Saturday, Nov 15, 2008
Tough talk from a wimp
The Times: Gordon Brown risks run on the pound, says George Osborne
"Britain is heading for a “collapse of sterling” if Gordon Brown persists with trying to borrow his way out of trouble, George Osborne says in an interview with The Times today."..................
Posted by titaniccaptain @ 12:09 AM (937 views) Add Comment
22 Comments
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1. planning4acrash said...
They are discussing a global devaluation of all currencies at the current global meetings, particularly currencies of strong free countries like America and Britain.
2. dude said...
The euro for Britain -- only a matter of time.Notice how, when the going gets tough and investors want to look for a safe haven, they look to the dollar or the euro, not the pound.
How far do we have to go before Britain works out it has a third rate currency, and we have to adopt the euro to allow us to trade with the rest of the world? Parity with the euro, or even worse? Financial services, especially those based on derivatives, are a charade. A large part of the UK economy has depended on this illusion, and now the bubble has burst that kind Lady Thatcher has left us naked, defenceless in the wake of the downturn. All our manufacturing has gone, and the prudent financial system we built up from the 19th century onwards (eg building and friendly societies) has gone, subsumed into the 'modern' services that are falling around our ears.
Ah well. It's taken thirty years but the chickens are finally coming home to roost. My biggest worry? That we get another Tory government that can wreak even more damage than they did the last time.
3. goweresque said...
I think the collapse in the £ may save us you know. If the £ goes to parity vs the dollar and the euro, think how competitive our exports will be. And we do still have exports, despite all the talk to the contrary. All the goods and services sold overseas will be massively cheaper as a result of the devaluation, and thus in more demand. Remember the positive effect the devaluation had in 1992. Low interest rates and a low pound = good for UK based business. Plus more expensive imports/holidays abroad = more spending on home produced goods, and holidays at the good old British seaside. I think this devaluation is being engineered by the BoE and the Treasury as the least worst way out of this mess. And if the banks can resist the temptation to lend too much money to people to buy houses at lower rates, I think it might just work. The higher import prices will offset the deflationary forces sweeping the world, and keep our RPI in positive terms, which is crucial. We need to keep people able to just about get by for the next 2 years, and let business have the benefits of the lower pound/rates. That way unemployment may not rise too much, and a Depression may be avoided. It will still be ugly, but I think it's our only chance.
4. bystander said...
dude - the last Tory government left a surplus, each recent labour governmnet has left the country with a major deficit and economic misery. I am neither Tory, liberal or Labour as each political party is deeply flawed, but to look back with tinted glasses and only remember the bad from tory rule, is like looking back at GB's chancellorship and thinking: 'he did a good job". Osborne is simply airing what everyone is thinking, and if they try to blame him for a 'run on the pound' they are a little behind the time, as I believe a drop of 10 euro cents over a week is pretty close to a run anyway and tat was caused by the fundamentally flawed decision of a bullied MPC to drop interest rates by 1.5%. So to all of you who hate the conservatives for Thatcher, remember that the whole country will hate NuLab for many years to come because of Blair and Brown.
5. tyrellcorporation said...
So dude it's thatchers fault again. Give it up mate you just sound pathetic.
6. Spectator said...
Completely agree with goweresque....
Economies do have natural stabalisers - one would hope that the fall of the pound is one of them. This is all just boom and bust, and a lot of you seem surprised by it all! Look at the graph on the front page of this website...tell me when it went down but didnt come back up? FFS in 1992 interest rates were 20% at one time! Those were desperate times. I know some of you guys are taking it hard, tough it out.
7. c'mon correction said...
Dude - please explain what policies Thatcher have caused you to say "now the bubble has burst that kind Lady Thatcher has left us naked, defenceless in the wake of the downturn" ??????????? You just don't make sense?
And why will a Tory government be worse than New Labour's performance??????
The predominantly left-wing media is on a tory-bashing-high at the moment when they should be looking at Gordon Brown's and New Labour complete failings. I suspect that deep-down they know a socialist party flirting with capitialism has created the biggest economic melt-down in 100 years, but won't admit it. This economic mess will even surpass the situation they got us in last time they were in power.
Don't forgot it was the 'stepping stones' project that Margaret Thatchers Tory government turned our economy from 'the poor man of europe'
to a stable, sustainable economy that Mad Gordon Brown has wrecked. If you don't know/believe this, then do your research before blind tory-bashing. Why support Labour currently? beacuse 'mum and dad votes Labour, so i will' or you believe everything the media spoon-feeds you?
8. handle_it said...
@ tyrellcorporation 7.25AM
Are you is some way suggesting that Thatcher and her Reaganomics isn't at all responsible for the destruction of our manufacturing base ? How old are you ?
9. phdinbubbles said...
Completely agree with your every word dude.
