Observations from the UKBy DeltaHedged • May 1st, 2009 • Category: The Thinking Room
DeltaHedged never sleeps. Currently, I’m enjoying the sights and sounds of the UK. What an interesting place.
Here are some observations from my first few days here:
1) The Bank of England has a lovely little museum in their building in London. I highly recommend this. They even have a full gold bar (approximate weight 30 lbs) that was worth (apparently) £300,000. This edifice is basically a shrine to inflation targeting and central bank independence, complete with a movie entitled “The Dangers of Inflation” and the full text of a Gordon Brown speech from 1997 when the Bank of England gained its independence. The most informative aspect of this museum was its brief bit on the gold standard. Surprisingly, they treated the potential benefits and costs of such a system reasonably well. I liken this to a Darwinist considering the merits of intelligent design - ultimately dismissive but reasonably considerate. Not as surprisingly, the museum does not mention the Soros-led speculative attack on the pound during the 1990s. Some things are better left unremembered.
2) Lloys TSB actually exists. It’s everywhere! Still hunting for a branch of Northern Rock.
3) While here, I learned that the Spanish unemployment rate was 17.4%. What the hell? Isn’t that insanely high for a “mature” economy? Even though their property markets were as bubblicious as ours in the US, their banks were prudent in avoiding securitization and derivative exposure. Are their labour markets really that inflexible?
4) Obama is a rockstar here. This is somewhat irritating, if only because my intellectual coming-of-age occurred during my semi-frequent trips abroad, defending Bush 43 and the American project writ large. In fact, the last time I was in England, it was during Katrinagate of late summer 2005. Funny how that was the death kneel to the Bush Presidency.
5) Canary Wharf is an apt representation of the financial services sector that it houses. There exists a perfect harmony of geography and human activity in this little enclave. Emerging from the tube station in Canary Wharf (that is by no means central in London, set aside in the East and only accessible by one subway line), I felt like I was in a Truman Show version of Lower Manhattan. Citi, B of A, Credit Suisse, and Morgan Stanley all had offices in plain sight of the tube exit. The whole thing seemed manufactured, with its high-end shopping centers, water-front bars, hip restaurants, and the like. Indeed, Canary Wharf really sprouted up over the past three decades, and in this sense mirrors quite well the evolution of the modern financial services sector. Canary Wharf’s streets had a triple A rating, but the whole thing seemed too good to be true.
(NB - I was in Canary Wharf to visit a former colleague who trades structured credit in a large financial institution. He and I had a hearty discussion about a curious relationship - M2 vs. mortgages outstanding. He handed me a Bloomberg printout that I will reproduce on DH when Statesside.)
6) If there is ever a day when the pound and dollar trade at or near parity, I would heartily recommend this country to everyone as an ideal tourist destination. Until then, stay on the sidelines. It’s a great city and lovely country with nice people, but it’s expensive. Credit crunch, after all.