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Qe And Interest Rates - The Pound

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Can someone help my tiny little brain out? I've been reading the forums several times daily over the last 4 years and love it. I've learned so much but yet still understand so little.

I thought all this quantitative easing would devalue the pound. Why hasn't it? Even when there are hints of even more QE?

But then, according to some, interest rates are likely to go up soon - which will increase the pounds value.

So is the pound going up in the next 12 months or down?

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So is the pound going up in the next 12 months or down?

If we knew that we´d be making a fortune on FX trades rather than @rsing around on internet forums. :lol::lol:

My guess is that the pound will settle in the 1.25-1.30 range but that is no more or less informed than anyone else here.

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Because everyone else is doing it too. If you sell sterling, you have to buy something else and other bits of paper money look worse than our paper money. You could, of course, buy real assets like oil, gold, houses etc but that's another topic.

My view (expounded here in the past) is that politics is helping sterling in that the scale of public debt is being talked about openly and the next government (mine hopefully) will have to sort it out. For what it's worth, I think $1.75 and €1.35 are about right.

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OK I'm not in US$ or Euro. I'm in Singapore dollar. I was working overseas and being paid in S$ so as the pound slid, I just kept it there and smiled quietly to myself.

Of course, I can't even enjoy the internalization of my smugness anymore....well for the time being.

I don't need the money at the moment but would probably need it in Euros at some point (the France dream like others on here).

I still believe that people like Jim Rogers, Marc Faber and Peter Schiff will end up being right long term. I don't think any of their advice is meant for short-term trading.

Is this really misguided, if I'm thinking long term?

What do you think of this talk of a currency crisis later this year/early next year? It's obviously not going to be in an Asian currency right?

Oh and one more question. Is the pound a commodity currency? Is the fact that many commodity companies are listed on a FTSE a factor? North Sea oil still? Commodities traded in sterling? Are any of these factors?

Ok that's 5 more questions! :lol:

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I believe QE has strengthened the UK economy from what it was going to be. And because even with all the printing of money, the destruction of credit money is still faster, there is deflation so each pound is becoming more valueable.

I'm supporting QE because it is sort of a backdoor way to do social credit, which is the economic and political theory I believe in. An argument I made was that social credit would strengthen the economy more than the amount of extra currency would devalue existing currency. It appears to be happening so far in the UK.

Of course I don't believe the UK is out of the woods yet, I believe we have severe structural problems namely government of all the mainstream parties outright hostile to heavy industry in the UK. Which imo is the basis of real high levels of wealth. The real production is where I really agree with Peter Schiff and co.

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Can someone help my tiny little brain out? I've been reading the forums several times daily over the last 4 years and love it. I've learned so much but yet still understand so little.

I thought all this quantitative easing would devalue the pound. Why hasn't it? Even when there are hints of even more QE?

But then, according to some, interest rates are likely to go up soon - which will increase the pounds value.

So is the pound going up in the next 12 months or down?

The forex markets are time-shifted. So the pound got devalued ahead of the "real" devaluation, when it fell to below $1.40 and nearly to €1.00.

Now we're back to the falling $ being the main mover. And the £ is also rising against the € because the latter had risen anomalously.

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I'm supporting QE because it is sort of a backdoor way to do social credit,

social credit? you meaning building roads, hospitals, schools, houses for social housing?

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I still believe that people like Jim Rogers, Marc Faber and Peter Schiff will end up being right long term. I don't think any of their advice is meant for short-term trading.

Is this really misguided, if I'm thinking long term?

What do you think of this talk of a currency crisis later this year/early next year? It's obviously not going to be in an Asian currency right?

It is simple logic you are correct.

The longer it takes before debt is addressed the worse it will be.

QE... "Quantitive Easing". What does it mean?

I know of several people who owned large houses had large cars and a very extravagent life-styles who used "QE" to help them. Unfortunately for them the banks said they could no longer give any more QEing as they had re-calculated the imaginary asset values they held so could no longer give them more imaginary money. (QE?) Because they had lent so much most of them could not keep up minimum payment and are going to go bust, the others are OK as interest rates are so low and bank have not asked for any of the principle back because the government have told them not to. So they will be ok unless they loss their job, interest rates go up, some unforeseen problem arises or their asset value falls lower. Unfortunately for them at least 3 factors will happen very soon and possibly 4.

