Years of Colonialism is the Sterling's Saving Grace

Moody’s came back yesterday to haunt the British Treasury. Nearly six months after the rating agency lowered the rating on the sovereign nations debt, they came back yesterday with a warning that the country will be in negative territory for the next year to year and a half.

With all the whispering about the true state of the UK economy, publicly seen as stabilizing while privately seen as fledgling, the independent auditors at Moody’s has seemingly undermined political efforts to paint a brighter picture.

The result of this effort was a drop across the board in the Sterling, which has not performed as bad as it could have been after the parliamentary corruption scandal of the early summer. In fact, British lawmakers have been scarcely seen on television or the newspapers for that matter, keeping a low profile to avoid any further scrutiny that could bring back the calls for a House of Commons overhaul.

To this end, even the Exchequer, Alistair Darling and Prime Minister Gordon Brown have been less than visible since the scandal – only talking when necessary and not really saying much when they do.

It should not come as a surprise that Moody’s found the British economy in bad shape and is forecasting a bleak immediate future. With record unemployment, manufacturing and exports down to 50 year lows, cost of basic goods rising considerably and increasing poverty at the middle class level, it is a given that they are in trouble.

However, the opinion I hold on the fate of the Sterling in relationship to the current economic climate is bold, by any accounts, and contradictory to the Moody’s report. Here is why:

I believe that the Sterling is one of the most fairly valued currencies in the Forex online market at this moment because of Gold. The UK spent hundreds of years pillaging and plundering the nations of the world for every natural resource it could find, especially Gold.

So the past 60 years has seen the Brits give back the land they occupied, the deals did not include the treasures. The UK has by far one of the largest collections of Gold reserves, next to the Vatican of course, and the price of this precious metal has been on the rise topping $1,000 per ounce last week.

Even if the economy spends another two years in depression, the value of the Sterling can be stable based on their reserves. I am not a fan of the British economic policies and I do believe that the ease in which they have gone about spending citizen funds on bailouts has contributed to their situation, but I must respect the almighty Sterling – it has for a long time, and will for a long time to come, be worth every penny (or should I say quid?).