Wednesday, Mar 10, 2010
Larry Elliot
Guardian: Overvalued exchange rate is a symbol of Britain's economic malaise
"But the message from the past 40 years – which includes repeated boom-busts in the property market and three deep recessions in manufacturing that have hollowed out the country's industrial base – is that an overvalued exchange rate and an over-heated housing market are the ugly sisters of the UK economy. Only in Britain would it have been possible for a fall in output of almost 5% in 2009 to have been accompanied by a 10% jump in house prices. Only in Britain would it have been seen as a cause for celebration."
Posted by dill @ 05:29 AM (1342 views) Add Comment
11 Comments
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1. hpwatcher said...
So, more of the same?
There seems to be a race to the bottom in terms of devaluing currencies, moreover a devalued pound may only lead to other currencies devaluing further. Wish these people would realise that there is no easy way out of this - and certainly no silver bullet.
2. Neil B said...
"The hope is that foreign goods will be priced out of our domestic market by a falling pound, while British exports become more attractive overseas"
What exactly does Britain export these days besides Boomers?
3. Acidrob said...
Just as creating debt based growth was an easy option to create a boom - devaluing your currency, instead of paying off your debt is the easy option in the ensuing bust!
4. dbc reed said...
The clincher is his final paragraph where he describes the property taxes and credit policies needed to contol house price inflation -then rightly calls them political suicide so stand by for the next bubble .He could scarcely be more radical short of going into a rant about Homeownerist hegemony and extolling LVT (his colleague Ashley Seager already published a full page call for LVT as the Credit Crunch gathered).Not to mention Elliott's membership of the Green New Deal Group which exposed how banks create credit in its pamphlet "The Cuts Won't Work" .Respect!
5. mark wadsworth said...
Yup. Larry highlights a few more of the key achievements of Home-Owner-Ism, and as dbc says, the very last paragraph is the important one.
6. sneaker said...
Where was all the complaining when the pound was over $2 ?
Anyway, currencies aren't a beauty contest - they're an ugly contest.
7. drewster said...
A falling pound will be good, but for who? There are always winners and losers. The losers are those who have cash savings or money invested in bonds.
Also what will happen to our vast migrant workforce, all the Poles and Latvians who came here to work hard in our fields & factories, and earn highly-valued pounds? They'll be on the next WizzAir flight back home (or to another EU state). Attached below is a 120-day graph comparing the Zloty to Sterling. Those hard-working Poles have already lost around 8% of their labour value in the last few months; how much more pain will they take? When they leave, they will be replaced by unemployed Brits with significantly lower levels of productivity. This implies the pound will have to fall even further than Larry Elliott's predictions would suggest.
8. righttoleech said...
So the falling pound will curb our thirst for chinese tat? Not when virtually everything including quintessentially 'British' goods like Dyson vacuum cleaners are manufactured there When I look for 'british' goods. the closest I normally get is a proudly displayed union jack, beneath which the legend 'designed in Britain'. Big deal........we are finished.
9. drewster said...
RtL,
The demand will always be there - in the same way that there is always demand for £200,000 Ferraris and Lamborghinis. What will change is the ability to pay. If we can't afford imported manufactured goods, we'll simply buy fewer of them. We'll have to make-do-and-mend - fix the washing machine instead of buying a new one, etc. Green voters love a falling pound....
10. letthemfall said...
Next housing bubble 2016? Start or middle? We're not out of the current one yet.
11. 51ck-6-51x said...
Neil B said, "What exactly does Britain export these days besides Boomers?"
- Financial services; primary energy; pharmaceuticals; chemicals