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The Coming Sterling Devaluation

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http://www.bloomberg.com/apps/news?pid=206...id=aY.WFW.AgaVY

King Crushing Pound as U.K. ‘Can’t Afford’ Strength (Update1)

By Anna Rascouet and Lukanyo Mnyanda

Aug. 17 (Bloomberg) -- The pound’s biggest five-month rally in 24 years is ending as the Bank of England floods the shrinking U.K. economy with newly printed cash and slowing inflation precludes higher interest rates to lure investors.

The currency soared 23.5 percent from March 10 to Aug. 5 on speculation U.K. assets would rise as the worst financial crisis in six decades eased. The sharpest increase since 1985 ended Aug. 6 after policy makers said the recession was deeper than anticipated and moved to spur the economy by expanding its purchases of U.K. debt 40 percent to $290 billion. Six days later, central bank Governor Mervyn King said inflation will probably fall below the Bank of England’s target.

The pound has slumped 2.6 percent since Aug. 5 to last week’s $1.6543 close.

Today: 1 GBP = 1.63485

Debt does not equal growth. The market cannot be beaten.

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Guest The Relaxation Suite
Debt does not equal growth. The market cannot be beaten.

+1. The market will always correct itself. All a Brown or an Obama can do is kick the can down the road for the next guy to pick up.

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http://www.bloomberg.com/apps/news?pid=206...id=aY.WFW.AgaVY

King Crushing Pound as U.K. ‘Can’t Afford’ Strength (Update1)

By Anna Rascouet and Lukanyo Mnyanda

Aug. 17 (Bloomberg) -- The pound’s biggest five-month rally in 24 years is ending as the Bank of England floods the shrinking U.K. economy with newly printed cash and slowing inflation precludes higher interest rates to lure investors.

The currency soared 23.5 percent from March 10 to Aug. 5 on speculation U.K. assets would rise as the worst financial crisis in six decades eased. The sharpest increase since 1985 ended Aug. 6 after policy makers said the recession was deeper than anticipated and moved to spur the economy by expanding its purchases of U.K. debt 40 percent to $290 billion. Six days later, central bank Governor Mervyn King said inflation will probably fall below the Bank of England’s target.

The pound has slumped 2.6 percent since Aug. 5 to last week’s $1.6543 close.

Today: 1 GBP = 1.63485

Debt does not equal growth. The market cannot be beaten.

where, exactly, is this flood of newly printed cash flooding into the economy?

its nonsense....banks assets have barely changed in value ......this cash is just replacing the falling assets (CDOS and shit).

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Debt does not equal growth. The market cannot be beaten.

Sterling has been massively overvalued for years as a direct result of the primacy of the City, which has helped to fuel in trade deficit and gradually strangle manufacturing and other export industries. $1.20 and Euro Parity would be a good thing IMO..

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So how does Sterling devaluation fit in with cash is king then? :blink:

It all depends on what kind of cash you are talking about. IMO, sterling and the Euro face some sharp adjustments vs. the US$.

My bet is still on global deflation when cash will rule the world. The black hole comprised of ordinary bank debt and "innovative financial products" (IFPs) will take more than 4 or 5 trillion to back fill before it can form a new foundation upon which to build recovery.

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It all depends on what kind of cash you are talking about. IMO, sterling and the Euro face some sharp adjustments vs. the US$.

My bet is still on global deflation when cash will rule the world. The black hole comprised of ordinary bank debt and "innovative financial products" (IFPs) will take more than 4 or 5 trillion to back fill before it can form a new foundation upon which to build recovery.

OK, so what you are talking about here is a diversification of currencies..... that it would make sense not to be completely in pounds but to hold other stronger currencies besides.

By this logic, would it not make sense to hold some gold besides US dollars and say Yen?

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Bits from other websites linking to the story:

http://www.forexrazor.com/News/articleType...d-Strength.aspx

The pound’s biggest five-month rally in 24 years is ending as the Bank of England floods the shrinking U.K. economy with newly printed cash and slowing inflation precludes higher interest rates to lure investors.

http://www.anyshorecasinos.com/2009/08/17/...fford-strength/

King Crushing Pound as UK 'Can't Afford' Strength

Some investors are betting the pound rally will continue as measures by Brown, 58, and King, 61, ease the economic slump. London-based HSBC Holdings Plc, … See all stories on this topic

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Those blasted markets can't take a hint. You have to scream it to them.

