£ To The €

[pongo]

Actually, I was being ironic.

 

Nor was I.

[Bombay Bad Boy]

The Economy Is F****d

What can he mean?

[Dunroamin]

They are priced in dollars, the US economy is stuffed and the dollar is about to fall. The prices are in any event at a four year low in dollar terms

 

However the largest cost of industrial production is not the raw material or the energy but the labour, factory etc.

 

I agre that old style devaluations led to infaltion and the export of unemployment. The recession may make this one different, although the export or import of employment is the only real tool Euro economies have as individuals

 

By rights the USD should fall heavily due to its economic turmoil and industrial problems. Mind you, it should already have fallen and has not due to its continuing abundance of natural resources and, more importantly, the Soveriegn states in the Mid and Far East are stuffed to the gunwhales with USD and cannot allow its vale to fall over far as it will cost them trillions and trillions.

[Sebrof]

...........more importantly, the Soveriegn states in the Mid and Far East are stuffed to the gunwhales with USD and cannot allow its vale to fall over far as it will cost them trillions and trillions.

 

That's the real reason. The silly blighters have too many dollars already, and are being forced to buy more in order to prop the dollar up and preserve the value of their "investment". Probably the biggest bubble of all.

 

Think I'll buy me a cottage and a vegetable patch in the South of France. Dig a well, install solar power, keep a brace of pigs, and live off the land. With a healthy life and lower alcohol consumption doctors will be unnecessary.

 

Does anybody remember the 102% income tax that Britain imposed in 1967? Or thereabouts. My solution to America's problems would be a massive capital tax (say 50%) on the very rich. That would sort out the FED's finances.

 

It would even please the Dolch.

 

S

[P.K.]

I am aware of the potential positives of joining the Euro. However, P.K. stated that it would be an advantage to join at a rate of 1:1 rather than say £1:E1.5 as it would devalue the pound. His statement is total and utter bollocks. That is what I would like him to explain.

I actually posted that the ONLY advantage to joining the Euro would be devaluation without the political bollocks. Because devaluing the currency is always political suicide. The last person to do it to the pound was Jim "Crisis, what crisis?" Callaghan. They got a drubbing at the following election. So you have to wonder if devaluation is actually the correct strategy would they do it knowing they'll be bollocksed at the next election? A Tory government would do anything to stay in power even if it meant destroying whole communities. The Labour lot I'm not so sure about.

 

A friend of mine dropped off the wage slave treadmill at the same time as I did. He went to live out the rest of his days in a modest villa on the Costa Blanca. Not a bad plan. Fortunately as an ex-pat he needed an "offshore" bank account so he chose Jersey. Unfortunately his pension is paid in Sterling. So in the last 18 months he has seen his income fall by a third. In his xmas "round robin" he said he was going to try and tough it out. The € has a much broader base than the £ so it's less at risk therefore interest rates are higher in the Eurozone than the UK so the £ is sliding. If they take the € at near 1:1 parity him and a lot like him are f~cked. Because it effectively means a devaluation of over 30%. That's not bollocks Mr Cambon, it's called mathematics, maybe you should try it...

 

Sure the prices in the UK would stay pretty much the same and exports would look attractively priced. IMHO unfortunately the UK has become too dependant on the finance sector and it will need manufacturing to produce the goods to export. But Maggie destroyed a lot of that so it doesn't look good. I'm sure that Brown et al will keep the £ in the hope it will recover against the basket. Me I'm not so sure and I suspect ex-pats in Spain are in for a really rough time...

[pongo]

I think that most people now more or less assume that parity will be more or less where £ vs € ends up - but my guess is that sterling will get much weaker first. A lot of it is psychological. Would it be crazy to guess that the £ might even sink to about 80c before recovering?

 

And at some points the markets will also make the assumption that Britain will inevitably join the €. Because abolishing sterling and adopting the € is, obviously, inevitable. It's just a matter of when.

 

When something is inevitable - it's annoying not to just get on with it. But I suppose it will take years. Keeps the money changers in business.

 

[it's annoying that British banks make it so relatively difficult to bank in €.]

[gazza]

The U.K. pound weakened to a record 98 pence per euro today, not long to go

[GD4ELI]

... I suspect ex-pats in Spain are in for a really rough time...

I agree - I don't see the pound recovering at all.

 

While some countries move forwards England in particular is on a very fast journey to nowhere. Sadly England is dragging the Island along with it

[P.K.]

I'm getting the impression that the £ might actually be a tad undervalued. Of course that nice Gordon Brown came in with a plan to save the world to aid Europe's financial recovery that was lauded just about everywhere. The irony being, of course, that if he hadn't right now they might be in a bigger mess and the £ would be looking better! But the £ needs a healthy Eurozone to recover I suppose.

 

I'm sure they're in "wait and see" mode. Their best scenario being the pound starts to recover so they can call an election on a "told you so" ticket. You can hardly blame them as Cameron and the rest of his chinless wonders just seem to be flailing around without any clarity of thought or action at all.

[thebees]

Do you think more normal people will open CHF or whatever accounts now? The pound is a bit rubbish and can only get worse (see previous postings relating to debt and the poor). Mrbees has been chatting about changing some of his wages over each month.

