Greg's Note: Heard the news? The Bank of England has made a historic rate cut. Adrian Ash gives us a little perspective from the country that the BOE is in the process of ruining. Send all questions and comments to greg@whiskeyandgunpowder.com. Whiskey & Gunpowder
Shock and awe was never supposed to be the Bank of England's approach. "Predictable," even "stolid" were meant to be this ancient institution's watchwords. The current chief, Mervyn King, proclaimed it so. Time and again. "Our ambition at the Bank of England is to be boring," declared Dr. King — a collegial buddy of Ben Bernanke's at Massachusetts Institute of Technology (MIT) in the '80s — in a jolly speech of April 2000, just a few years after the Bank's 300th anniversary. But ever since the Bank gained "operational independence" from government diktat in May 1997, the only boring thing about monetary policy has been King's after-dinner gags on the subject. The actual practice — and the resulting value of assets in Sterling — has been more like riding the Corkscrew at Alton Towers...and just about as sickening. ~~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Your Personal Bailout Package Is Here The greatest economic crisis ever is still gathering power…what's going on today is just a precursor. The time bomb of our national deficits is still ticking away. Don't be caught unprepared. Our offer is currently exclusive to Agora readers, but only until Dec 21 when we make it available to the general public. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ First the Dot.Com Bubble, then the housing market and finally energy, food, even Gold Bullion prices...everything lurched higher except the purchasing power of the Pound. The TechMARK index rose almost three-fold between Oct. 1999 and mid-March 2000. Then the Bank of England tried to baby-step away from its lowest rates in more than two decades...and the bubble collapsed. Then the Bank tried to mop up the tech-stock collapse with cheap money, offered at the lowest rates in half-a-century. Consumers and lenders were only too eager to take it, and so average house prices almost tripled from ten years before. But raising rates — once again in little baby-step moves — to try and cool the resulting jump in inflation only popped that bubble in turn. And then, with the value of Sterling losing more than one-quarter against dollars and yen, even the gold price in Sterling shot higher...up from below £160 to break £550 an ounce this autumn as Dr. King and his team pumped limitless cash into London's interbank markets to bail out those lenders drowning in unpayable debts. Oh yes, the Old Lady (as the Bank's still known after an 18th century cartoon) was only playing along with the rest of the world, of course. And she did have the City of London to consider as well — let alone British homebuyers and the real estate agents now packing the High Street. But boring she ain't. And now this old maid — thanks to a shock cut of 1.5% to the base rate on Thursday — is freer with her virtues than at any time since Dec. 1954. Just whatever happened to boredom? "We need to cut interest rates not to protect the banks, but to protect the public from the banks..." So says David Blanchflower, the U.S. member of the Bank's policy-making committee who's voted to raise U.K. rates only once in 29 meetings since joining in June 2006. He's voted to cut rates on 14 separate occasions. And during his time on Mervyn King's team, consumer-price inflation — which the Bank of England is mandated to target at 2.0% per year — has more than doubled to 5.2% annually. ~~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Your Next Check Arrives November 15 That would be the case if you were part of the "Endless Paycheck Portfolio." It's a steady stream of cash flow that is automatically added to your bank account. There's no work involved, hardly any risk, and barely any reason not to become a part of it yourself. Click here to start your new income stream as soon as possible… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ But to return to his claim, Blanchflower says the bust-bubble in banking now requires cheap money to prop up consumers. If the rate runs too high — and banks in the U.K., as everywhere else, have signally failed to pass on the sharp cuts to rates ordered so far — home-loans will default, families will end up on the street, and people will simply stop spending. And all because the U.K. economy can no longer bear interest rates of 5% per year — right around the long-run average of base rates ever since the Old Lady was put in charge of issuing money in 1844. Now the British government wants private-bank lending to return to the 2007 level — a level that was twice the average of the previous ten years. And to kick-start the fun, the Bank of England has now slashed its base rate to the lowest level below inflation since 1978. If you think this is a good way to protect innocent households from all those evil, grabbing bankers in the City — and if you think it's a smart answer to the historic tower of debt now teetering above the U.K. economy — then you're almost as funny as Mervyn King's boredom. Regards, Greg's Endnote: Adrian is willing to help you store gold offshore. Just click here to find out more. We may not live in England, but we don't doubt for a moment that our own central bank isn't busy destroying our currency too. "Why aren't gold prices exploding?" I get asked all the time. Your Whiskey editors are always going on about the eventual destruction of the dollar through printing and the resulting explosion in gold prices. So when's it gonna happen? Give it time, Whiskey Shooters. Things just don't play out that linearly. The inflation of the money supply has to work its way into the system. The rot will creep in until its everywhere and suddenly things are just going to go haywire. Will you be ready? Here's one way you can be. |
Whiskey & Gunpowder Special Reports New "Backlash" Set to Rocket Oil Past $150...and Send Gas Soaring to Over $6 per Gallon The 10 Shocking Reasons for China's Pollution Problem Geothermal Energy: Investment in the Future Here's One Coal Stock That's Set to Skyrocket Investing in Exchange Traded Funds The Real Story Behind the True Gold Bull Market If someone forwarded you this copy, please look here to start your own subscription. Wanna let us know what you thought of today's issue? Now you can... click on this link. Whiskey & Gunpowder is a free e-mail service brought to you by a team of rebellious brigands. If you have not already done so, please click here to confirm your subscription. This will help us ensure you get every Whiskey & Gunpowder without interruption. Are you having trouble receiving your Whiskey & Gunpowder? You can ensure its arrival in your mailbox here. Please note: we sent this e-mail to finan4@finanmart.com because you subscribed to this service. To end your Whiskey & Gunpowder e-mail subscription, click here. Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. © 2008 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. |
