or
lower spending, or default on the debt by inflating it away or
refusing to pay. The Fund's depressing verdict is that, even though
good work has been done, it will take more effort and pain before
Britain is anywhere near the edge of the woods.
The incumbents in Downing Street have shown they are incapable of
meeting this challenge. Let's try for a moment to think purely in
economic, not political, terms. As a deficit nation, Britain is
reliant on investors – whether the pensioner from Kent or the central
bank reserve manager from Beijing – buying its debt. If the
Government was, all of a sudden, unable to raise this debt from the
markets, and had to balance its Budget, it would take a 42.7p
increase in the basic rate of income tax to make up the shortfall.
It is, therefore, essential that the nation's creditors are not
driven off. But they are starting to lose faith. The IMF and S & P
reports are littered with repetition of the c-word – credibility.
Gordon Brown, as Chancellor and Prime Minister, has squandered any
trust investors had in him. Markets want a cogent set of rules and
die-cast promises to bring the public finances back in order, and/or
a change of personnel.
This leads us to a stark conclusion which, from an economic
perspective, it no longer feels controversial to utter: vote Gordon
Brown at the next election and you're voting for a real economic and
fiscal meltdown.
===============
2. Britain's AAA rating under review for first time in 30 years
Britain's economic stability has come under the gravest scrutiny yet
again after the Government's debt was placed under official review by
the world's leading ratings agency for the first time in more than
three decades.
By Edmund Conway, Economics Editor
In a decision which sent shivers through the currency, gilt and stock
markets, Standard & Poor's (S&P) announced that it had put Britain's
AAA rating onto "outlook negative". The decision comes only a day
after the International Monetary Fund warned that the Treasury needs
to cut debt faster than promised in the Budget.
S&P explained that the impact of the financial and economic crisis
would be to push Britain's total net debt up towards 100pc of gross
domestic product, rather than the 80pc forecast by the Treasury. Its
decision represents the first time the UK's top-tier rating has been
officially put under question since it first started being rated in
1978. Historically, just over one-in-three countries put on "outlook
negative" are downgraded in the subsequent 24 months; those that are
not usually retain their rating by cutting deficits significantly
through tax rises or spending cuts.
Should the UK be downgraded, it would join the ranks of Japan,
Ireland and Spain, all of which now have AA ratings. According to
analysts, such a move would automatically trigger an exodus of
investment from the country, since many currency managers are obliged
to hold only a limited portfolio of non-AAA sovereign investments.
In the wake of the decision gilt yields on the benchmark 10-year gilt
instantly shot 12 basis points higher to 3.7pc, before settling back
at around 3.66pc by the end of the day. The FTSE 100 index dropped
2.75pc to 4345.43 points and the pound dipped sharply against the
dollar before recovering its ground and closing up a third of a cent
at $1.5719.
The S&P statement warned that the agency would be watching the UK
closely ahead of next year's expected election to identify whether
the main political parties are likely to put the public finances back
in order.
It said: "The rating could be lowered if we conclude that, following
the election, the next government's fiscal consolidation plans are
unlikely to put the U.K. debt burden on a secure downward trajectory
over the medium term."
Alan Clarke, UK economist at BNP Paribas, said: "This is a shot
across the bows for both parties. Ahead of the election in mid-2010
- either plan to get the public finances back in order, or face
downgrade."
Central to S&P's decision is its assessment that the public finances
will be more damaged by the banking crisis and the ensuing credit
crunch than the Treasury has projected. The agency's David Beers said
UK national debt would soon reach nearly 100pc of gross domestic
product by 2013 - a level that "would in Standard & Poor's view be
incompatible with a 'AAA' rating."
In part the difference is due to S&P's pessimistic view of the impact
on the public finances of the banking bail-outs. It calculated that
the eventual cost to taxpayers from rescuing the banks – in other
words the amount of cash pumped into the system that would simply be
lost – would hit £100bn-£145bn: up to 10pc of GDP. This, plus a more
realistic economic forecast, would mean the outlook for the public
finances is far worse than the Budget laid out. The Treasury has
already had to scale up its borrowing forecasts repeatedly over the
past couple of years as the scale of the recession has become
apparent. The weaker the economy, the higher the Government's
borrowing as it suffers a shortfall of tax revenue and has to absorb
the extra cost of supporting Britain's unemployed.
Barely 15 minutes after S&P's announcement, the Treasury said that it
borrowed £8.5bn last month – the highest total for an April since
records began. April is usually a big month for tax income as HM
Revenue and Customs receives an influx of cash from businesses.
