Tuesday, Jun 08, 2010
Pound is now worth less
Telegraph: How sterling lost a fifth of its buying power in four years
"Talk of “once in a generation” spending cuts to curb Britain’s budget deficit pushed sterling lower again today, prompting currency exchangers to point out how much worse off holidaymakers overseas will be this summer.Some predict the pound will fall further and say prepaid currency cards to lock into current exchange rates should be considered". "Football fans attending the World Cup in South Africa will find the spending power of each pound has fallen by a fifth compared to what it bought during the last World Cup in 2006".
Posted by alan @ 08:11 PM (1296 views) Add Comment
9 Comments
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1. Meerkat81 said...
It has fallen to 30% more like...
2. Exiges said...
That article looked like a cheap advertorial for Travelex, nothing else.
3. paul said...
And every time public figures from the Bank of England or the Treasury deliberately talk down sterling (as they have been doing for at least a year now), inflation increases.
Do you think these dullards know what they are doing? Don't doubt it. They don't now and they never did.
4. drewster said...
Over the last four years the pound is down about 1/5th against the dollar and the euro. However it's worse if you measure in gold. Four years ago, gold cost about £330/ounce. Today it costs £850/ounce. Swapping the numbers around, that means £33,000 bought you 100oz in the past compared to 39oz today. That's a fall of 61% (or to put it another way, gold rose by 157%).
5. britishblue said...
The pound is up 18% over the euro from 17 months ago when it was at its lowest. the Euro was way overvalued when it was first in existance. 1.20 seems to me to be about fair value. It is also much higher against the Eastern european currencies that are not in the Euro. The pound is also about 7% down on the US dollar against its long term average, which is not a huge deal and not an issue when you are still have a weak economy. The pound and all western currencies were overvalued against many other curencies in the world which led us to sucking in cheap imports. (Like China where the pound is now worth 30% less in the last 2 years). Isn't there an argument to say that there is a rebalancing act going on in the currency world and just like house prices which have been to high for too long, the pound has also been too high against a basket of currencies and is finding its right level. Also jsut as house prices shouldnt be the guiding light of our economy, the costs of foreign holidays should not be the the key indicatyor in assessing whether the pounds position is good or bad.
6. easybetman said...
Or I can say Pound maintain its purchasing power against the Deutsche Mark over 15 years period. The exchange rate of GBP/EUR (and hence implied exchange rate against DEM) is actually higher in 2010 then in 1995.
Currencies goes through cycles and 1.45 to a dollar is pretty close the long range average of 1.5. Sterling bought less Asian currency in 1990 then it is today (where most asian currencies crashed after 1997).
Sterling was clearly overvalue in 2007 thanks to Northern Rock and the likes as the capital inflow bolstered sterling and ironically, we actually benefited from Northern Rock's recklesses (cheaper products, cheaper holidays etc). Nothing to complain now really..
7. miken said...
Anyone can see the Euro is like a sprinter who has a large weight around their neck. The large weight being the PIGS and the Pound is currently surging: 1 GBP - EUR 1.2111 EUR +0.00492 (0.408%)
8. Smorris200 said...
Travellers in South Africa are lucky, I am living in brazil where the spending power of my pounds has dropped by well over 40%.
In 2006, I could get R$4.8 to the pound, now I can only get R$2.7. The 10 Year average is about R$3.9 to the pound. So my pounds are currently "safely" locked up in a bank until I either return to England or the pound strengthens. On the plus side, the vast quantity of Reals I am earning here make travelling to the UK much cheaper than three years ago.
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