Pound Appears To Be In Free-fall Today.

[Tired of Waiting]

In other words, it's all about Mervyn and nothing to do with reality.

In the long term, currencies depend on countries' productivity.

And productivity depends mainly on infrastructure and educational level of the labour force.

Britain has been highly overvalued for a decade, boosted by borrowing. The party is over. The pound will go down to its deserved level - low.

Edited September 24, 2009 by Tired of waiting

[Tired of Waiting]

Forex markets are rigged. Central banks of all G7 countries are deciding exchange rates amongst themselves every day. In fact they might be the ones really creaming the profits from Joe idiot every day.

China is deciding it. But they have conflicting concerns - protect their reserves, or their exports.

[Guest Skinty]

So let me get this straight. The WofE try to talk down the pound so that our exports become more competitive. But in so doing imports become more expensive.

Got you so far.

But they also want us to spend more and tell us that thrift is bad for the economy.

So do they want to encourage spending or manufacturing?

Sounds like they are trying to have their cake and eat it.

[Sour Mash]

So let me get this straight. The WofE try to talk down the pound so that our exports become more competitive. But in so doing imports become more expensive.

Got you so far.

But they also want us to spend more and tell us that thrift is bad for the economy.

So do they want to encourage spending or manufacturing?

Sounds like they are trying to have their cake and eat it.

Yep - we're kind of damned if we do, damned if we don't. Well, basically the country is fscked.

Devaluation/inflation has been 'the easy way out' in the past but given that the UK now is so dependent on non-export businesses with lots of imports fuelling the retail sector, the 'boost' given by a cheaper pound is somewhat diminished but the pain is much greater than it would have been in the past when GB had a much stronger export-led economy (ie. the seventies).

Also, since we now live in a globalised world there are strong downward pressures on wages even in an environment of the devalued pound (it would have to devalue a long way to make us even remotely competitive with China and emerging Eastern countries) so the potential for wage inflation emerging to erode debt is much diminished ....

On the other hand, free and easy money makes things a lot easier for our wonderful banking sector who are in a position to get their nose in the inflationary trough and erode their not-inconsiderable bad debt liabilities away. It's just that the rest of the population is going to see their standard of living drop drastically to keep the pig-men in bonuses.

[Tired of Waiting]

So let me get this straight. The WofE try to talk down the pound so that our exports become more competitive. But in so doing imports become more expensive.

Got you so far.

But they also want us to spend more and tell us that thrift is bad for the economy.

So do they want to encourage spending or manufacturing?

Sounds like they are trying to have their cake and eat it.

With imports more expensive local products, when available, become more competitive, as local tourism, etc. And more Europeans visit Britain, or by UK products, etc. It is classic, normal. "Buy local", "staycation" etc.

[leicestersq]

So let me get this straight. The WofE try to talk down the pound so that our exports become more competitive. But in so doing imports become more expensive.

Got you so far.

But they also want us to spend more and tell us that thrift is bad for the economy.

So do they want to encourage spending or manufacturing?

Sounds like they are trying to have their cake and eat it.

"So do they want to encourage spending or manufacturing?"

Well if you spend more, that creates demand for manufactures does it not? Which also increases the value of the plant used in the manufacturing, driving up asset prices and real wealth.

Remember, the more a country can consume, the richer it can be. In the long run those that save will see their economies go backwards.

[scappers]

Remember, the more a country can consume, the richer it can be. In the long run those that save will see their economies go backwards.

Only if it produces what it consumes. Otherwise it needs to borrow money to consume someone else's stuff. A bit like the last 20 years.

And China tends to produce and not consume. They seem to have done quite well. So really the road to wealth is to produce and sell more than you consume yourself.

Edited September 24, 2009 by scappers

[RufflesTheGuineaPig]

£ is down nearly 3% against the dollar today.

[redmen9]

redmen9, you have "answered" your own "question".

The root problem of the British economy is exactly that: "we import a damned site more than we export".

Do you think this is sustainable? The only way we kept doing it was by borrowing money, mostly from China. Hence our national debt. And this money, brought in by the banks, was lent to the people, via mortgages and credit cards. That was the source of our bubble. Not only in houses prices, but in the whole economy.

Besides, Mervyn, or Britain, has no control on the level of the pound. It is set by international markets, by our creditors and investors. And it depends mainly on credibility.

Would you lend more money to Britain now?

So. The pound will fall. It is not Mervyn Kings choice.

And it will be good, very good for Britain, as it will make imports more expensive, and exports more competitive, hence curbing imports, and helping exports, and this will in a few years, re-balance our international balance of payments.

I agree with you to a large degree, the only problem I have with your argument is the assumption you make that British industry has the capability of producing goods that will make us competitive and increase exports. As I see it, Britain has become over-reliable on the banking and service industries to the detriment of heavy industry. With the recession there is little money to support the successful businesses let alone fledgling business that require investment.

In the long term, perhaps the Government can refocus its attention in to supporting industry in this country but that would fly in the face of successive Governments that have brought industry in this country to its knees.

[slurms mackenzie]

I agree with you to a large degree, the only problem I have with your argument is the assumption you make that British industry has the capability of producing goods that will make us competitive and increase exports. As I see it, Britain has become over-reliable on the banking and service industries to the detriment of heavy industry. With the recession there is little money to support the successful businesses let alone fledgling business that require investment.

In the long term, perhaps the Government can refocus its attention in to supporting industry in this country but that would fly in the face of successive Governments that have brought industry in this country to its knees.

We're something like the fifth or sixth in terms of manufacturing in the world still.

Think arms, drugs, food, booze and to some degree even cars.