The Budget forecast that the Government will need to borrow a total
of £175bn this year – the highest amount, as a share of national
income, in post-war history.
Many economists fear that if S&P does downgrade the UK, the Treasury
will struggle to raise money at future auctions of gilt-edged debt.
However, in a reassuring sign, the Debt Management Office
successfully auctioned off £5bn worth of short-term debt – its
biggest auction ever, barely an hour after the rating decision.
Nevertheless, economists fear that strains will start to show in the
gilt market when the Bank of England's programme of quantitative
easing, through which it is buying £125bn of gilts, comes to an end.
However, while most attention was focused on the UK yesterday,
experts have warned that it is unlikely to be alone in facing a
potential downgrade. Indeed, ING analyst Chris Turner said the S&P
decision raised questions over the United States's rating.
The US faces a similar constellation of economic and financial
problems, with its own net debt set, according to the Congressional
Budget Office, to spiral to above 80pc of GDP in the coming decade.
===============
3.Britain looks to the land of the rising sun with envy
Loss of "AAA" status is not in itself a death sentence. A string of
rich countries have been ejected from the club over the past decade
without calamitous results, and most have clawed their way back in
after a few years of penance.
By Ambrose Evans-Pritchard
It is less clear whether Britain can hope to muddle through so easily
if Standard & Poor's pulls the trigger, given its reliance on
foreigners to fund its debt and deficits.
Norway lost its AAA in 1987, Finland in 1990, Sweden in 1991, Canada
in 1994 and this year Spain and Ireland, both acutely vulnerable
since, as eurozone states, they cannot devalue their way out of
trouble or print money. The risk does not go away in a currency
union: it shifts from debasement to default.
Perhaps most surprising is that Japan fell in 1998, though it was by
then the world's top creditor with more than $1.5 trillion of net
foreign assets (now $3 trillion). Lender abroad, it is a mega-debtor
at home, the result of Keynesian pump-priming to fight perma-slump.
The stimulus vanished into those famously empty bridges in Hokkaido.
"The Japanese didn't take the downgrade seriously," said Russell
Jones, of RBC Capital, a Japan veteran from the 1990s. "They didn't
think they would have any trouble funding their debt."
They were right. Yields on 10-year bonds fell to 1pc by the end of
the decade, and to 0.5pc in the deflation scare of 2003 – confounding
those who expected Japan's emergency stimulus to stoke inflation and
push up yields.
Eisuke Sakakibara, then the finance minstry's "Mr Yen", was
insouciant enough to swat aside the Moody's downgrade as an
irrelevance. "Personally, I think if Moody's continues to behave like
that, the market evaluation of Moody's will go down,'' he said.
Japan had a crucial advantage: its captive bond market. Some 95pc of
government debt was held by Japanese savers or the big pension funds.
The foreign share of UK public debt has risen from 18pc to 34pc over
the past six years. The central banks of Asia, Russia and emerging
economies like gilts because they offered 1pc extra yield over bunds.
This was the "proxy euro" trade.
"We're far more vulnerable than Japan ever was," said Albert Edwards,
global strategist at Société Générale. "Japan had a huge current
account surplus and a strong currency. The UK is a deficit country,
at risk of a sterling collapse. Years of UK macro-mismanagement have
dragged the UK economy to the edge of a precipice."
S&P said yesterday that UK debt is likely to reach 100pc of GDP in
the "medium term" even if the Government tightens its belt. Prof
Charles Goodhart from the London School of Economics said the danger
is a debt compound trap when interest rates rise. "If that happens
we're in real trouble. We could be close by next year," he said.
Britain is at the mercy of foreign powers. Marc Ostwald, of Monument
Securities, said Russia's central bank held 9.7pc of its reserves in
sterling at the end of last year. "They are going to lighten the load
if Britain is downgraded. It will be slow attrition," he said.
Hong Kong's monetary authority is obliged to hold 96pc of its
reserves in AAA assets, and a number of small states have similar
restrictions.
"The question is which foreigners are holding your bonds," said Hans
Redeker, currency chief at BNP Paribas. "Some countries have to
reduce exposure because of Value-at-Risk rules if the UK loses its
AAA. Britain has a double problem because it has to raise £220bn in
gilts this year at a time when foreign direct investment is going to
fall off sharply because of the new tax regime.
"The only way out of this is for Britain to tighten fiscal policy and
keep monetary policy loose. That will weaken the currency, which is
what you need. If they're not disciplined about spending, Britain is
going to run into huge problems."
