As the Fed continues to
inflate inject liquidity into the market, I’d watch for the dollar to fall even further against Sterling. Despite the ongoing “credit crunch,” formerly known euphemistically as an “economic downturn,” formerly known as a “recession,” sometimes “depression,” and in its most pronounced manifestation, “Flucht in die Sachwerte” – the U.S. central bank seems content to repeat the errors of the past, the Bank of England, on the other hand, remains reluctant to offer any bailouts to the market:
“Interest rates aren’t a policy instrument to protect unwise lenders from the consequences of their unwise decisions,” [Bank of England Governor Mervyn] King said at the release of the bank’s quarterly inflation report last week, before the credit crisis erupted.
Indeed, interest rates aren’t a game or a policy instrument. Start falsifying economic calculation, and it’s only a matter of time before its effects catch up with you. By far, one of the wiser statements issued by a Central Banker that I’ve ever come across.