It is exactly the same for the UK government only more so.

Expect:

Interest rates to rise before the year end

Businesses to start going bust from about now

Unemployment to start to take off from about now

Product prices to go up quickly.

Unless you run or manage a business you will be unaware there has been any downturn at all yet, but very very soon you will realise we are not in a slight downturn but in a depression.

When you are in a hole stop digging

Stop spending money Gordon

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Can someone help my tiny little brain out? I've been reading the forums several times daily over the last 4 years and love it. I've learned so much but yet still understand so little.

I thought all this quantitative easing would devalue the pound. Why hasn't it? Even when there are hints of even more QE?

But then, according to some, interest rates are likely to go up soon - which will increase the pounds value.

So is the pound going up in the next 12 months or down?

I can't predict what will happen to Sterling relative to any currency - to even establish a hunch requires epic levels of effort - and plenty of risk remains even then. Roumours of a scandal like Madoff or Stamford, for example, are entirely outside the scope of individuals to anticipate - and this, coupled with large scale international capital flows, makes it remarkably difficult to reliably trade currencies for profit.

I've never been in the camp that believed that QE in the UK would devalue sterling (though I make no representation whatsoever about whether or not Sterling would appreciate or depreciate for other reasons.) Japan used QE from ~2002, on a modest scale, and that devalued their currency... but the reason for that is that the Bank of Japan bought non-yen debt... which kept their industries competitive on the world stage with a devalued currency. China have done something comparable with their sovereign wealth funds... the same, too, for other vibrant economies. The Bank of England, however, engaged in buying Sterling debt... which has the effect of devaluing all other currencies relative to sterling. Fingers crossed it doesn't break the international monetary system... of course.

Any kind of analysis is extraordinarily awkward because, with modern fiats - in the context of a US dollar/US banking crisis, there will be little consensus about how to measure value. For example, are asset prices or the prices of traded goods most relevant? It's a really big mess - no-one is sure where anyone else stands.

When Japan crashed in 1990 - although some say that the asset bubble was far larger in Japan than it has ever been in the UK - something interesting happened. It emerged that a vast number of loans had been made on dubious or non-existent collateral. I'd be shocked if something similar does not emerge in the UK. Bad debts would devalue the currency in which they are denominated - in my opinion... this effect would have the opposite effect to the recent BoE QE activities - in my opinion. I'm passing no comment on the magnitude of either of these effects... that's a very hard question to answer.

Edited by A.steve

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What an excellent question.

The prime factors for a currency rising are gains in GDP combined with the trade (in)balance shrinking.

Before QE was announced, and reducing interest rates to near zero, the UK was looking at falling GDP, and had a very poor balance of trade which meant the currency fell sharply.

Dispite printing money on a huge scale being announced in addition to below inflation interest rates, huge fiscal deficits as far as the eye can see and massive borrowing stepped up, and the possibility the UK may lose its AAA rating, the main things for the currency market at this time are that, its key focus - prospects for rising GDP have improved (hence the probability of rising short term interest rates has improved), and the previous devaluation of sterling dropped the trade imbalance vis a vis Europe and the US. Hence the justification for a rising currency.

Edited by brainclamp

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I believe QE has strengthened the UK economy from what it was going to be. And because even with all the printing of money, the destruction of credit money is still faster, there is deflation so each pound is becoming more valueable.

I'm supporting QE because it is sort of a backdoor way to do social credit, which is the economic and political theory I believe in. An argument I made was that social credit would strengthen the economy more than the amount of extra currency would devalue existing currency. It appears to be happening so far in the UK.

Of course I don't believe the UK is out of the woods yet, I believe we have severe structural problems namely government of all the mainstream parties outright hostile to heavy industry in the UK. Which imo is the basis of real high levels of wealth. The real production is where I really agree with Peter Schiff and co.

QE has reduced LIBOR towards base rates, and thereby benefited those in debt at the expense of the prudent. If that is the social credit you think we need, then that seems a strange set of priorities to me. It has subsidized the reckless borrowers at the expense of our silver haired prudent savers, many of whom are faced with a squeezed income.

The £ has devalued - it was well over $2 to £1, and €1.6 to £1 not that long ago, so even with the rally it has weakened - the rally I understand in part to be growing expectation that the BoE is looking to bring QE to an end, though the Govt clearly wants it to go on as long as possible as it helps its electoral prospects, and it doesn't seem bothered by the long term consequences.

