Busch: London Takes A Pounding
Today, the British pound has been unceremoniously thrown beneath the carriage and trampled (Tut Tut!) as story after story all point in the same direction. Let's start the ball rolling with possibility of co-ordinated nationwide strikes that would hit energy supplies later this week. The Telegraph reports that a dispute over foreign workers is escalating and appears ready to boil over.
Next up, Moody's decided to put the hammer down on the UK banking system.
They cut its long-term ratings on Barclays Bank by two notches to Aa3, citing expectations for "significant" further losses due to credit-related write-down's and rising impairments. Moody's Investors Service maintained a stable outlook for the British lender but lowered Barclays' Bank Financial Strength Rating to C from B, with a negative outlook, and cut the bank's hybrid instruments also by two notches to Aa3 according to Reuters. "The action brings Barclays' long-term ratings in line with Fitch, which on Wednesday cut the lender by one notch to AA-minus citing the expected earnings volatility from investment banking unit Barclays Capital and deteriorating economic growth in key areas of operation."
- Watch: How to Maneuver the Markets
The UK Department for Work and Pensions is expecting long term unemployment to soar to 300,000 people. It's so bad that that government officials have admitted that bidders for a flagship new £1.2bn welfare-to-work program will have to revise radically their tenders for the contracts. "Private and voluntary organizations are currently bidding for contracts to provide personal advisers and training to get the long-term jobless back into work, " the FT reports.
Lastly, Prime Minister Gordon Brown indicated that he will not intervene to prevent the pound from sinking further against the US dollar, the euro, and other major currencies according to the Independent. The Times reported that Brown mounted a spirited defense of his government's economic record at the World Economic Forum in Davos, pointing to the country's low inflation, low interest rates and low public debt, the Times reports. He dismissed suggestions that London was Reykjavik on Thames.
To be honest, I think Iceland would be insulted at this point.
Polls in the UK indicated that voters agree as polls show the lead for the opposition has grown to 12 points. Should the vote be held today, the Tories would enjoy an overall majority of 62 in a general election.
It may take an election in the UK to turn things around from a policy and a psychological standpoint.