A Potential Crisis In the UK Pound Sterling

According to Niall Ferguson, a financial historian, the chances of a UK currency crisis are one in three as the UK's public finances are in the worse shape of any peacetime period in British history.

According to Bloomberg,

Ferguson’s concern stems from the deterioration in the U.K.’s public finances, which prompted Standard & Poor’s to warn on May 21 that the country could lose its AAA debt rating. The firm estimated the cost of propping up Britain’s banks at 100 billion pounds ($166 billion) to 145 billion pounds and said government debts could double to almost 100 percent of gross domestic product by 2013.

Chancellor of the Exchequer Alistair Darling said on April 22 that this year’s government deficit would hit 12.4 percent of GDP. Alan Clarke, a London-based economist at BNP Paribas SA, expects it to reach 17 percent of GDP in 2010.

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Bottom line: Steer clear of investing in the UK for the time being.