Sunday, January 16, 2011

Could Britain be Heading for a Crash?

I had a long talk on Tuesday with one of the wisest and cleverest economic thinkers I know, and he was sure of one thing: we are heading for a crash. Is he right? The stock market has started the year strongly. Sterling is up against the dollar and was rising against the doomed single currency as well, until the Chinese – for their own Machiavellian reasons – bought vast quantities of euro debt
this week.

Sadly, other indicators suggest that such good news as we have is an illusion. It mystifies me why the Bank of England didn't raise interest rates this week, with the threat of inflation now blindingly apparent. Think, though, what that would do to a housing market already heading south; or to those people with other, shorter-term debts, the repayments on which could well become suffocating. For many of them, the day of reckoning has been long postponed. Now, it may be just weeks away.'


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