Pound Sterling Is a "Basket Case"

February 27, 2010 (LPAC)—Jim Rogers, the former partner of Her Majesty's private speculator George Soros, told the Guardian that the pound sterling is a "basket case" of world currencies. "Other currencies aren't strong and the euro has real problems, with cracks much wider than Greece beginning to show," Rogers said, "but it's the pound that's most vulnerable. In real terms, it's already devalued against virtually every currency barring the Zimbabwe dollar and it's especially exposed over the weeks running up to the U.K. election. In a basket of currencies, the pound is potentially a basket case. That will put Britain in an extremely bad position."

The pound fell two cents to the dollar to an 9-month low. It also fell against the euro and yen.

Rogers has in the past warned that nitroglycerin can be found under British treasury bonds. Most of that refers to the mountain of bad debt it is holding, of the banks it has bailed out. One of these is Lloyds Bank, which announced a £6.3 billion loss for 2009, which follows a loss of £6.7 billion loss in 2008. It suffered "impairments" (bad loans) of £24 billion. The bank is 41.3% owned by the government. This follows a reported loss by the Royal Bank of Scotland—now 84% owned by the government—of £3.6 billion.

Much of this bad debt is from the British housing bubble, which began to collapse two years ago. The slight increase in prices over the last months is proving to have been a dead cat bounce. Housing prices dropped by 1% during February for the first time in 10 months, following a downturn in home sales by 8%.