Wednesday, Jan 21, 2009
The Underlying value in Currency - Why the pound is falling
CynicusEconomicus: The Underlying value in Currency - Why the pound is falling.
Just found this blog with excellent articles. I post this one but the others are good too. To summarise, the pound is on the way down for good and we are doomed. Probably best to read it yourself. Not on this article but another one, he insists that wealth is moved out of the country by returning immigrants, which I disagree with. The only end use of sterling is to purchase goods in the UK, whether it is temporarily moved out of the country or not doesn't matter. But certainly wealth has moved out in that we have large debts abroad. Anyway, lots of different articles, well written, well worth a read. I agree with his opinion that the pound is on a permanent move downwards.
Posted by stillthinking @ 08:09 PM (1080 views) Add Comment
11 Comments
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1. A said...
Why talent moving out is bad for the pound:
1. If talent has money he will exchange his pounds for another currency.
2. The value of the currency is proportionate to the amount of currency in circulation and the amount of riches in circulation in the country. Les talent equals less riches, which makes the pound go down.
2. fjcruiser said...
Very interesting article. It is quite amazing to see that the government believed that the UK would benefit from a weak pound as it would export more. The trade deficit figures speak for themselves showing a substantial increase between November and December. It will not be long before with hyperinflation, importing non luxury goods like food for eg will be the preserve of the rich or those who can pay in other currencies than £.Go and get an allottment me think. Hoops, too late,already a long waiting list.
3. stillthinking said...
fjcruiser, there are loads more there. I am still ploughing through them but I feel like a bit of a break. Irritatingly, he keeps referring to capital as though it were real and ignores the balance sheet idea of banking, debt/savings being equal. Therefore for him savings is ultimately good, I take him to mean that saving(i.e. not consuming) in order to -invest- is good. Anyway.
He is dead right though as far as what are people going to buy with sterling if they don't want to further debt levels, nothing, so our currency is therefore ultimately kaput. The distinction between the UK and Japan's deflation being that there is a whole load of stuff that people want to buy from Japan.
Really interesting though.
4. bystander said...
"The distinction between the UK and Japan's deflation being that there is a whole load of stuff that people want to buy from Japan.:@stillthinking.....and as the cost of these items will become hugely more expensiveno-one will be able to buy them. So unless the Japanese governmnet go the same route as Russia, China and dare I say it UK and deliberately devalue their currency the recession in Japan will be longer and deeper than it will be in Europe and the USA. I disagree with the prognosis on the pound and belive that it still has some life in it yet and will retrace some of the losses, not all mind, but some , especially against the dollar and euro and the yen if devalued. Safe havens are only good when they are safe and recession/ depression has a wonderful way of levelling the playing field. These fluctuations are deigned and desired by HMG/BoE and capitalised on by Rogers and the rest who have the soapbox power to control market sentiment. IMHO.
5. bystander said...
Change 'wonderful' to "sobering", there is nohing wonderful about recessions or depressions.
6. nopensionnohouse said...
Perhaps the “answer” is a single world currency. That would stop currency speculation and would help various countries trade in a more stable global environment. Plus your holiday this year would cost the same as the one last year.
Unfortunately that would mean “they” would be able to rack almost every transaction in the world.
Call me mad but I think the writing might be on the wall for this. All this volatility and devaluation is softening us up!
7. drewster said...
stillthinking,
Thanks for posting this. It's nice to have some views outside the Peston / Ambrose circle. Long article though, took me ages to read it!
8. hpwatcher said...
It is quite amazing to see that the government believed that the UK would benefit from a weak pound as it would export more.
I can't believe that they are so foolish to think that; as Labour has continued the process of runining manufacturing.
9. bellwether said...
I know TM, who trades currency based on technical analysis thinks the pound is currently way oversold and due a serious and sustained rally. I've found his analysis useful in the past but right now this view seems at odds with the fundementals which suggest a long and continued down for sterling against the large economy currencies, interspersed with brief counter trend rallies. I see no reason why we shouldn't approach parity with the dollar ie the all time historic low against the dollar, esp as it seems a racing certainty that our credit rating is going to be downgraded, perhaps more than once.
TM if you are around maybe I've got you wrong on this, could you elaborate on longer term view.
10. bellwether said...
Can't stop posting this morning! The author of the article refers to creditors as wealth producing, which overlooks the fact that creditors are one side of the equation and are nothing without debtors ie if wealth is produced by debt it is produced because of an interaction between the debtor and creditor not because of one or the other in isolation. This reveals a bias similar to Schiff and Rogers.
The problem is imbalance we make too little and spend too much and the east make too much and spend too little.
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