London, United Kingdom (PressExposure) December 08, 2009 -- "Zen International": The UK's apparent inability to curb public spending and raise taxes may cause a severe run on the British pound in the run up to and after the May 2010 general election.
Without doubt, the UK has spent more than any other developed country in its efforts to bail out its beleaguered banking system. The British taxpayer owns an eye watering 80% of the Royal Bank of Scotland and just under 45% of Lloyds Banking Group.
"Zen International" analysts cite the fact that the UK is the only major developed economy still mired in recession and is also mindful of the fact that the Bank of England has left the door open to the possibility of additional quantitative easing measures in an effort to flood the economy with additional liquidity.
The Asian-based investment boutique is thought to believe that there is a risk of a crisis of confidence in the British economy which could culminate in the loss of the nation's essential AAA credit rating which could subsequently force up long-term interest rates at a time when the economy can least afford it.
"Zen International" apparently advised its clients to divest themselves of sterling-denominated assets well over 18 months ago and also urged them to ignore rights issues by UK banking groups seeking to raise capital.
The notion that Europe's second largest economy may suffer the ignominy of going to the IMF for a bailout is one which has been dismissed by many economists but "Zen International" analysts believe that the events of the last three years have shown that investors would do well to expect the unexpected.