James Lewis

U.K. Gilts Could Be World's Best Short

Clive comments are very interesting. If we were to join the Euro, then we would first need to bring interest rates in line with europes and peg our currency on 1pound-1 euro. Therefore this suggests slight weakening of the pound. So owning Gilts if you are an interntional investor may be a bad idea because of currency risk.

Of course the pound joining the euro is a very big step as we are essentially a monarchy. The pound with the queens head on it is the only real thing we have left from the days when we ruled the world through the British Empire. Of course with the Labour Government owning most of the banking system - we could join the Euro if things got really bad this side of the water. And Europe pushed forward. However I am not sure if this is the case, after all Spain and Italy are in such terrible state they may want to pull out of the Euro.

In terms of who will buy our debt. I urge readers to remember that that the FED was essentially an offshore UK banking network. The USA will (if they can) step up and buy our debt. But there will need to be some interest rate rises. But not the amount everyone is predicting. And maybe this will not strengthen sterling because of the state of the UK economy and the very obvious need to devalue the currency through QE.

As crazy as this may sound to everyone, my feeling is that the UK is in such deep trouble. That any attempts to restriant the QE program through concepts as 'rsponsible money supply control etc' will be very damaging. We need to print as much money as we can through QE as quickly as we can. We need to devalue our currency by 25% from where it is now. And we need to subsidise manufacturing so we can build a manufacturing industry on the back of weak sterling. We need to reduce un-employment benefits and have those that want to be unemployed working in low skill factories for a few days per week to get their money.

On top of this we need to inact vary favourable incentives for rich people to come to UK from other countries. Further to this we need to subsidise living costs by taking away greedy private companies making money on the back of running our country (utility companies etc) and by definition drive down wages.

This is a very tall order, I guess that not even 5% of the above will be done. Therefore expect a year of growth before the s*h*t really hits the fan. The UK is in a very bad place