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The Pound Must Fall Further If Britain Is To Have A Lasting Recovery


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Yes, I heard this line about how good a declining pound is at pricing the UK back into world markets, but a £24Bn housing benefit bill, a good fraction of which is paid to people in work, suggests that we are pricing ourselves below our bottom line, as defined by the scandalously high cost of housing in the UK.

And remember trashing the pound even further will encourage more foreign buyers into the UK housing market so a double benefit (UK goods cheaper and HPI maintained). Not so good though for UK residents who need to buy the basics and pay the rent.

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And remember trashing the pound even further will encourage more foreign buyers into the UK housing market

or not, they may consider the pound a bad bet or wait for the pound to be trashed further. Trashing the pound will eventually inflate away house prices even for UK residents as it will create inflation in the economy which will kick through to wages.

You are not a pensioner trying to eek out a meager existence on his UK pension in the euro zone are you?

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Yes, I heard this line about how good a declining pound is at pricing the UK back into world markets, but a £24Bn housing benefit bill, a good fraction of which is paid to people in work, suggests that we are pricing ourselves below our bottom line, as defined by the scandalously high cost of housing in the UK.

well, of course, they know full well housing assets are priced too high...they have been financialised to the max, thus, lenders relying on them as fall back in default are in danger when people cant pay.

They therefore aim to keep the financialisation as cheap as possible...hence low rates...but these same low rates hurt capital formation, so people who need capital have to get it from further financialisation....and when a firm has some excess, leaving it in banks is not an option, as returns elsewhere are better...so they buy stocks.

Meanwhile government aims to keep lenders lending and borrowers borrowing....there is no strategy to make wealth creation a priority..its as if banks have some sort of hidden influence over them. TBH, there are too many banks...we could do with a few of them going bust.

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well, of course, they know full well housing assets are priced too high...they have been financialised to the max, thus, lenders relying on them as fall back in default are in danger when people cant pay.

They therefore aim to keep the financialisation as cheap as possible...hence low rates...but these same low rates hurt capital formation, so people who need capital have to get it from further financialisation....and when a firm has some excess, leaving it in banks is not an option, as returns elsewhere are better...so they buy stocks.

Meanwhile government aims to keep lenders lending and borrowers borrowing....there is no strategy to make wealth creation a priority..its as if banks have some sort of hidden influence over them. TBH, there are too many banks...we could do with a few of them going bust.

BL for PM

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There is a serious catch with the UK using a falling pound to "price" itself back into world markets as I was reading earlier.

Looking further afield

The oil price has been on a rising trend recently and a barrel of Brent Crude is now priced at over US $109 and is up just under 6% on a year ago. This presents a quite different picture to when it dipped into the high-90s in early April. Also it’s rise is being exacerbated by the fact that the pound sterling seems to have entered a weaker phase again and at US $1.505 as I type this is down just under 4% on a year ago. Add the two together and we have the beginnings of some oil price pressure on the UK economy.

http://www.mindfulmoney.co.uk/wp/shaun-richards/inflation-presents-a-contractionary-danger-for-the-uk-economy-yet-again/

After all when we tried this in 2007/08 we got very little by way of an economic boost because inflation quickly began to erode it. The annual rate of CPI is at 2.9% as it is...

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I am a bit of a fan of Roger Bootle.

It was his prediction of falling interest rates back in 2007 that convinced me to take out a life time tracker at 0.17% above base rate.

The Guy has saved me a lot of money.

He also said that interest rates would stay low for five years when others said interest rates would shoot back up.

Why do you think the article is appalling?

and forget about what I have written above I do have an open mind.

+1

Roger Bootle has consistently made some accurate calls, interest rates will remain low, inflation won't spike, the bond vigilantes will remain quiet. He's been getting it right whilst people like Niall Ferguson have been getting it wrong.

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I posted this before, there was an article in the ST some time back about how businesses used currency changes to profit take rather than build a sustainable improvement in the business.

This kind of makes sense really. I run a business that does a lot of exporting. The bottom line is you'd be mad to plan a major business expansion on the back of some currency fluctuation, because what with all the competitive devaluations the whole exchange rate is up and down like a tarts knickers.

Exchange rates probably help most on low margin high volume manufacturing, such as manufacturing tat and consumer goods. A lot of manufacturing business in the UK is specialist and in this respect the competition is more biased towards capability of the product rather than price (?)

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+1

Roger Bootle has consistently made some accurate calls, interest rates will remain low, inflation won't spike, the bond vigilantes will remain quiet. He's been getting it right whilst people like Niall Ferguson have been getting it wrong.

Interest rates and bond vigilantes have been kept subdued by QE. Inflation is spiking, just not consumer inflation. Stocks, bonds, house prices, oil, food etc. There are asset price bubbles everywhere.

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The pound must fall further if Britain is to have a lasting recovery

So the "recovery" will last as long as the pound falls. Seeing as the pound has been falling for decades and the UK is foundered at where it's at now there seems to be a bit of a flaw in that idea.

So repeat a policy that's been shown to fail and fail again :rolleyes:

That's not to say that under the current system from time to time some adjustment in the level of the pound might have some superficial benefit now and again but the idea that it will result in a "lasting" recovery is just daft.

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Those arguing that inflation is not spiking presumably do not buy food.

The rise in June in input prices was driven by Home Food Materials (who makes these categories up?) which soared by 7.2%. As we had not had the recent hot weather by then that leaves the wet weather of 2012 and early in 2013 to take the blame.

But on a more fundamental point if you feel that food purchases have become more noticeably more expensive then at least one component of the UK inflation measuring system is agreeing with you as Home Food Materials annual inflation is now running at 14.3%.

http://www.mindfulmoney.co.uk/wp/shaun-richards/inflation-presents-a-contractionary-danger-for-the-uk-economy-yet-again/

14.3% in a year is quite a surge!

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Yes, I heard this line about how good a declining pound is at pricing the UK back into world markets, but a £24Bn housing benefit bill, a good fraction of which is paid to people in work, suggests that we are pricing ourselves below our bottom line, as defined by the scandalously high cost of housing in the UK.

+1

And those who complain most about the housing benefits bill are doing all they can to keep the cost of housing high by rigging the market with 'help to buy'- the whole thing is so incoherent.

There's also this unquestioned premise that more capex will lead to more jobs- but it's just as likely to lead to less as newer more automated technology is introduced.

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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