[COLOR="DarkOrange"]British Banking System Collapse Is Worst Since World War I[/COLOR]
October 22, 2008 (LPAC)--"It is difficult to exaggerate the severity and importance of those events" of September, Bank of England governor Mervyn King pronounced yesterday. "Not since the beginning of the First World War has our banking system been so close to collapse." King went on to announce that the country was heading into a recession--the first government official to make the admission.
Yesterday, the British pound collapsed by 6 cents, the biggest one day decline since George Soros brought the pound down in 1992. "Traders in the U.S. and Japan rushed to dump their holdings of sterling, electing to cut their losses as forecasts suggest the British economic is poised to deteriorate further," the Daily Telegraph writes. The pound now stands at 1.621 to the dollar and analysts are saying it will hit 1.60 soon. It also fell against the euro.
Speaking before the Leeds Chamber of Commerce and Industry, King said: "Following the failure of Lehman Brothers on 15 September, an extraordinary, almost unimaginable, sequence of events began which culminated a week or so ago in the announcements around the world of a recapitalization of the banking system." King admitted that the "scale of central bank liquidity support during the crisis has been unprecedented, and central banks have increased the scale of their lending in broadly similar ways. The U.K. taxpayer now has a larger claim on the assets of banks (in the form of collateral held by the Bank of England) than the total equity value of U.K. banks."
This cannot go on forever, King confessed, but the government had no choice but to step in to recapitalize the banks. This recapitalization, he lied, was "not designed to save the banks as such, but to protect the rest of the economy from the banks." The UK banking sector, he said, "has been relying extensively on external capital flows, principally short-term wholesale funding, to finance its lending activities." And, like a Third World country experiencing capital flight, "Those external inflows have fallen sharply -- a mild form of the reversal of capital inflows experienced by a number of emerging market economies in the 1990s. Unless they are replaced by other forms of external finance," King admitted that the economy will remain in recession.
larouchepac.com