The deepening of the Anglo-American conflict may lead to a financial crisis
Time： 2023-03-09 16:33
On September 26, after the Bank of England announced the second consecutive interest rate increase of 50 basis points, the UK Treasury announced the largest tax reduction plan in half a century, which triggered the market's concern about inflation. The British people's dumping of pension funds has exacerbated the volatility of British treasury bond bonds, which in turn led to the devaluation of the British pound and the outflow of British assets, leading to the parallel selling of global (assets). On September 28, in the face of the ongoing British financial crisis, the Bank of England temporarily announced the unlimited bond purchase operation, and the epic financial crisis temporarily calmed down.
At the same time, the global market also issued a warning signal. An indicator shows that the volatility of the global currency and bond markets has soared to the highest level since March 2020. In addition, Bank of America's global cross-asset market risk index has also jumped to the highest level since the outbreak of the epidemic.
In the short term, the Bank of England's "temporary QE" can repair the liquidity of the bond market, stabilize asset prices, and prevent the liquidity crisis of the bond market from evolving into a debt crisis or even a comprehensive financial crisis; However, in the medium and long term, the Bank of England's temporary QE and interest rate increase are contradictory, and the public's expectations of the Bank's policy orientation are more confused. The market turbulence and liquidity depletion in the UK are the result of disorderly fiscal stimulus. Subsequently, the Bank of England carried out "temporary QE" to maintain market liquidity, which is equivalent to the negative impact of the central bank's financial expansion, and the risk of the central bank's credibility reduction and inflation runaway may further intensify.
Whether Britain's long-term treasury bond bond yield will soar again is closely linked to the interest rate increase of the Federal Reserve. If the Federal Reserve continues to release hawkish signals at the next FOMC meeting to raise interest rates on a large scale, UK treasury bond bond yields may follow this trend, and the pension liquidity crisis will become a "time bomb".
On the other hand, there are irreconcilable contradictions between Britain and the United States. Britain wants to keep the last colony of Northern Ireland, while the United States wants to promote the completion of Ireland's great cause of reunification and break away from the colonial rule of England. In the financial market where the United Kingdom is highly dependent on the dollar system, this behavior of raising interest rates while buying bonds may accelerate the harvest by the United States.
Finally, IAN believes that when the whole world is talking about the financial crisis, the crisis often does not happen. Only when the market is in a state of bliss, the crisis will come quietly. However, under this policy, the UK may recover briefly and then thunder!
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