The tories won't change their spots either. Take their policy on inheritance tax - protecting those who already have wealth rather than, for example, reducing level of taxation on income to encourage people that they can achieve their aspirations through hard work. Just belies the tosh they spout out about encouraging people to take responsibility for themselves. Meritocracy my @rse. Protecting us fat-cats more like. We've had tory rule now for 29 years and look where it's got us.
10. planning4acrash said...
dude, we only have a third rate currency because our government has taken on too much debt, printed too much money, manipulated inflation stats and kept the cost of borrowing too low, destroyed our manufacturing base and sold all our gold.
goweresque, you are a freaking idiot, do you realize you just said that YOUR wage, pension and savings and you not being able to put food on the table will save you? Yes, that kind of pansy nonsense from you boys and girls is why the government will have their way with us and eat us for breakfast. You know nothing, and have no idea about what's coming.
11. stillthinking said...
There won't be a collective devaluation of global currencies. How can all they all devalue at the same time ? They can't. The idea of export led recovery is also flawed, imho, because this suggests that demand for British exports will increase, and with the EU just starting off on a recession, they won't.
Think about this;
last year we exported 100 woollen sweaters (which we don't probably but anyway) and in return we get 100 bottles of french wine.
After the collapse in sterling, we need to either export 130 woollen sweaters but still only get 100 bottles back/or export the same 100 woollen sweaters and get back 70 bottles instead.
How can this be good?
Essentially the trick of a lower currency is using the value of peoples savings as a discount on exports. Not only are our goods being sold on the cheap, and the savers losing out, but they are not really cheap. Just fake cheap and likely to end up being uncompetitive.
The only true way to recover is by increasing demand... Why is this so difficult for the government to understand. That means increasing the amount of disposable income available to people i.e. lower taxes and lower public spending. While I am on this rant, the reason there is a recession or worse next year is because a collapse in demand is now inevitable, and will be global but worse in the UK, so the government should really be planning a model for the recovery where consumer demand is sustainable, and obviously that means building our -own- stuff not borrowing it.
12. c'mon correction said...
How much do Labour governments take support away from the UK manufacturing with high taxes to spend on an always much bigger public sector? That is their very prinicipals and which they are based. Conservatives by their very nature support the private sector more than Labour. But, every government in part has responsibility to a reduced manufacturing base, the UK can't compete on a large scale globally anymore, certainly not the type of manufacturing around in the 60's and 70's. We are good at the speacialised stuff however and can compete.
Callaghan's Labour party was running the UK coal mines at a £1billion a year loss in 1970's prices! Why dig stuff out of the ground to sell it at a loss? Just to support employment levels. Ditto with ship yards, steel etc. It wasn't sustainable. And neither is our current economy and public sector.
13. planning4acrash said...
Collective devaluation will see gold and commodities all rise for all currencies, commodities then sold to pay off debt. It really is the only way to do it without avoiding bankruptcy. And they just refuse o destroy any of their currency because it would appreciate the wealth and power of the people vs the government and corporations.
14. planning4acrash said...
"Callaghan's Labour party was running the UK coal mines at a £1billion a year loss in 1970's prices! Why dig stuff out of the ground to sell it at a loss? Just to support employment levels. Ditto with ship yards, steel etc. It wasn't sustainable. And neither is our current economy and public sector."
Callaghan had to subsidize because he presided over almost hyperinflation. The coalmines would have GONE DOWN in cost had we had sound gold backed money and no inflation. And this now would be a wonderful country, but the old folk here never bothered to educate themselves about money and liberty and so never went to the streets for anything other than what the newspapers told them to fight for, even though the corporations run the newspapers. So, we had miners fighting for jobs and pay rises, literally asking for poison, when they should have been fighting for sound money and an end to inflation. Wake Up!!
15. c'mon correction said...
It is the monetary system that was put place a long time ago, which IS deeply flawed. However, the system applies to all types of government equally, it is what they operate in.
Wake Up!! ?! it doesn't change the fact of how different goverments use the SAME system.
We get it, the system doesn't work and won't be sustainable forever (that's a different agrument, which you seem desperate to have in every thread !). It doesn't change this agrument.
16. stillthinking said...
The problem is international debt, so gold reserves could be used to settle the debt, apart from the fact of course that collectively we are in debt, as in we don't have anything. This is a bit like suggesting that people use gold to pay off mortgage arrears. They don't have any.
On a different note, the sheeple seem to be under the illusion that depending on the brilliant policy decisions of our masters, we might come through this not so bad, but -either way- we end up poor. We are going to be poor because we are paying off debts, or we are going to be poor because we can't pay them off so they just accumulate. The success(!) would be poort because paying off debts and we are not even going to manage that. We have stupidly moved consumption from the future to the present. There is no consumption left in the future, its all gone.
That is why there is nothing to rescue by boosting demand.
