If The Euro Goes..what Happens To The Pound

[didntbuytolet]

If the Euro goes..What happens to the pound? No one is discussing this, and I'd quite like to know...

[Agentimmo]

If the Euro goes..What happens to the pound? No one is discussing this, and I'd quite like to know...

Lots of hot, laundered money would flow into the UK. I've no idea what would happen after that.

Edited November 29, 2010 by Agentimmo

[Nationalist]

It becomes a "safe haven" currency and soars. Inflation therefore plummets and the Bank of England reduces interest rates, because they can, and house prices take off with renewed vigour and we're all very, very rich.

[swissy_fit]

It becomes a "safe haven" currency and soars. Inflation therefore plummets and the Bank of England reduces interest rates, because they can, and house prices take off with renewed vigour and we're all very, very rich.

Er...

[Nationalist]

Er...

Alright, they QE another trillion then, just to get inflation up to its 2% target.

[swissy_fit]

If the Euro goes..What happens to the pound? No one is discussing this, and I'd quite like to know...

It will be ages before you have to worry about this. There are trillions more to be plundered by bankers and bailouts-a-plenty to go before any population wakes up enough to throw off the yoke.

Look at the Irish, they're letting their own government rob them of everything to bail out the banks! If that doesn't wake people up, then what will?

[swissy_fit]

Alright, they QE another trillion then, just to get inflation up to its 2% target.

Now that sounds more likely.

[mattyfc]

There is no chance the euro will "go". Realistically the DM or it's 21st century equivalent will come.

In such an eventually the old euro would tank hard, there would probably have to be capital controls & massive QE for a period of time. The current all time low for the € is about 0.70$, I could see it going $0.50-0.60 without Germany. Sterling would fall vs the $ as well. 10,20,30% really hard to guess.

The new DM would probably be ultra hard after initial jitters and would strengthen against everything.

The alternative seems to be a €1-2trn transfer from Germany and France to the rest of the eurozone. Could slightly violate the German constitution, and be very popular with hard working German and French citizens...

[volvos60]

If I were living in mainland Europe, & I had substantial funds, I would be panicking right now. I'd want to get out of Euros. There are 6 realistic possibilities:

1. US Dollars - with massive QE, this may not be a good option

2. Swiss Francs - maybe

3. Sterling - maybe

4. Gold - maybe (lets not spark a gold debate here)

5. Property, not really, it's a falling asset class

6. Equities - probably not, going to be very volatile

To be honest, many will see Sterling as a good option. The result will be a strengthing pound, cheaper imports, lower inflation, interest rates held. More printing, not sure, because they can slowly introduce more honest inflation numbers to counteract the effect of cheaper imports. Another effect will be an influx of more EU workers attracted by earning those lovely strong pounds.

Of course, there are many unknowns, such as the chaos in the banking system that would occur & the impact on British banks.

My hunch is that overall, by 'luck' the British economy will look rather successful in comparison to our neighbours, Cameron will claim the credit, & Labour will have no chance of winning an election for a generation, & we'll all live the good life on the back of cheap imports

Edited November 29, 2010 by volvos60

[Frank Hovis]

My hunch is that overall, by 'luck' the British economy will look rather successful in comparison to our neighbours, Cameron will claim the credit, & Labour will have no chance of winning an election for a generation, & we'll all live the good life on the back of cheap imports

I think that's a very likely scenario.

Well done Gordon Brown for keeping us out of the Euro.

I knew he must have done something right.

[Sour Mash]

If I were living in mainland Europe, & I had substantial funds, I would be panicking right now. I'd want to get out of Euros. There are 6 realistic possibilities:

1. US Dollars - with massive QE, this may not be a good option

2. Swiss Francs - maybe

3. Sterling - maybe

4. Gold - maybe (lets not spark a gold debate here)

5. Property, not really, it's a falling asset class

6. Equities - probably not, going to be very volatile

To be honest, many will see Sterling as a good option. The result will be a strengthing pound, cheaper imports, lower inflation, interest rates held. More printing, not sure, because they can slowly introduce more honest inflation numbers to counteract the effect of cheaper imports. Another effect will be an influx of more EU workers attracted by earning those lovely strong pounds.

Of course, there are many unknowns, such as the chaos in the banking system that would occur & the impact on British banks.

