London bridge is falling down

Look at GBP collapse against the dollar and the UK banks implode. It's been a long time coming. The UK government did an admirable job fighting the tide, but gravitation wins.

That's what happens when you're not a global reserve currency and you borrow short, lend long internationally, purchase foreign non-liquid assets, and have huge FDI inflows from commodity based currencies (Gulf). This isn't to say the US isn't in deep doo-doo, we're knee-deep in it, but the UK is neck-deep. It'll take too long to re-type my thinking, so here it is, in the raw:

11/19/08 4:30:41 PM	eugene:	i think GBP going to be rocked
11/19/08 4:30:49 PM	leo:	yeah, i can't wait
11/19/08 4:30:55 PM	eugene:	does the UK even produce anything these days?
11/19/08 4:31:02 PM	eugene:	lol at least we have crappy car companies
11/19/08 4:31:07 PM	leo:	nothing that's why they're screwed
11/19/08 4:31:11 PM	eugene:	they're a big hedge fund
11/19/08 4:31:16 PM	eugene:	actually
11/19/08 4:31:18 PM	eugene:	they really are
11/19/08 4:31:18 PM	leo:	yeah, only financial services
11/19/08 4:31:30 PM	eugene:	IIRC they also did a huge amount of FDI
11/19/08 4:31:37 PM	eugene:	let me find the piece
11/19/08 4:31:48 PM	eugene:	well not huge
11/19/08 4:31:50 PM	eugene:	but substantial
11/19/08 4:32:59 PM	eugene:	received a huge amount of FDI
11/19/08 4:33:07 PM	eugene:	i think i touched on it
11/19/08 4:33:15 PM	eugene:	that is not GBP supportive
11/19/08 4:33:17 PM	eugene:	haha long day
11/19/08 4:33:54 PM	eugene:	i think a huge amount of gulf money
11/19/08 4:33:57 PM	eugene:	was laundered in UK assets
11/19/08 4:33:59 PM	eugene:	into
11/19/08 4:34:07 PM	eugene:	real estate
11/19/08 4:34:11 PM	eugene:	businesses
11/19/08 4:34:30 PM	eugene:	as that money is pulled out
11/19/08 4:34:36 PM	eugene:	it is being converted to dollars
11/19/08 4:34:43 PM	eugene:	because gulf currencies are pegged to dollars
11/19/08 4:35:19 PM	eugene:	gulf states were in such a rush to convert oil into other long term assets
11/19/08 4:35:27 PM	eugene:	sort of like money laundering
11/19/08 4:35:35 PM	eugene:	a mobster is willing to run an unprofitable business
11/19/08 4:35:49 PM	eugene:	to convert useless dollars into ones he can spend freely

11/25/08 11:56:22 AM	eugene:	pound is doing a little bit of a retracement
11/25/08 11:56:52 AM	eugene:	risk aversion decreasing a bit too and US gdp not so good... but oh boy just wait until the GB info comes out
11/25/08 11:57:07 AM	eugene:	im going to short a bit at these levels methinks
11/25/08 12:00:26 PM	eugene:	1) sov funds propped up assets and now fleeing to dollars and euros 2) financial services is a 25% portion of GB exports, kiss that goodbye 3) GB bailout of banks is in sterling for foreign denominated liabilities
11/25/08 12:01:12 PM	eugene:	a train wreck is a-comin
11/25/08 12:02:00 PM	eugene:	gbp isnt much of a reserve currency either
11/25/08 12:07:50 PM	eugene:	the US has its share of problems but the UK problems seem far worse. e.g. price to income ratios for housing, much worse in the UK, export versus import breakdown is not good for balance of payments in a recession, and the currency isn't really in demand globally... no one is fleeing to british gov't bonds
11/25/08 12:07:50 PM		Conversation ended.