Friday, Apr 20, 2007
Two-dollar pound could help cure inflation ills
Reuters: Two-dollar pound could help cure inflation ills
The pound's rise above $2 may squeeze British exporters a little but it could also be just what the economy needs to calm inflation at a time when investors are ramping up their bets on higher interest rates.
Posted by david20040_0 @ 03:27 PM (145 views) Add Comment
4 Comments
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1. enuii said...
Which is all well and good if you've got a job and are not on the minimum wage which is set according to th rigged inflation figures!
2. sold 2 rent 1 said...
A very short sighted article indeed.
A higher pound will reduce the short term inflation.
The higher it goes the bigger the eventual fall when it devalues.
If this reduced short term inflation means lower IR then the credit cycle will go on even longer.
When the cycle turns the landing will be harder.
Delaying the pain only means much more pain later on.
3. Rob said...
I think you'll find that one of the main reasons the pound is good against the dollar is because the markets expect rates here to go higher because of inflation. The rise of the £ is a syptom - not a cure.
4. harold said...
Now David2004, where do we begin? Perhaps by asking why it is that £1 = $2? Is it that the $ and the US are toast, for reasons too numerous to mention, or is it (also) that the fx markets know that to contain the UK's huge inflationary pressures is going to require massive hikes in IRs? Answer: both, but more of the latter. Were it the case that the UK imported large amounts of goods from the US then £1 = $2 may mask inflation for a while. However, inflation is not created by foreign exchange rates, it's created by money supply outstripping the growth of the economy measured, in part, in goods and services. The sticking plaster of £1 = $2 is not going to save the bacon of those who engineered this boom, come the ensuing bust. No amount of wishful thinking (re: this article) is going change this fact.