Hopefully, we can at least count on the big powers to shield us from
total disaster. "Japan is part of the G7 and the last thing they want
to do is destabilise the market by selling gilts: they are good
allies of the West," said Brad Setser, of the US Council for Foreign
Relations.
Besides, where can China, Korea, or Brazil, if they want, rotate out
of dollars into other currencies? Simon Derrick, currency strategist
at the Bank of New York Mellon, says global reserves are 59pc in
dollars, 31pc in euros, 5.5pc in pounds, 2pc in yen, so not much
fresh money will go into US Treasuries.
"The advantages of sterling may sound far-fetched but it is really
not so bad in a world where everybody has got problems," he said.
TELEGRAPH 22.5.09
1. Labour must go if the economy is to be saved
Edmund Conway says Gordon Brown has failed to address fears about our
soaring debt mountain.
Edmund Conway
When the delegation of International Monetary Fund economists
finished their annual survey of the British economy this week, they
did not wait to be escorted out of the Treasury. The six men and
women simply packed their calculators into their bags, handed in
their passes and quietly walked out of the building, leaving an empty
room and a trail of bemused officials in their wake.
Given the chaos which ensued in the following 24 hours, this rapid
departure should have been taken as a warning. The IMF's verdict,
delivered on Wednesday, was pre-agreed with the Treasury: even so,
there was no disguising the organisation's concern about the state of
the economy and public finances. The recent Budget, it concluded,
hadn't done the trick. Alistair Darling's plans to cut public debt
were not ambitious enough, his projections of economic growth
unrealistic. It is one thing for a newspaper columnist to say this;
it is another for the world's leading economic authority to say it.
Yesterday morning, Standard & Poor's took its cue from the IMF, when
the prominent ratings agency issued a warning over Britain's
creditworthiness. Since 1978, when such ratings began, Britain has
been awarded an immaculate AAA – the mark of a healthy, leading world
economy. That golden run could come to an end. "Outlook negative" is
now emblazoned on every pound of debt issued by the Government,
meaning there is a good chance – on past evidence, a 37 per cent
chance – that Britain's debt will be downgraded within a couple of
years.
Given the responsibility borne by ratings agencies for the financial
crisis – they failed to identify the real risk surrounding mortgage-
related debt instruments – such organisations are hardly the most
popular or reputable outfits. But ratings on sovereign debt still
matter. They determine the behaviour of investors (including, for
that matter, the Bank of England). Should Britain be downgraded,
there will be an instant exodus of hot money from around the world.
This has been a horrible fortnight for Parliament, so it probably
ought not to surprise us that the Treasury was unable to issue a
particularly convincing response to S & P. It muttered about how the
decision may be rescinded if the public finances start to improve,
but this is pie-in-the-sky stuff. No sooner had S & P made its
announcement than the Government admitted recording an £8.5 billion
deficit in April – the worst ever for that month.
Britain's secret economic weapon – the one that has fostered growth
and expansion since before Victorian times, and which has kept
foreign and domestic investors paying funds into the public purse –
is double-pronged: a strong and stable rule of law and governance,
and a history of paying our debts back.
Parliament's existential crisis over the past fortnight has raised
faint questions over the first of these; this week, the IMF and S & P
raised official concerns over the second. As I understand it, the
Fund's economists were horrified when they set eyes on the Treasury's
Budget figures. It isn't merely that the Government is set to borrow
so much over the next few years – so, after all, is every other
country – it is that much of what that borrowing is intended to fund
could conceivably be cut. Most of the extra spending is not caused by
the so-called automatic stabilisers which kick in when recession
bites, but is down to Labour's stubborn commitment to continued
annual increases in budgets for health, education and its other
priorities.
Even were these to be chopped back, as the IMF recommends, any future
government will still be left facing a stark dilemma: accept stagnant
economic output for years as debt is repaid through higher taxes or
lower spending, or default on the debt by inflating it away or
refusing to pay. The Fund's depressing verdict is that, even though
good work has been done, it will take more effort and pain before
Britain is anywhere near the edge of the woods.
The incumbents in Downing Street have shown they are incapable of
meeting this challenge. Let's try for a moment to think purely in
economic, not political, terms. As a deficit nation, Britain is
reliant on investors – whether the pensioner from Kent or the central
bank reserve manager from Beijing – buying its debt. If the
Government was, all of a sudden, unable to raise this debt from the
markets, and had to balance its Budget, it would take a 42.7p
increase in the basic rate of income tax to make up the shortfall.
