Coo

[drplokta]

Apparently, the UK has now overtaken the US and has the highest nominal GDP per head of any major economy. We're now exceeded only by a few fairly small countries in north-west Europe (largest: the Netherlands; richest: Luxembourg) and by Qatar.

Of course, a fair amount of this is that the pound is rather over-valued, and you can still buy more for the average per capita GDP in the US than in the UK.

Comments

[andrewducker]

Any thoughts as to why the pound is over-valued?

[purplecthulhu.livejournal.com]

My thought is that it won't be for much longer, especially if interest rates are cut again.

[timill]

Well, it seems to be sliding nicely against the Euro, so I guess that it's just sliding at the same rate as the USD.

Now might be a good time to up sticks and move...

[erikvolson.livejournal.com]

The dollar is collapsing because 1) the mortgage crisis in the US, 2) the commerical credit crunch in the US, and 3) the Federal Reserve has decided to try to inflate the currency to solve 1 & 2. The fact that everyone woke up last week and realized that we're plummeting into a very nasty recession.

Now, the UK. Banks going into effective receivership because of bad mortgages, and the inability for commercial entities to get short term paper. Check and Check. Thankfully, the Bank of England has resisted the same siren song that the US Fed heard, and is holding firm on interest rates.

Oh, wait...nope, they cut them, and the pound slipped rather firmly, as the rest of the world realized that the Bank was willing to inflate the pound. It quickly fell back under $2USD, which was a pleasant surprise for me, I was thinking I'd be paying on the order of $2.12USD for the pound.

If you announce to the world, by your central bank's action, that you're going to inflate a currency, don't be surprised that the world suddenly starts taking a liking to the Euro.

BTW -- if you're holding USD, the question today is not "will the Fed cut rates again?" it's now "how much." The fear of recession went from "piffle" to "Holy Fsck!" in about a week, and the markets are betting on a 50 point cut (rather large.)

[drplokta]

Northern Rock's problem wasn't bad mortgages -- its mortgage book is actually pretty strong. Its problem was a bad business model, which relied on going back out to the markets every three months to borrow more wholesale funds to pay back the previous batch of short-term funding. When market liquidity dried up, this was no longer viable, but it's a liquidity problem and not a solvency problem. As far as we know.

[erikvolson.livejournal.com]

I suspect there's deeper problems (and so does the market.) Liquidity crunches don't involve borrowing nearly 30% of your total value from a central bank to stay solvent. According to the Wikipedia (via the Daily Telegraph), the asset book as of Novemeber was 80b prime and 27b subprime -- over a quarter of the book is in the subprime market. Before the madness hit, a bank would carry maybe 5% in such.

The reason I think they're in worse shape is the difficulty in getting the buyout to happen. If the book was solid, even in the current credit crunch, they'd still be a steal. The fact that people are being very leery means they don't have confidence in those assets -- and I don't think it's because they don't trust NR's assets, I'm thinking that it's because they don't trust *any* real estate backed assets right now, and that's all that NR has.