Yellow Alert - Pound Crash on the Horizon?

From Infowars.net -

Billionaire financier Jim Rogers has predicted that the British Pound could completely collapse within weeks, sending shockwaves throughout the global economy and heralding the beginning of a downturn that would make the recent economic crisis look tame in comparison.

“Other currencies aren’t strong and the Euro has real problems, with cracks much wider than Greece beginning to show,” Rogers said.

“But it’s the Pound that’s most vulnerable. In real terms, it’s already devalued against virtually every currency barring the Zimbabwean dollar and it’s especially exposed over the weeks running up to the UK election. In a basket of currencies, the Pound is potentially a basket case. And that will put Britain in an extremely bad position for the shakedown.”
“The last few months have seen a ‘false bounce’, shorn up by massive short-term injections of government underwriting,” Rogers, the former business partner of George Soros, said.

“But it can’t last. We’ve been applying temporary sticking plasters, not long-term cures. Later this year we’ll see the start of the real recession, with more Lehman-scale disasters and a fallout which won’t stop until the underlying malaise is genuinely cured.” he added.Rogers’ sentiments echo those of Swiss Bank UBS, which this week speculated that there could be a run on the pound if the government too aggressively tackles Britain’s huge deficit, projected to reach £178bn this year.

Last week, Sterling hit a nine month low against the dollar, falling to $1.05, and slumping beyond parity for the first time against the euro.

An announcement yesterday by Mervyn King, the Governor of the Bank of England, that the bank was ready to print more money and “do whatever seems appropriate”, sent the currency sinking once more.

Sterling fell sharply, from $1.5529 at 9.13am, just before King began speaking, to $1.5398 at 10.30am, when he finished giving evidence to MPs.

The stark downturn has led Jim Rogers and Marc Faber to predict a currency crash foreshadowing a full scale global “shakedown”.

The Real Effect
Back in September of 2008 (before the plunge), I referred to the economy/stock market as a sugar addict. (See prediction timing on chart below. Right before it lost over 40%)

The market is reacting like an addict, convulsing with desire for more goods (I.E. - Fiat debt-based liquidity). This will only make the fall that much harder.

Why? Because 1) It's an accurate description of the relation between the market and those that juice the market and 2) It helps us understand how this whole thing will play out.

Now imagine that you had a friend in the same position. Out all night, hopped up on caffeine/sugar, tired, hasn't slept in 3 days. What do you do? Give him more sugar to keep him going or tell him to sleep it off? Well if you don't follow the latter point, it's only a matter of time before his heart gives out and HE DIES!

Our economy is no different. More debt will only keep the fool alive a little longer but surely amplify the poison's negative consequences. Except our friend, the economy, has been resurrected once already. Now it's time for him to fling himself off the side of 100 story building.