Wednesday 24 February 2010

What has Labour promised UBS will (or won't?) happen to them if they publicly support the view of continued government deficit spending?

It just seems to me that UBS would know better than to really believe the Pound is worth more when more of them will be printed. It just runs completely contrary to the very basics of supply-and-demand. Printing money is the very definition of inflation, and inflation is necessarily the sworn enemy of bond investors.

So why would they come out today with an analysis/warning that if the rampant deficit spending (money printing) is curtailed then there will be a run on the Pound and it will fall in value to $1.05? It just defies logic. People will sell their Pound-denominated assets if they feel that selling later instead would result in them getting less valuable Pounds then than they would now. Not the other way around.

It would make far more sense if they said the complete opposite!

No, I'm sorry but this smells like a political favour to me. I just wonder what size and shape of a carrot they have been offered to do this..? (Or what stick they have been threatened with if they do not...)

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