Edited by Icantbelieveitsnotbutter

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Guest DissipatedYouthIsValuable
Because everyone else is doing it too. If you sell sterling, you have to buy something else and other bits of paper money look worse than our paper money. You could, of course, buy real assets like oil, gold, houses etc but that's another topic.

My view (expounded here in the past) is that politics is helping sterling in that the scale of public debt is being talked about openly and the next government (mine hopefully) will have to sort it out. For what it's worth, I think $1.75 and €1.35 are about right.

Has the likely incoming government made enough out of the housing boom to not be enticed to steal more basic needs from future generations?

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Can someone help my tiny little brain out? I've been reading the forums several times daily over the last 4 years and love it. I've learned so much but yet still understand so little.

I thought all this quantitative easing would devalue the pound. Why hasn't it? Even when there are hints of even more QE?

But then, according to some, interest rates are likely to go up soon - which will increase the pounds value.

So is the pound going up in the next 12 months or down?

Against what? The pound has NOT gone up.The $ and Euro have fallen.Against other currencies sterling is level or down.People say "the pound has risen",what they mean is against the $/Euro.

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social credit? you meaning building roads, hospitals, schools, houses for social housing?

Ya right now most money that comes into being is created as private bank loans(about 90%). Its been that way for hundreds of years. Social credit says to restrict this private expansion of the money supply and instead the state creates the money and gets it into the economy by either outright giving it to the people as a dividend or through spending like you mentioned.

To give you an idea of the scale over the last decade the expansion of the money supply was running at about £400 billion a year in the UK. 90% of it through private debt creation. If we took that £400 billion and instead brought it into the economy through a dividend it would be about £8500 per year to every adult in the UK.

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QE has reduced LIBOR towards base rates, and thereby benefited those in debt at the expense of the prudent. If that is the social credit you think we need, then that seems a strange set of priorities to me. It has subsidized the reckless borrowers at the expense of our silver haired prudent savers, many of whom are faced with a squeezed income.

The £ has devalued - it was well over $2 to £1, and €1.6 to £1 not that long ago, so even with the rally it has weakened - the rally I understand in part to be growing expectation that the BoE is looking to bring QE to an end, though the Govt clearly wants it to go on as long as possible as it helps its electoral prospects, and it doesn't seem bothered by the long term consequences.

The decline in the pound happened before QE started though, and the pound has risen since QE started.

Social credit wouldn't use the QE to buy long term bonds.. instead it would use it to fund fund government debt. Which £100 billion of the £150 billion of QE Brown has put towards funding government debt. And that move a great part of the elite were moving against him.

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you can't measure it on an essential short term time frame, one of the reasons why politicians love inflation so much (and ripping us off) is because it takes years to show up, perniciously over time, it won't happen straight away unless they get totally carried away and the process accelerates

you can guarantee in the long run - over years rather than months - our currency will lose value as they increase the money supply, therefore you should see this as an opportunity to go against the crowd

Edited by punter

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Ya right now most money that comes into being is created as private bank loans(about 90%). Its been that way for hundreds of years. Social credit says to restrict this private expansion of the money supply and instead the state creates the money and gets it into the economy by either outright giving it to the people as a dividend or through spending like you mentioned.

To give you an idea of the scale over the last decade the expansion of the money supply was running at about £400 billion a year in the UK. 90% of it through private debt creation. If we took that £400 billion and instead brought it into the economy through a dividend it would be about £8500 per year to every adult in the UK.

Ah but surely that would be far too dangerous for the bankers, some of them might actually have to earn their money by correctly setting loan rates to cover the risk of the loan as after all they'd no longer have a monopoly on cheap money. We can't expect bankers to have to use skill and judgement to make a living can we?

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Social credit wouldn't use the QE to buy long term bonds.. instead it would use it to fund fund government debt. Which £100 billion of the £150 billion of QE Brown has put towards funding government debt. And that move a great part of the elite were moving against him.

I can't make sense of that.

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To me that means essentially throwing money out of helicopters ;) or in this case directly into every citizens bank account? Although I do agree with aa3 that QE is a good thing right now, however I don't want to see any extension of the program.

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