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ore evidence has emerged this week that the West’s financial system is teetering on the brink of collapse, as Europeans worry that they won’t have enough affordable energy to heat their homes this winter.
During a speech in Washington, D.C., Bank of England Gov. Andrew Bailey first warned that “market volatility went beyond bank stress tests,” which is frightening in an of itself, before he reinforced that there is a “serious risk to UK financial system stability,” adding that a program to bail out pension funds is “temporary,” according to Zero Hedge.
However, Bailey then dropped a bombshell.
“My message to the funds involved and all the firms is you’ve got three days left now. You’ve got to get this done. The essence of financial stability is that it (intervention) is temporary. It’s not prolonged,” he said in a chilling warning that sent shockwaves through financial sectors around the world. “I’m afraid this has to be done, for the sake of financial stability,” he added, per the BBC.
Meanwhile, according to the Financial Times, here’s why traders are not selling more UK bonds:
Traders say the reluctance of some investors to offload larger quantities of gilts is in part a consequence of the BoE’s approach to making purchases.
The central bank has only bought gilts at close to the prevailing market level and has rejected offers it deemed too expensive. Investors may get a slightly better price by selling their bonds to the central bank rather than on the open market, but the difference is measured in small fractions of a percentage point. In return, they have to face the uncertainty of whether the BoE will actually accept their offer to sell, or potentially leave the bank holding unwanted gilts in a market where the price may have moved against them in the meantime.
