I must have been insane!!

In a very weak moment or was I insane but I was contemplating a minor purchase of War Loan. This was after my previous post on how likely it was for foreign investors to boycott gilts (British government bonds) for inflation and currency
reasons.

Obviously, this is not a recommendation one way or the other since this is not a professional blog and I have not got any professional qualifications. Most of my ideas probably come from the Daily Telegraph. I think it was in the 1930s that the UK government cut the coupon on War Loan, which was a tinsy bit naughty. It is an undated stock and some hold the bonds through inheritance. I still fancy buying them though, since they are a bit of history.
www.searchifa.co.uk

However, conventional government bonds can really be hit by inflation. A lot of financial pundits are saying that UK index-linked gilts are a better buy. In reverse,
if there is real deflation in Britain, then gilts and corporate bonds could be a wonderful investment if coupons are maintained. That is a big if, especially if yields reach the default levels of the 1930s.

Also bond prices are being distorted by quantative easing measures being carried out by the Bank of England, so I better lie down and wait for the War Loan urge to go away.

UK Chancellor Alistair Darling stretches credibility.

It is probably correct to say that UK Chancellor Alistair Darling is stretching everyone's credibility with his growth forecasts for the British economy, which is basically England. To get Johnny Foreigner to invest in £200bn plus worth of gilts, I would have personally introduced measures such as higher VAT, lower international aid and European Union payments and lower expenditure on PFI projects. As I am not chancellor....

Introducing a top rate of 50 pct might play well to the left wing of the Labour Party but will lead to a lot of talent going abroad. However, it will be nice to see top-level bureaucrats and town council fat cats having to pay more. I think it is the case that quite a few footballers and football managers get paid through the Channel Islands, so at least this will stop (I think?).

The mountain load of UK government bonds (gilts) will have to compete with US Treasuries, German Bunds and even Spanish Bonos. There is unlikely to be a currency gain since we need a very weak sterling to get the British economy going and to mask the effects of deflation. If there is a gilt buyers strike and we have to lift the yields on these British government bonds, then Gawd help us poor
Britishers.

British Premier Gordon Brown says the economic crisis started abroad. If you say so Gordon. Obviously, Northern Rock and Dunfirmline Building Society are major international institutions. That is why they hit the rocks. (sorry about the pun).

I suppose we live in dangerous times!!

G-20 already seems far away. And it was only last week. I doubt if the world's leaders were worried about British government bonds (gilts). I suppose we live in dangerous times. Gilts could be a poor investment if inflation takes off unless they are the index-linked variety. These last type of gilts are a favourite investment of the pension fund of the Bank of England itself itself according to economist Liam Halligan writing in the Sunday Telegraph..
The investment expert Brian Tora writes in moneymarketing.co.uk
that corporate bonds could be hit by either inflation or by a downturn longer than forecast.
I wonder if we need a return to the Goldilocks economy, not too hot or too cold. I know there are some big bets being made over corporate bonds on the basis they are underpriced and that they could provide much-needed income. There is a ghastly alternative scenario and this is that corporate bond defaults will match the 1930s Depression.