My hunch is that overall, by 'luck' the British economy will look rather successful in comparison to our neighbours, Cameron will claim the credit, & Labour will have no chance of winning an election for a generation, & we'll all live the good life on the back of cheap imports

Except that a much stronger currency off the back of money seeking a safe haven currency would destroy exports. However, it would suppress house prices and those of us with sterling savings would be laughing as the price of imported goods should fall making your money worth more (deflation).

The thing is, the entire Western fiat currency system is teetering. I reckon the end of one major currency would bring the lot down in relatively short order.

[swissy_fit]

There is no chance the euro will "go". Realistically the DM or it's 21st century equivalent will come.

In such an eventually the old euro would tank hard, there would probably have to be capital controls & massive QE for a period of time. The current all time low for the € is about 0.70$, I could see it going $0.50-0.60 without Germany. Sterling would fall vs the $ as well. 10,20,30% really hard to guess.

The new DM would probably be ultra hard after initial jitters and would strengthen against everything.

The alternative seems to be a €1-2trn transfer from Germany and France to the rest of the eurozone. Could slightly violate the German constitution, and be very popular with hard working German and French citizens...

Which ones would those be?

(I won't tell my French colleagues I said that)

[frenchy]

Which ones would those be?

(I won't tell my French colleagues I said that)

best not mention it indeed! They might make jokes about tea drinking British citizens...

Edited November 29, 2010 by frenchy

[Game_Over]

I think the pound would be seen as a relatively safe haven and would strengthen as a consequence

This would allow another round of QE which would effectively constitute a 200 Billion+ pound windfall for the Uk economy and

this should be set against the billions we are having to pay out to prop up the Euro.

Overall if the Euro failed we could be hundreds of Billions better off.

At the end of the day, however, the Euro has nothing whatever to do with economics - it is a political project which is supported by the European political classes so that when they are kicked out by the electorate they go to the EU and get paid millions to do feck all.

:angry:

[fellow]

Except that a much stronger currency off the back of money seeking a safe haven currency would destroy exports.

The reduction in the price of imported raw materials would surely offset this. Lower inflation would also help keep wages down.

[stormymonday_2011]

Take your pick.

In the pre ERM 1980s sterling oscillated between nearly £1 to $1.03 and nearly £1 to $2. It performed similar gyrations against other currencies

UK banks are as deeply in the Eurozone mess as any others in addition to having huge exposure to the UK property market.

Countries quitting the Euro would almost certainly swap Euros for their old domestic currencies on a 1 to 1 basis at the time of conversion but that would almost certainly lead to immediate capital flight and devaluation which would be mean huge implicit write down on any Euro denominated loans issued by UK.institutions.

I do not see Sterling as any sort of safe haven unless you are planning to work and live here and have all your liabilities denominated in the currency.

Personally I think the more likely, simpler and probably safer outcome is that the Germans quit the Euro which would then be allowed to decline to a more realistic valuation with QE being used to inflate away some of the debt.

It needs to be remembered that the dsappearence or devaluation of the Euro would not be an unalloyed benefit to the UK as it would suddenly make British exports less price competitive in some of our main European export markets. It certainly wont help the UKs chronic current account deficit which is one of the main underlying causes of UK economic weakness

Whisper it quietly but the Eurozone would actually have made a great deal more sense if it had been drawn roughly along the boundaries of the Old Roman Empire with the UK and its capital markets in the Euro and the Germans out of it, as in many ways the UK is more like the poor old PIIGS than any of the hard currency countries. Of course, that would be complete heresy both to Eurosceptics in the UK and to Euro enthusiasts on the Continent so I wont press the point as I dont want lots of hate mail from both camps.

Edited November 29, 2010 by realcrookswearsuits

[campervanman]

Except that a much stronger currency off the back of money seeking a safe haven currency would destroy exports. However, it would suppress house prices and those of us with sterling savings would be laughing as the price of imported goods should fall making your money worth more (deflation).

The thing is, the entire Western fiat currency system is teetering. I reckon the end of one major currency would bring the lot down in relatively short order.

Which is why it won't happen. The Germans will just keep on swallowing up the rest of the Eurozone.

[stormymonday_2011]

Which is why it won't happen. The Germans will just keep on swallowing up the rest of the Eurozone.

Well Berlin looks to be ideally geographically situated to be the capital of a Greater Continental Europe now the EU has expanded East, although in truth London could have fulfilled that role just as well as it has trading links going back centuries with both the Baltic and the Mediterranean countries. Sadly Britain was either to be busy pining for its lost Empire or retreating into its island fortress modeto take the opportunity.

