Sterling has fallen sharply against the dollar as yet more bad economic data points towards a prolonged recession and further interest rate cuts.

The pound was down 5.2 cents to $1.486, its largest one day fall in percentage terms since sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992.

Sharp falls in the FTSE 100 index - down 5.2% on Monday - also served to undermine the currency.

The pound was also down 3.5 cents against the euro, at 0.851 pounds.

The poor economic data increases the likelihood that the Bank of England will cut interest rates on Thursday.

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The Bush administration had the chance, years before the economy collapsed, to restrict the no-money-down, interest-only mortgages that poisoned the financial system.

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown.

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Mortgage approvals dropped again in October, suggesting that house sales and prices have further to fall.

Bank of England figures show that just 32,000 mortgages were approved, 1,000 fewer than in the previous month.

The number of mortgages approved, but not yet lent, is a good indicator of medium term trends in lending.

The UK housing market has already seen prices fall by between 10% and 15% in the past year with sales down by more than half.

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The Royal Bank of Scotland (RBS) has doubled the time guaranteed not to repossess the properties of customers who fall behind on payments from three months to at least six months.

The bank, which owns NatWest, is Britain's fifth largest mortgage lender with a 7% market share.

The government has bought a 58% stake in RBS as part of its recapitalisation plan for the banking sector.

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Deflation may be the next economic problem the world must face.
As commodity prices tumble due to lack of demand. Factory gate prices are also expected to start falling as consumer demand falls due to the credit squeeze and lack of confidence in the economy.

 

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