Britannia Radio

Why Cash Is Pouring Back Into Britain (BCS)

XXXXXXXXXXXXXXX JW l|May. 18, 2009, 7:19 AM|3

Maybe the UK isn't finished just yet.

Now that the crisis of the Anglo-Saxon banking model has abated (temporarily at least), UK is looking less and less like Iceland-on-the-Thames as it came to be known during the worst of the panic.

With a banking system multiples of its GDP, a serious wipeout at its top banks, like Barclays (BCS) had the potential to fully wash out the pound, were a bailout to be needed.

Alas that day of reckoning will have to come another time, and in the meantime, cash is flowing back into the UK:

Bloomberg: Money is already pouring into Britain. Currency flows into the pound from pension funds, insurers and other institutional investors in the 60 days to May 13 were more than 99 percent higher than any comparable period since 1997, according to Boston-based State Street Global Markets LLC, the world’s second-largest custodian of financial assets, with $11.3 trillion.

“There was an extreme undershoot of sterling versus the euro during the financial crisis,” said David Powell, a currency strategist in London at Bank of America-Merrill Lynch. “The risk of implosion for the financial system has largely passed, sparing the U.K. economy and sterling.”

Bottom line, if you think the worst has passed, then the depressed pound is in itself a way to play distressed assets with high potential for upside.

Now, dealing with other problems in the UK, like the country's miserable youth culture, and growing resentment towards immigrants... those are other problems.