Bank of England launches money printers to solve acute retirement drama

The collapse of the British pound and government bonds has forced the Bank of England to turn on the money printers right away. Fund managers of England’s largest pension funds received ‘margin calls’ on Wednesday, meaning they will be liquidated if they don’t provide more collateral soon.

Bank of England intervenes

The United Kingdom’s central bank had to intervene immediately to prevent the bond market from entering a deadly spiral. “The intervention of the Bank of England was necessary to avoid a vicious circle that may have forced pension funds to sell their positions,” said Claum Mackenzie, an investment partner at Aon.

The rapid and significant response from the Bank of England is a testament to how much of a downturn it has been for pension funds and the bond market. Apparently, if the pension funds had been forced to sell, a total collapse of the UK bond market was possible. This was prevented by the intervention of the British central bank.

In principle, pension funds work with historical data for their risk models. With this they determine how much risk they can take with levers and the like. The problem with that is that you can always be surprised by unique circumstances, which seems to be the case at the moment.

The Bank of England said it would assist “as much as necessary” in a situation that poses “a material risk to UK financial stability”. So it is a complete emergency in which the central bank has to print large amounts of money, while on the other side it tries to fight inflation.

What does this mean for bitcoin?

The British pound is collapsing, British government bond yields are rising above those of Italy and Greece and the central bank must step in to prevent more misery. In the background, the country also has to deal with sky-high inflation. We are talking about a dark black scenario for the United Kingdom, which it is only hoped for the country to recover from.

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In principle, this is another example that your money is not safe anywhere. The entire traditional financial system is closely linked and in principle only bitcoin (BTC) is completely separate from this. For many people, an event like this can be a wake-up call that makes them think about the question “what is money?” A question that is so important to understand bitcoin.

James Lavish sums up the story well with the above tweet. “So the Bank of England is now printing money and ‘raising’ interest rates at the same time. You can hardly come up with it yourself,” says Lavish. I personally have nothing to add to that.

The traditional financial system squeaks and cracks and central bankers try to fix everything with a thick roll of duct tape. In any case, the policy of the Bank of England is no longer up to scratch. On the one hand fighting inflation with higher interest rates, while on the other hand turning on the money tap to save the bond market.

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