The US bond risk is… extant, but it's not high. While central banks are at liberty to choose whatever interest they like, investors are equally at liberty to tell them where to stick it. I don't think the UK economy is strong enough to justify a negative interest rate.
In any case, the USA was just one example. In the real world, one would diversify. But when it comes to forex risk it's worth noting that energy is a significant proportion of the cost base for many businesses and oil is denominated in USD…
To summarise some of the material in your first link, Denmark has a strong economy and isn't in the Eurozone, but manipulates interest rates to make the Krone shadow the Euro. We don't have the luxury of a strong economy. Thanks to quantitative easing (and the memory of Black Wednesday) we don't have the capacity to control our exchange rates tightly, either.
Denmark is what is technically known as "not fucked". That's why people will pay Denmark to look after their money.
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Date: 2013-01-28 03:27 pm (UTC)In any case, the USA was just one example. In the real world, one would diversify. But when it comes to forex risk it's worth noting that energy is a significant proportion of the cost base for many businesses and oil is denominated in USD…
To summarise some of the material in your first link, Denmark has a strong economy and isn't in the Eurozone, but manipulates interest rates to make the Krone shadow the Euro. We don't have the luxury of a strong economy. Thanks to quantitative easing (and the memory of Black Wednesday) we don't have the capacity to control our exchange rates tightly, either.
Denmark is what is technically known as "not fucked". That's why people will pay Denmark to look after their money.