It is, therefore, essential that the nation's creditors are not
driven off. But they are starting to lose faith. The IMF and S & P
reports are littered with repetition of the c-word – credibility.
Gordon Brown, as Chancellor and Prime Minister, has squandered any
trust investors had in him. Markets want a cogent set of rules and
die-cast promises to bring the public finances back in order, and/or
a change of personnel.
This leads us to a stark conclusion which, from an economic
perspective, it no longer feels controversial to utter: vote Gordon
Brown at the next election and you're voting for a real economic and
fiscal meltdown.
===============
2. Britain's AAA rating under review for first time in 30 years
Britain's economic stability has come under the gravest scrutiny yet
again after the Government's debt was placed under official review by
the world's leading ratings agency for the first time in more than
three decades.
By Edmund Conway, Economics Editor
In a decision which sent shivers through the currency, gilt and stock
markets, Standard & Poor's (S&P) announced that it had put Britain's
AAA rating onto "outlook negative". The decision comes only a day
after the International Monetary Fund warned that the Treasury needs
to cut debt faster than promised in the Budget.
S&P explained that the impact of the financial and economic crisis
would be to push Britain's total net debt up towards 100pc of gross
domestic product, rather than the 80pc forecast by the Treasury. Its
decision represents the first time the UK's top-tier rating has been
officially put under question since it first started being rated in
1978. Historically, just over one-in-three countries put on "outlook
negative" are downgraded in the subsequent 24 months; those that are
not usually retain their rating by cutting deficits significantly
through tax rises or spending cuts.
Should the UK be downgraded, it would join the ranks of Japan,
Ireland and Spain, all of which now have AA ratings. According to
analysts, such a move would automatically trigger an exodus of
investment from the country, since many currency managers are obliged
to hold only a limited portfolio of non-AAA sovereign investments.
In the wake of the decision gilt yields on the benchmark 10-year gilt
instantly shot 12 basis points higher to 3.7pc, before settling back
at around 3.66pc by the end of the day. The FTSE 100 index dropped
2.75pc to 4345.43 points and the pound dipped sharply against the
dollar before recovering its ground and closing up a third of a cent
at $1.5719.
The S&P statement warned that the agency would be watching the UK
closely ahead of next year's expected election to identify whether
the main political parties are likely to put the public finances back
in order.
It said: "The rating could be lowered if we conclude that, following
the election, the next government's fiscal consolidation plans are
unlikely to put the U.K. debt burden on a secure downward trajectory
over the medium term."
Alan Clarke, UK economist at BNP Paribas, said: "This is a shot
across the bows for both parties. Ahead of the election in mid-2010
- either plan to get the public finances back in order, or face
downgrade."
Central to S&P's decision is its assessment that the public finances
will be more damaged by the banking crisis and the ensuing credit
crunch than the Treasury has projected. The agency's David Beers said
UK national debt would soon reach nearly 100pc of gross domestic
product by 2013 - a level that "would in Standard & Poor's view be
incompatible with a 'AAA' rating."
In part the difference is due to S&P's pessimistic view of the impact
on the public finances of the banking bail-outs. It calculated that
the eventual cost to taxpayers from rescuing the banks – in other
words the amount of cash pumped into the system that would simply be
lost – would hit £100bn-£145bn: up to 10pc of GDP. This, plus a more
realistic economic forecast, would mean the outlook for the public
finances is far worse than the Budget laid out. The Treasury has
already had to scale up its borrowing forecasts repeatedly over the
past couple of years as the scale of the recession has become
apparent. The weaker the economy, the higher the Government's
borrowing as it suffers a shortfall of tax revenue and has to absorb
the extra cost of supporting Britain's unemployed.
Barely 15 minutes after S&P's announcement, the Treasury said that it
borrowed £8.5bn last month – the highest total for an April since
records began. April is usually a big month for tax income as HM
Revenue and Customs receives an influx of cash from businesses.
The Budget forecast that the Government will need to borrow a total
of £175bn this year – the highest amount, as a share of national
income, in post-war history.
Many economists fear that if S&P does downgrade the UK, the Treasury
will struggle to raise money at future auctions of gilt-edged debt.
However, in a reassuring sign, the Debt Management Office
successfully auctioned off £5bn worth of short-term debt – its
biggest auction ever, barely an hour after the rating decision.
Nevertheless, economists fear that strains will start to show in the
gilt market when the Bank of England's programme of quantitative
easing, through which it is buying £125bn of gilts, comes to an end.
