British Pound Undermined by the Bank of England, Sterling Bear Market Resumes

By: Nadeem_Walayat
The Bank of England and Mervyn King's recent announcements in the mainstream press have clearly been aimed at sending the markets a signal that official policy favours a weak currency so as to support the economic recovery by boosting the export sector. The reaction in the markets was for a swift drop in the exchange rate across all major currencies and most notably against the Euro which triggered a fall of over 8% from the recent high of 1.20 to below 1.10

Following the fall in the Sterling to £/$ 1.62, Mervyn King stated :
“The fall in the exchange rate that we have seen will be helpful to that process but there’s no doubt that what we need to see now is a shift of resources into net exports – whether directly or in producing things that compete with imports.”

The resumption of the sterling bear market against all major currencies that are themselves engaged in a programme of competitive devaluation is inline with my analysis of the past 2 years following the peak of sterling in December 2007, that ever escalating measures to bailout the banks and stimulate an economy entering first recession and later depression would result in ever larger increase in the debt that tax payers would be lumbered with, far beyond that which the chancellor was estimating way back in November 2008, which prompted in depth analysis - Bankrupt Britain Trending Towards Hyper-Inflation?

The below debt and liabilities graphs illustrate the reasons why the sterling bear market has a long way to run which targets an eventual break below the 2008 low of £/$ 1.36.