The Australian financial press is shouting “Red Alert!” over last week's UK pension plan meltdown. The scary part is they may not be wrong.
But here's the killer line.
"Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability."
What the Bank of England was suggesting, according to former London City trader Henry Jennings, is that when the bond market moved violently against these pension funds, they were at risk of being placed into margin calls.
That is, many funds had borrowed money to make more money. They were heavily in debt to enhance their returns.
They were about to be asked to "pay up".
The problem for the UK is that the pressures which brought the pension funds to the brink of disaster are still there.
The problem for the rest of the world, according to the Australian financial press, is contagion risk.
If they're right, the next great financial crisis is already starting. Pray they are wrong.
Has The Great Financial Crisis 2.0 Already Begun?
The Australian financial press is shouting “Red Alert!” over last week's UK pension plan meltdown. The scary part is they may not be wrong.
The problem for the UK is that the pressures which brought the pension funds to the brink of disaster are still there.
The problem for the rest of the world, according to the Australian financial press, is contagion risk.
If they're right, the next great financial crisis is already starting. Pray they are wrong.