 

OFC Thatcher is to blame, she is an evil wicked tyrant who bolstered her mates in business while screwing the country - do you really think closing the coal mines and factories was for the good? do me a favour. That is exactly why people are buying a load of old shit from China made with resources that could have been ....well anyway Im depressed enough already today. I think I will away and plan some festivals to goto in the summer....if I can afford it

[Lawnmower]

Because devaluing the currency is always political suicide. The last person to do it to the pound was Jim "Crisis, what crisis?" Callaghan. They got a drubbing at the following election.

 

Lessons from history hey? Perhaps getting the history right may help. I seem to remember that it was Chancellor Roy Jenkins, in Harold Wilson's government who did the actual devaluation. 14% if I remember aright.

 

Callaghan was at that time something like Home Secretary and miles away from the economy.

[Slim]

I'm getting the impression that the £ might actually be a tad undervalued.

 

Or the Euro overvalued. Isn't the devaluing pound a good thing? For a country that mainly exports services, we're pricing ourselves nicely back into the market, and keeping tourist pounds here rather than abroad?

 

I was talking to a German mate who says him and his buds are all buying up stuff from the british Amazon site, because everythings so much cheaper in quids, makes a difference from the old rip off britain!

[P.K.]

Lessons from history hey? Perhaps getting the history right may help. I seem to remember that it was Chancellor Roy Jenkins, in Harold Wilson's government who did the actual devaluation. 14% if I remember aright.

 

Callaghan was at that time something like Home Secretary and miles away from the economy.

I don't think it was Woy? Those on here with "google opinions" can sort it but I'm pretty sure Uncle Jim was Chancellor. They had inherited a monster trade deficit from the Tories so something had to be done. I think JC was opposed to devaluation so he did the decent thing and resigned. A politician with morals, what a quaint idea in today's world... Woy may have handled the mechanics of it on Callaghan's resignation but I'm pretty sure it wasn't on his watch.

[Cambon]

I actually posted that the ONLY advantage to joining the Euro would be devaluation without the political bollocks. Because devaluing the currency is always political suicide. The last person to do it to the pound was Jim "Crisis, what crisis?" Callaghan. They got a drubbing at the following election. So you have to wonder if devaluation is actually the correct strategy would they do it knowing they'll be bollocksed at the next election? A Tory government would do anything to stay in power even if it meant destroying whole communities. The Labour lot I'm not so sure about.

 

A friend of mine dropped off the wage slave treadmill at the same time as I did. He went to live out the rest of his days in a modest villa on the Costa Blanca. Not a bad plan. Fortunately as an ex-pat he needed an "offshore" bank account so he chose Jersey. Unfortunately his pension is paid in Sterling. So in the last 18 months he has seen his income fall by a third. In his xmas "round robin" he said he was going to try and tough it out. The € has a much broader base than the £ so it's less at risk therefore interest rates are higher in the Eurozone than the UK so the £ is sliding. If they take the € at near 1:1 parity him and a lot like him are f~cked. Because it effectively means a devaluation of over 30%. That's not bollocks Mr Cambon, it's called mathematics, maybe you should try it...

 

Sure the prices in the UK would stay pretty much the same and exports would look attractively priced. IMHO unfortunately the UK has become too dependant on the finance sector and it will need manufacturing to produce the goods to export. But Maggie destroyed a lot of that so it doesn't look good. I'm sure that Brown et al will keep the £ in the hope it will recover against the basket. Me I'm not so sure and I suspect ex-pats in Spain are in for a really rough time...

 

Back tracking now, hmmm.

 

As you point out above, finance is about all the UK has left. A low exchange rate will improve exports temporarily. However, as most Uk raw materials are imported the increase in import costs will cause an increase in export costs, so no long term gain there. Labour are trying their best to engineer some good news over the next 6 months. After that we will be in real trouble because they will have exhausted all options. Recession and interest rate increases are inevitable. The sooner the interest rate goes up the better (3% above ECB rate would do it). Firstly, because it will get the economy moving, but not in a good way, secondly because it will bring money flooding into the country/banks (people and businesses seeking better interest rates for deposits and the low exchange rate that will improve.) That means banks will have money to lend (which they don't have now) and the cycle can start again.

 

I feel sorry for your friend in Spain, but there is nobody to blame but the labour governement. No more boom and bust (my arse).

[P.K.]

Back tracking now, hmmm.

Back tracking on what exactly????

 

2009 will be particularly tough because a lot of bonds from major industrials will fall due. If the banks prop up failing industries they will be doing it with OUR money. So the line between the public and private sector will blur somewhat. However with the gov (ie us) owning so much of the banking system their success or failure will be a direct judgement on essentially what makes up UK PLC. It could get very messy. But you might as well pay them to stay employed at least producing something rather than pay them to produce nothing.

 

I also do not share the simplistic knee-jerk "the government is to blame" bollocks. There is a strong argument that runs that professional politicians should not run businesses. That should be left up to the professional bankers, manufacturers, financiers etc etc. You only have to look at Tynwald to see what a horlicks it can produce. Unfortunately the so-called "professional" bankers, financiers etc etc were not as professional as they should have been. Maybe the warning signs should have been seen earlier by the government but those involved even more deeply in the mire they were creating, like the board of Northern Crock, would have seen it coming a lot earlier, and they did nothing about it.