Debt and the Germans

[doodab]

An investor that lent the UK government 1,000 USD or 1,000 EUR 5 years ago would only receive back around 700 USD or 700 EUR today. The UK government has intentionally manipulated the value of sterling for exactly this reason, hence many would argue it has defaulted and continues to default on it's debts.

Are there any UK bonds denominated in EUR or USD? I'm not sure there is.

If someone has exchanged currency to invest in GBP denominated bonds then they have assumed the FX risk for themselves, which is hardly the fault of the British government.

[bingobob]

Are there any UK bonds denominated in EUR or USD? I'm not sure there is.

If someone has exchanged currency to invest in GBP denominated bonds then they have assumed the FX risk for themselves, which is hardly the fault of the British government.

Of course, but the important thing to bear in mind is that the UK government chose to devalue it's currency, it was not market forces as such. How do you think the money markets will react when the UK renegotiates it's debt in 2017? Either the UK will have to strengthen it's currency (which will meaning sharply raising interest rates and contracting the money supply) or fx risk (past and future) will simply be priced in and the UK government will be bankrupt within days.

[sasguru]

Of course, but the important thing to bear in mind is that the UK government chose to devalue it's currency, it was not market forces as such. How do you think the money markets will react when the UK renegotiates it's debt in 2017? Either the UK will have to strengthen it's currency (which will meaning sharply raising interest rates and contracting the money supply) or fx risk (past and future) will simply be priced in and the UK government will be bankrupt within days.

Not likely. Britain did the same in the 70s and wasn't penalised by the markets. In hard times political stability is valued as much as economic.
That's also why loads of rich Southern Europeans are buying property in London now

[bingobob]

Not likely. Britain did the same in the 70s and wasn't penalised by the markets. In hard times political stability is valued as much as economic.
That's also why loads of rich Southern Europeans are buying property in London now

That's a relief, we 'did it' in the 70's so it will all be fine now (any particular part of the 70's or was Britain just crazily 'doing it' for a decade).

Thanks for the insight anyway, have you thought about writing a book?

[d000hg]

An investor that lent the UK government 1,000 USD or 1,000 EUR 5 years ago would only receive back around 700 USD or 700 EUR today. The UK government has intentionally manipulated the value of sterling for exactly this reason, hence many would argue it has defaulted and continues to default on it's debts.

'Many' would predominantly be populated with those who don't know what words like 'default' and 'recession' mean.

[Doggy Styles]

An investor that lent the UK government 1,000 USD or 1,000 EUR 5 years ago would only receive back around 700 USD or 700 EUR today. The UK government has intentionally manipulated the value of sterling for exactly this reason, hence many would argue it has defaulted and continues to default on it's debts.

It still isn't a default.

We can speculate about currency manipulation, all nations do it but that's still playing within the rules. A default isn't, and that's why markets punish it.