Quote:
Originally Posted by Outofdodge  Have you compared the value of the US dollar against the British Pound or the Euro lately? It's a good time for a Brit to vacation in the USA, not vice versa. While the difference in discount rates is not the entire reason, it is a significant part for the disparity in the two currencies |
I travel to the US a few times a year and the GBP has been strong against the US$ for some time now, making it easier for us and more costly for you to travel to England, (even worse when you consider our prices here!).
What I was getting at was the more ambitious and adventurous approach the FED, (& the European Bank), takes to fiscal policy than the staid BoE. This slowly slowly policy has already lead, in my view, to our Northern Rock disaster and a wobbling of our banking system due to the BoE talking about moral risk at a time when the first priority should have been liquidity in the financial system.
Bank of England warns against bailing out struggling banks 
By Carter Dougherty
Published: September 12, 2007
FRANKFURT: In an unusual public display of discord, the Bank of England criticized other major central banks Wednesday for injecting cash into the financial system to help stabilize credit markets, saying such a policy amounted to a bailout of investors who had made bad decisions.
Mervyn King, the governor of the Bank of England, also hinted that the current crisis could make further interest rate rises unnecessary, if the recent sharp increase in borrowing costs ended up hurting consumer demand. That, he said, would lower the inflation outlook, despite the current explosion in prices of commodities from oil to wheat.
The main thrust of his written testimony to the British Parliament, however, was a sharp warning about "moral hazard," a term used to describe the downside of policies that effectively rescue investors when their bets turn out wrong.
"The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior," King wrote. "That encourages excessive risk-taking and sows the seeds of a future crisis."
Over the past month, as investors have refused to buy securities backed by potentially shaky U.S. mortgages, major central banks have stepped in to provide short-term lending to the financial system, easing the search for cash.
The European Central Bank, which kicked off the effort Aug. 9, has added about €250 billion, or $347 billion, to the market, and on Wednesday it continued its effort by lending €75 billion for three months. The U.S. Federal Reserve and the Bank of Japan have done the same, and on Aug. 17, the Federal Reserve also cut the rate at which it loans money directly to banks.
But the Bank of England has barely taken part in this effort, injecting only £4.4 billion, or $8.9 billion, into the system since the crisis began a month ago.
Bank of England warns against bailing out struggling banks - International Herald Tribune