It is amazing how the main stream media miss the really big financial stories.
Last week, the BoE published data on the external liabilities of UK banks. At the risk of over-simplifying things, this number measures bank deposits of foreigners held here in the UK. What did this number show? Foreigners are pulling out their cash.
UK based banks hold huge amounts of external liabilities. In March 2008, the number peaked at almost ₤8 trillion. That is about 5 times UK GDP. However, between March and June, external liabilities fell by ₤740 billion. That represents about a 9 percent fall. As the chart above illustrates, this is not something that has happened recently.
As external liabilities were falling, UK banks were reducing their assets. In other words, they were selling off their positions in order to finance their withdrawals.
Here is a question - why do you think foreigners are pulling their cash out of the UK?