by Alasdair MacLeod
This article assesses the likelihood of the pound following the dollar into monetary hyperinflation. Between March and September, the US Government financed twice as much of its spending by bond sales — mostly through inflationary QE — compared with tax revenues. And there is much more monetary inflation to come.
A hyperinflating dollar is now the international backdrop for all currencies, including sterling.
To date, the UK’s budgetary arithmetic is less alarming than that of the US. In theory, the UK government has a workable plan, to turn the UK into a global entrepôt. However, if, as is becoming increasingly certain, the dollar falls heavily on the foreign exchanges in the coming months, dollar interest rates will rise, and so will those for sterling — catastrophic for government finances and the future of debt-laden zombies. Furthermore, with counterparty exposure to insolvent Eurozone banks and escalating covid-related insolvencies, British banks are not strong enough to withstand the general credit contraction a rise in dollar rates would trigger.