The shit
I predicted back in March has finally hit the fan. Tonight the Dow finished down nearly 7% on news that the bail out plan was rejected by Congress. Today was a bad day but it's going to be a picnic compared with tomorrow when the Asian markets wake up and react
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If they devalue the pound, then inflation will spike. Unfortunately for the government, many of their liabilities are inflation linked, so it doesn't help reduce that debt. Also, it will increase their borrowing costs.
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Politically, I'm quite a strong free market capitalist. However, even to me, it's been clear that the debt-fueled boom and reckless lending of the last several years was going to end in tears. I just hope it doesn't trash the whole economy too badly (though I'm predicting a moderately severe recession).
I'm glad I did sell many of my shares six months or so ago. For administrative awkwardness reasons I do still hold some Barclays and RBS shares. I'm not sure it's worth selling them now.
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