Direct from the desk of Dane Williams.
An updated look at the state of play in the potential UK financial crisis of 2022.
If you had UK financial crisis on your 2022 bingo card, then congratulations.
Last week we saw absolute incompetence from the UK government put the entire UK economy on the brink of a financial crisis.
Sure the Bank of England (BoE) stepped in to stem the bleeding in the short term.
But the reality is that their temporary bond buying program is akin to putting a bandage over an axewound.
It will prevent you from dying before you get to the hospital, but without stitching up the wound, you’re still going to bleed out eventually.
What an absolute mess.
Last week I said that the key day was October 15 in the UK and so here we are just a day out from the deadline already.
Let’s take a look at the state of play.
Will the BoE really stop buying government bonds?
The BoE has made it abundantly clear leading up to its self imposed deadline that they will NOT extend their emergency debt-buying plan.
BoE Governor Andrew Bailey reiterated this fact while speaking in Washington this week.
"My message to the [pension] funds involved — you've got three days left now. You have got to get this done."
"Part of the essence of a financial stability intervention is that it is clearly temporary."
In a world where we’re so used to central banks beating around the bush with forward guidance, you honestly can’t get a much clearer answer than that.
We even got a little bit of sarcasm thrown in for good measure.
So the answer to whether the BoE will really stop buying government bonds on Friday in the UK, looks to be a resounding yes.
With that in mind, the next logical question to ask is should they halt their bond buying program already?
Well that hypothetical is a whole other kettle of fish.
And the honest answer is that we just don’t know.
But even if there’s a chance that allowing the bond market to fall back into disarray and thus spur a wider financial crisis, you’d think they would continue.
Right?
Does the fact they are so confident to use such an arrogant tone in their communication to the market, might suggest they know something that we don’t?
Maybe.
Or, you know…
…they might just be cunts.
While I would like to believe they know what they’re doing, I’m nervous.
Just last week they simply had to step in and prop up the bond market to avoid a full blown firesale across other assets.
It’s not like the bond market has returned to normal in the meantime.
Who in their right mind is going to buy this absolute horseshit (UK government debt!! Jesus how far we have come…) that will continue to be dumped on the market.
Surely they’re going to simply have to step in again?
I guess we’re about to find out!
What does this means for GBP and financial markets?
All this means for the pound and wider financial markets is uncertainty continues to reign supreme.
When it comes to starving off a financial crisis, clarity and money… okay, clarity and a SHITLOAD of money is all that matters.
But all the BoE has done this week is sow confusion.
And now they want to pull their money too?
Come on.
As a foreign market commentator, I’m super disappointed in the BoE.
I can’t imagine what the UK citizens that these clowns are meant to be working for, feel.
With UK mortgage rates already soaring and the GBP continuing to tank toward parity with the USD, there is no relief in sight.
Let’s hope the BoE indeed knows what they’re doing.
Best of probabilities to you.