A Banking Crisis Looms

Commentary 
My columns have turned rather apocalyptic of late, but for a valid reason. Just this week, we got confirmation that our financial system is, again, at the brink of collapse, when the Bank of England (BoE) was forced to enact, de facto, a bailout of the pension funds of the United Kingdom.
On Sept. 28, around noon, the Bank of England stepped (back) into the Gilt markets and start buying government bonds with longer maturities to stop the collapse in their value which could have caused the financial system to become unhinged. Pension funds were faced with major margin calls, which threatened to cause a rapidly cascading run on their liabilities as trust in their liquidity and solvency would have become questioned by a widening circle of investors and customers. Effectively, the BoE stepped in to limit the vicious circle of margin calls faced by pension funds because of the crashing values of the Gilts….