I wish i could dig up the stats i can't.

[Charlie Don't Surf]

Down again this morning:

-1.29% against the Yen

-0.55% against the Euro

Both of which I hold

[crashologist]

Down again this morning:

-1.29% against the Yen

-0.55% against the Euro

Both of which I hold

Yen Climbs on Speculation Japan Companies Repatriating Funds :

http://www.bloomberg.com/apps/news?pid=206...id=a4nc1_cdYSgg

“The pound was the star of all the currencies that fell today”

Edited September 25, 2009 by crashologist

[grumpy-old-man-returns]

We're something like the fifth or sixth in terms of manufacturing in the world still.

excuse me for 1 moment..............

I wish i could dig up the stats i can't.

[webchat]

Looking at the long term charts it's been at or around the $US1.60 level since June. I think the fall will only be significant if it dips back under $1.50, but the support at $1.60 seems strong.

[Si1]

Looking at the long term charts it's been at or around the $US1.60 level since June. I think the fall will only be significant if it dips back under $1.50, but the support at $1.60 seems strong.

what's it got to do with USD$ anyway?

[crashologist]

what's it got to do with USD$ anyway?

The pound appears inherently weak because of the UK's problems regardless of the currency you compare it with.

Edited September 25, 2009 by crashologist

[bogbrush]

Look at it against currencies that aren't involved in the Great Deevaluation.

Down 21% against the New Zealand Dollar in a couple of months.

There goes my plan to buy a spread over there!

[Guest spp]

Hey HPC! long time no talk.

The pound is getting slammed over here in OZ. Shame my money is the silver shiny...!

We will get caught on the short for a while but...trust me their heads will come off!!

Don't you love WWIII behind closed doors (for now).

[moneyscam]

Look at it against currencies that aren't involved in the Great Deevaluation.

Down 21% against the New Zealand Dollar in a couple of months.

There goes my plan to buy a spread over there!

There seems to be a reverse of the carry trade going on, with now the $ and £ beeing seen more like funding currencies as the Yen used to be. So I expect more devaluation against the crosses in the medium term (short term I think £ is a little oversold so may be due a small bounceback). I'm working in Switzerland at the moment, a year ago 1£ bought you 2.30-2.40, now rapidly approaching 1.60 - feck me, a packet of 12 Nurofen yesterday cost me £6!!

[redmen9]

We're something like the fifth or sixth in terms of manufacturing in the world still.

Think arms, drugs, food, booze and to some degree even cars.

I wish i could dig up the stats i can't.

Well that may well be the official line, I'm no expert, all I can do is comment on what's going around me.

I live in rural North Wales and as far as I can see, the heavy industries that have traditionally employed large amounts of workers are going belly up and I can't see them ever being revived.

Anglessy Aluminiun shed nearly 400 jobs

Conwy Valley aluminium works sheds 170 jobs

Slate Quarries shedding 175+ jobs

There are countless industries in North East Wales that have gone to the wall recently and this is all in a relatively small area. What's happened in the rest of the country? Birmingham for example?

The Aluminium works in the Conwy valley I mention above is probably going to be converted into a holiday village/leisure centre type complex (probably can't find the finance at the moment though). Heavy Industry giving way to service industry. That means that's nailed the chances of that plant ever returning to its former use.

I speak to my brother in law who's a local businessman and he says that getting any form of credit from banks for your business these days is increasingly difficult with the cost of borrowing having more than doubled. Now tell me how our exporting is going to pick up with these underlying conditions?

[CrashConnoisseur]

We're something like the fifth or sixth in terms of manufacturing in the world still.

Think arms, drugs, food, booze and to some degree even cars.

I wish i could dig up the stats i can't.

Here you are...

[grumpy-old-man-returns]

Here you are...

if UK manufacturing has gone up since 2000, then why don't we see any increase in towns/cities near us dot com ?

I bet the companies are registered in the UK, head office in Londinium Town, but has the plants in Eastern Europe ?

There is no way on Earth that Uk manufacturing has gone up since 2000 ffs, anyone with a brain must know this.

Common sense, experience, eyes & ears, that's ALL you need.

[Mega]

0.92.............Its coming.

Mike

[slurms mackenzie]

if UK manufacturing has gone up since 2000, then why don't we see any increase in towns/cities near us dot com ?

I bet the companies are registered in the UK, head office in Londinium Town, but has the plants in Eastern Europe ?

There is no way on Earth that Uk manufacturing has gone up since 2000 ffs, anyone with a brain must know this.

Common sense, experience, eyes & ears, that's ALL you need.

I'll ignore the insult.

What about operating efficiencies, what about a transition to lighter industry, what about the actual location where you live?

Would your eyes and ears, common sense notice if a games development company set up shop next door? Do you check factory output figures on a unit by unit basis, do you know what the yields from land are?

<edit> Thanks for the graph crash connoisseur</edit>

Edited September 26, 2009 by slurms mackenzie

[indirectapproach]

"Although the manufacturing sector's share of both employment and the UK's GDP has steadily fallen since the 1960s, data from the OECD shows that manufacturing output in terms of both production and value has steadily increased since 1945.

This is a trend common in many mature Western economies.

Heavy industry, employing many thousands of people and producing large volumes of low-value goods (such as steelmaking) has either become highly efficient (producing the same amount of output from fewer manufacturing sites employing fewer people-

for example, productivity in the UK's steel industry increased by a factor of 8 between 1978 and 2006 [30])

or has been replaced by smaller industrial units producing high-value goods (such as the aerospace and electronics industries)."

If the idiots guide says so it might well be true.

http://en.wikipedia.org/wiki/UK_economy#Industries