Edited November 29, 2010 by realcrookswearsuits

[madpenguin]

Take your pick.

In the pre ERM 1980s sterling oscillated between nearly £1 to $1.03 and nearly £1 to $2. It performed similar gyrations against other currencies

UK banks are as deeply in the Eurozone mess as any others in addition to having huge exposure to the UK property market.

Countries quitting the Euro would almost certainly swap Euros for their old domestic currencies on a 1 to 1 basis at the time of conversion but that would almost certainly lead to immediate capital flight and devaluation which would be mean huge implicit write down on any Euro denominated loans issued by UK.institutions.

I do not see Sterling as any sort of safe haven unless you are planning to work and live here and have all your liabilities denominated in the currency.

Personally I think the more likely, simpler and probably safer outcome is that the Germans quit the Euro which would then be allowed to decline to a more realistic valuation with QE being used to inflate away some of the debt.

It needs to be remembered that the dsappearence or devaluation of the Euro would not be an unalloyed benefit to the UK as it would suddenly make British exports less price competitive in some of our main European export markets. It certainly wont help the UKs chronic current account deficit which is one of the main underlying causes of UK economic weakness

Whisper it quietly but the Eurozone would actually have made a great deal more sense if it had been drawn roughly along the boundaries of the Old Roman Empire with the UK and its capital markets in the Euro and the Germans out of it, as in many ways the UK is more like the poor old PIIGS than any of the hard currency countries. Of course, that would be complete heresy both to Eurosceptics in the UK and to Euro enthusiasts on the Continent so I wont press the point as I dont want lots of hate mail from both camps.

Agree 100%, Germany will either bail everyone out (after a lot of moaning), or it goes it alone, and in that case where would you put your cash?, a small island with most of it's industry run down, a very good casino down by the Thames and the rest of the population employed by either fast food restaurants, or the government, most of whom are up to their eyes in debt?, or in Germany which is regularly either 1st or second worlds biggest exporter by value with a large skilled workforce a large industrial base and a propensity towards saving?

I suspect if the longed for Spanish collapse takes place we will find many British banks heavily involved.

And finally when Europe is no longer a target on the speculators radar who would make a tempting target next? China and Germany too strong fundamentally but the UK and Sterling?, all it would take would be a few well placed rumors and announcements by "respected" Wall Street analysts to push it over the cliff.

Edited November 29, 2010 by madpenguin

[Peter Hun]

but the UK and Sterling?, all it would take would be a few well placed rumors and announcements by "respected" Wall Street analysts to push it over the cliff.

UK doesn't have many funding requirements, and a large number of UK institutions who will buy regardless. Plus with control of the pound it can be devalued and QE'ed.

So the jerk on Wall street can talk all he likes, won't make much difference

[Malkin]

Was it nostradamus who said germany would try to conquer europe three times through force and fail and then succeed through economic domination?

Edited November 29, 2010 by Malkin

[General Congreve]

Except that a much stronger currency off the back of money seeking a safe haven currency would destroy exports. However, it would suppress house prices and those of us with sterling savings would be laughing as the price of imported goods should fall making your money worth more (deflation).

The thing is, the entire Western fiat currency system is teetering. I reckon the end of one major currency would bring the lot down in relatively short order.

I'm sure they'll be a temporary boost to the pound. However, if this strengthens the pound too much, expect loads of QE to weaken it again, the government can't allow the pound to appreciate, the debt load is too great, this is a race to the bottom that everyone is desperate to win.

Besides, ultimately I don't think it'll make a great difference to the fortunes of the pound. For example, if me and you are both pretty rubbish at football, just because you suddenly break a leg and become totally rubbish, it doesn't mean I'm suddenly brilliant, it just means I'm still rubbish but now you're more rubbish.

Edited November 29, 2010 by General Congreve

[Maddog21]

It becomes a "safe haven" currency and soars. Inflation therefore plummets and the Bank of England reduces interest rates, because they can, and house prices take off with renewed vigour and we're all very, very rich.

You're Mervyn King and I claim my £5 etc.................

[ccc]

Was it nostradamus who said germany would try to conquer europe three times through force and fail and then succeed through economic domination?

No it was CGNAO. He also predicted nuclear wars like Nostradums though. I think they may be the same person. He must be old though.

[Maddog21]

No it was CGNAO. He also predicted nuclear wars like Nostradums though. I think they may be the same person. He must be old though.

Thats cheered me up..

Never see them in the same forum though ........

boom tish