Gotta love bloomberg.

Who makes their narrative up, I wonder?

"Millions of investors do x because warren buffet has lentils for lunch."

"Pound falls as Miles Davis is on Radio 2."

etc

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Is the UK really worse off than the US, or the Eurozone (including Spain, Ireland and other strugglers)?

I'm not so sure it is, and so I don't see the £ falling relative to them.

Instead, surely the £, $ and Euro will all fall relative to the rest of the world and commodities like oil or gold ?

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Is the UK really worse off than the US, or the Eurozone (including Spain, Ireland and other strugglers)?

I'm not so sure it is, and so I don't see the £ falling relative to them.

Instead, surely the £, $ and Euro will all fall relative to the rest of the world and commodities like oil or gold ?

Yes, perhaps it is better to view it as currencies falling in relation to commodities as opposed to commodities rising in relation to currencies. The currencies that are being 'diluted' by the effects of Q E will fall the most in relation to commodities.

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Gotta love bloomberg.

Who makes their narrative up, I wonder?

"Millions of investors do x because warren buffet has lentils for lunch."

"Pound falls as Miles Davis is on Radio 2."

etc

its what the hurd heard

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Yes, perhaps it is better to view it as currencies falling in relation to commodities as opposed to commodities rising in relation to currencies. The currencies that are being 'diluted' by the effects of Q E will fall the most in relation to commodities.

Sounds very logical. But then again, the demand for money might increase, the demand for commodities might decrease, and then currencies would all rise against commodities. :rolleyes:

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Sounds very logical. But then again, the demand for money might increase, the demand for commodities might decrease, and then currencies would all rise against commodities. :rolleyes:

You have just defined deflation.

The likely scenario for the next decade or so. We are going "Japanese" as a result of the bust in all assett prices. Gold is down 1,600 ticks today when , in the more usual scenario of late, it should be soaring. Big money is moving into bonds (especially LT US treauries) which also tells you the smart money is on deflation and falling assett prices.

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You have just defined deflation.

The likely scenario for the next decade or so. We are going "Japanese" as a result of the bust in all assett prices. Gold is down 1,600 ticks today when , in the more usual scenario of late, it should be soaring. Big money is moving into bonds (especially LT US treauries) which also tells you the smart money is on deflation and falling assett prices.

Yes, I just wonder if this time round we could see "hyper" deflation where currencies themselves get knocked for six. In this scenario, it would make sense to hedge yourself in stronger currencies including gold. Gold here has not sold off much and is rather just reflecting dollar strength.

The way I see this kind of deflation playing out is that local currencies may hold up and do very well against local assets, but certain currencies could also devalue against stronger currencies. If you had the stronger currencies, you would do most excellently against local assets.

A basket of stronger currencies would have to include the US dollar, Yen and gold.

I agree with you we are going Japanese... and that would be the optimistic outcome.

Edited by roman holiday

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Yes, I just wonder if this time round we could see "hyper" deflation where currencies themselves get knocked for six. In this scenario, it would make sense to hedge yourself in stronger currencies including gold. Gold here has not slod off much and is rather just reflecting dollar strength.

The way I see this kind of deflation playing out is that local currencies may hold up and do very well against local assets, but certain currencies could also devalue against stronger currencies. If you had the stronger currencies, you would do most excellently against local assets.

A basket of stronger currencies would have to include the US dollar, Yen and gold.

I agree with you we are going Japanese... and that would be the optimistic outcome.

I think the Yen and the $ will move in the opposite direction to gold. The buying in gold was based on the Armageddon scenario which is fizzling out to a long drawn out period of deflation where speculation in all forms of commodities (including metals) will dry up. The only real returns will be, as you say, in holding stronger currencies as against the weaker ones.

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I think the Yen and the $ will move in the opposite direction to gold. The buying in gold was based on the Armageddon scenario which is fizzling out to a long drawn out period of deflation where speculation in all forms of commodities (including metals) will dry up. The only real returns will be, as you say, in holding stronger currencies as against the weaker ones.

The devaluation and I believe the collapse in the pound will be a currency event that causes inflation in the UK.

It is going to happen , gold is a hedge against a falling currency and the perfect play at the moment because who knows what will happen to the dollar or the euro. Just as the banks went down so could countries.

I do not see how anyone can be anticipating deflation over the coming years, the only way out of this crisis is worldwide inflation and it is on it way.

Edited by co2_is-not_man_made

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