However, while most attention was focused on the UK yesterday,
experts have warned that it is unlikely to be alone in facing a
potential downgrade. Indeed, ING analyst Chris Turner said the S&P
decision raised questions over the United States's rating.
The US faces a similar constellation of economic and financial
problems, with its own net debt set, according to the Congressional
Budget Office, to spiral to above 80pc of GDP in the coming decade.
===============
3.Britain looks to the land of the rising sun with envy
Loss of "AAA" status is not in itself a death sentence. A string of
rich countries have been ejected from the club over the past decade
without calamitous results, and most have clawed their way back in
after a few years of penance.
By Ambrose Evans-Pritchard
It is less clear whether Britain can hope to muddle through so easily
if Standard & Poor's pulls the trigger, given its reliance on
foreigners to fund its debt and deficits.
Norway lost its AAA in 1987, Finland in 1990, Sweden in 1991, Canada
in 1994 and this year Spain and Ireland, both acutely vulnerable
since, as eurozone states, they cannot devalue their way out of
trouble or print money. The risk does not go away in a currency
union: it shifts from debasement to default.
Perhaps most surprising is that Japan fell in 1998, though it was by
then the world's top creditor with more than $1.5 trillion of net
foreign assets (now $3 trillion). Lender abroad, it is a mega-debtor
at home, the result of Keynesian pump-priming to fight perma-slump.
The stimulus vanished into those famously empty bridges in Hokkaido.
"The Japanese didn't take the downgrade seriously," said Russell
Jones, of RBC Capital, a Japan veteran from the 1990s. "They didn't
think they would have any trouble funding their debt."
They were right. Yields on 10-year bonds fell to 1pc by the end of
the decade, and to 0.5pc in the deflation scare of 2003 – confounding
those who expected Japan's emergency stimulus to stoke inflation and
push up yields.
Eisuke Sakakibara, then the finance minstry's "Mr Yen", was
insouciant enough to swat aside the Moody's downgrade as an
irrelevance. "Personally, I think if Moody's continues to behave like
that, the market evaluation of Moody's will go down,'' he said.
Japan had a crucial advantage: its captive bond market. Some 95pc of
government debt was held by Japanese savers or the big pension funds.
The foreign share of UK public debt has risen from 18pc to 34pc over
the past six years. The central banks of Asia, Russia and emerging
economies like gilts because they offered 1pc extra yield over bunds.
This was the "proxy euro" trade.
"We're far more vulnerable than Japan ever was," said Albert Edwards,
global strategist at Société Générale. "Japan had a huge current
account surplus and a strong currency. The UK is a deficit country,
at risk of a sterling collapse. Years of UK macro-mismanagement have
dragged the UK economy to the edge of a precipice."
S&P said yesterday that UK debt is likely to reach 100pc of GDP in
the "medium term" even if the Government tightens its belt. Prof
Charles Goodhart from the London School of Economics said the danger
is a debt compound trap when interest rates rise. "If that happens
we're in real trouble. We could be close by next year," he said.
Britain is at the mercy of foreign powers. Marc Ostwald, of Monument
Securities, said Russia's central bank held 9.7pc of its reserves in
sterling at the end of last year. "They are going to lighten the load
if Britain is downgraded. It will be slow attrition," he said.
Hong Kong's monetary authority is obliged to hold 96pc of its
reserves in AAA assets, and a number of small states have similar
restrictions.
"The question is which foreigners are holding your bonds," said Hans
Redeker, currency chief at BNP Paribas. "Some countries have to
reduce exposure because of Value-at-Risk rules if the UK loses its
AAA. Britain has a double problem because it has to raise £220bn in
gilts this year at a time when foreign direct investment is going to
fall off sharply because of the new tax regime.
"The only way out of this is for Britain to tighten fiscal policy and
keep monetary policy loose. That will weaken the currency, which is
what you need. If they're not disciplined about spending, Britain is
going to run into huge problems."
Hopefully, we can at least count on the big powers to shield us from
total disaster. "Japan is part of the G7 and the last thing they want
to do is destabilise the market by selling gilts: they are good
allies of the West," said Brad Setser, of the US Council for Foreign
Relations.
Besides, where can China, Korea, or Brazil, if they want, rotate out
of dollars into other currencies? Simon Derrick, currency strategist
at the Bank of New York Mellon, says global reserves are 59pc in
dollars, 31pc in euros, 5.5pc in pounds, 2pc in yen, so not much
fresh money will go into US Treasuries.
"The advantages of sterling may sound far-fetched but it is really
not so bad in a world where everybody has got problems," he said.
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