The culpability of Brown is that after I borrowed a 100 to blow on chinese tack, the chinese then lent the 100 to Brown who , guess what, has already spent it. The idea that perhaps I should have been working off the debt is missed. I now owe my original 100 plus I owe -another- 100 on behalf of Brown, if I had been a bit luckier, a bit more dependant on the state, I might have caught some of the government money in which case I could have paid down my own debt and would only be left with Brown's. Which is the position of the UK rich. They have debt, just its held on their behalf by New Labour. The UK poor also have their own separate debt.
Should the whole thing worsen to the extent that people leave the UK, that should be understood in the context of defaulting on debt, not seeking a lower tax regime elsewhere. The money has already been spent on your behalf. If you abscond without paying a decade of heavy taxes then you are a defaulter.
Which seems to me a big flaw in the payback arrangements.
17. goweresque said...
An export led recovery can work - it depends on import substitution. If we export more and import less because of a low pound that improves the balance of trade, hopefully to a positive number. How do you think China manages to have built up such huge foreign reserves? Through artificially keeping its currency low and running a massive balance of trade surplus. More money in than out = good for the nation. Simple as.
If you are old enough to remember the last 2 recessions (early 80s and 90s) you will remember in both British industry was crucified on a high pound. In the 80s it was because the pound was considered a petrocurrency as North Sea Oil had only just started to flow in the late 70s. In the 90s it was a political decision (against Maggies better judgement, but supported by both opposition parties and Lawson/Hurd/Howe/Heseltine and the politico/media classes) to join the ERM at a rate that proved too high once the economy took a nosedive. Interest rates were hiked again and again to defend the pound against its lower limits in the ERM, until eventually the market won out (as did George Soros) and relief was granted by 'Black' Wednesday in 1992. The recovery was fast after that.
I'm not saying things will not be difficult over the next 2 years, just that allowing, or even purposely driving down, your currency will have a positive outcome economically. We are still a massive trading nation, and will benefit from a lower pound, mark my words. Many on this site seem hell bent on predicting (and revelling in) 'end of the world as we know it' type scenarios. While I realise there are limits to the financial system we have (fiat currency, fractional reserve banking etc) I suspect that the world is not going to end, we are not heading for a Mad Max style world. The fall in sterling has given me a glimmer of hope economically for the first time in ages. Compare us with the USA. Not only are they heading for the buffers, but also with an appreciating currency. Lower import prices, lower exports, massive balance of trade deficit, substitution of imports for home production. I know which I'd rather face.
18. matt_the_hat said...
As a 20 something I asked the generation above why we need to have inflation. They either respond that its essential and they bought a house that's now paid for by inflation or they don't know what I am talking about.
In each society through the ages the younger generation have had their elders who they support through labour for the benifit of their wisdom. What we have a load of pot smoking, baby booming free loaders, who don't want to build new houses in their backyard for younger people but want their pensions paid for. Well I have a shock for them, the biggest threat to this country now is not racial divide but inter-generational. Why should I work to support 3 retired people, its not going to happen.
The government realised this so have enslaved an entire generation into debt. I say rent, pay off your credit cards keep your noses clean, build up your skills then move to a country that gives you oppertunities. I have heard people on this site moan about young people and their addiction to debt. That's not the case, young people always think they will get a better quality of life than their parents, this will not happen in the UK so people subsidies the dream with debt. Its about time this generation revolted, not violently (the government would love that) but silently, through stealth, into the night, hidden in the emigration figures.
I have not borrowed a cent in my life but apparently I owe thousands (national debt), well the credit card got cleared 3 months ago when I emigrated. Follow me its a different world one where your valued. I don't expect this posting to stay on the site for long, I can smell the fear now. But if anyone has any sense leave now well you can, once the automated gates are on at airports no-one owing money (utility bills, credit cards etc) will be able to leave the country - if you don't believe me I know of a very important multi-millionair business man who lives in dubai and was stopped at customs (dubai customs) unable to leave the country on a business trip because his gas bill was overdue!!!!!
19. stillthinking said...
The Chinese export strategy was based on extremely cheap labour. Our export strategy is based on subsidising labour with savings. We are not truly working more cheaply, we are just selling stuff below true value. I don't see that these are the same.
A successful but rather brutal export strategy would be to abandon the minimum wage regulations and limit social security payments to a single month. Then we have an export drive. Our plan is nothing like that.
20. phdinbubbles said...
A successful export strategy would be to send our bankers to the far-east.
21. dude said...
@18, matt_the_hat. Keep up the posts; for my money (borrowed, of course) yours is the best read on this page.
22. Anonymous_coward said...
matt_the_hat.. thats exactly what I did and now living relativley stress free outside of the UK and europe.. happy days never going back to that wet rock.
In the UK i was looking for a job for 2.5 years got a job here in 2.5 weeks (I entirely blame recruitment f*kwit mac-jobbers)
The people are leaving in thier droves, surely that should lower the demand for affordable housing?