Times Article

[WSG]

http://business.timesonline.co.uk/article/...2105445,00.html

times article about expected fall in pound against dollar tomorrow after Bernake increases US rates

[bert]

What does this all mean exactly?

I have £80k in offshore savings which my father won't let me touch unless it's to buy property (I've told him I wanted to put some in Gold and a bit in the FTSE100). Is it only 'worthless' if I'm wanting to exchange it for another currency? Is my purchasing power for goods (property in particular) in the UK affected?

Edited March 27, 2006 by bert

[aussieboy]

http://business.timesonline.co.uk/article/...2105445,00.html

times article about expected fall in pound against dollar tomorrow after Bernake increases US rates

An amazingly valueless article summarising a dull macroeconomic truism and wrapping it as news.

I switched to the Times from the Guardian a while back, but if they keep up their current poor standard of reportage and four ill-informed health front pages a week I'm going to have to go back.

[Waiting Patiently]

What does this all mean exactly?.........................................

It means that as interest rates worldwide go up the value of sterling will eventually come under increasing pressure unless the Bank of England raise our rates. Something many on the MPC seem extremely reluctant to do, because of political pressure from the Chancellor I suspect.

[non-FTBer]

What does this all mean exactly?

I have £80k in offshore savings which my father won't let me touch unless it's to buy property (I've told him I wanted to put some in Gold and a bit in the FTSE100). Is it only 'worthless' if I'm wanting to exchange it for another currency? Is my purchasing power for goods (property in particular) in the UK affected?

Depends what currency the offshore savings are in, and what currency you will eventually want to spend it in, and when.

If the offshore currency is in $ and you eventually want to spend in £ then this news is good for you as they are effectively saying that you'll get more £ for your $. This may not be a long term revaluation of the £ against the $, and lots of other things will affect it.

By putting your savings into a currency other than what you will spend it in (I'm assuming £'s if you're looking to buy in the UK) then you are effectively taking a bet that the £ will fall relative to your savings currency.

Either $ or commodities priced in $ will do well out of sterling falling relative to the $.

Gold possibly good (exchange rate should offer more £/oz with a weaker £), but a gamble on static/rising $/oz.

FTSE... dunno.... Not an expert, but could FTSE get hit by investment moving out of £ and into $??

EDIT: For spelllings... Doh!

Edited March 27, 2006 by non-FTBer

[Goat]

It means that as interest rates worldwide go up the value of sterling will eventually come under increasing pressure unless the Bank of England raise our rates. Something many on the MPC seem extremely reluctant to do, because of political pressure from the Chancellor I suspect.

Also falling sterling causes inflationary pressure in the UK econonmy as the price of imported goods rises. BOE response to this pressure is higher interest rates.

[aussieboy]

It means that as interest rates worldwide go up the value of sterling will eventually come under increasing pressure unless the Bank of England raise our rates. Something many on the MPC seem extremely reluctant to do, because of political pressure from the Chancellor I suspect.

... and because their remit relates to inflation only.

Haven't we had this discussion several times?

[non-FTBer]

Also falling sterling causes inflationary pressure in the UK econonmy as the price of imported goods rises. BOE response to this pressure is higher interest rates.

BOE response to this pressure SHOULD BE higher interest rates, but with Gordon Clown in charge I suspect that we might see a few politically friendly IR moves until he is PM.

[MarkG]

Meanwhile, the pound is up today.

Pretty much everyone who matters expects the Fed to raise rates to 5%, and expects the BoE to hold rates for a few more months, so if that happens tomorrow it's pretty much irrelevant. What does matter is whether the Fed gives a reason to believe they'll continue raising rates past 5%, or the BoE gives a reason to believe they'll cut rates: then the pound will be seriously screwed.

[BoredTrainBuilder]

Also falling sterling causes inflationary pressure in the UK econonmy as the price of imported goods rises. BOE response to this pressure is higher interest rates.

But falling sterling also suits manufacturers and exporters. It was the sharp fall of sterling after Britain's eviction from the european currency mechanism in the early 1990s that arguably led to the much stronger economy we have now.

I doubt that the MPC of the BoE will be overly swayed by this argument.

[MarkG]

It was the sharp fall of sterling after Britain's eviction from the european currency mechanism in the early 1990s that arguably led to the much stronger economy we have now.

The difference is:

a) the pound was clearly hugely overvalued back then.

we actually still made stuff to export.

Today the pound is hardly overvalued, and we import vastly more than we export. Worse, our oil is running out, so we're going to have even less to export and even more to import in a few years.

Edited March 27, 2006 by MarkG

[Duplex]

A fall in the pound would help UK manufacturing, if UK manufacturing existed. Compare Euro area manufacturing employment compared to the UK.

[Goat]

But falling sterling also suits manufacturers and exporters. It was the sharp fall of sterling after Britain's eviction from the european currency mechanism in the early 1990s that arguably led to the much stronger economy we have now.

I doubt that the MPC of the BoE will be overly swayed by this argument.

Yes but the BOE's remit is inflation only so the effect on manufacturing is not a real concern. Also re BTB's reply, the MPC do seem to be genuinely independent and the structure of the system makes it hard to fiddle.

[non-FTBer]

Yes but the BOE's remit is inflation only so the effect on manufacturing is not a real concern. Also re BTB's reply, the MPC do seem to be genuinely independent and the structure of the system makes it hard to fiddle.

MPC independant?

Dosen't GB appoint 5 of the 9?

How independant are you if your position depends on being a good boy and toeing the party line?

[aussieboy]

A fall in the pound would help UK manufacturing, if UK manufacturing existed. Compare Euro area manufacturing employment compared to the UK.

I'm not sure that our manufacturing output is directly correlated with the number of people employed. Sheffield makes more steel now than it ever did, and it hasn't done that by employing more people... A total output graph might make a more relevant read.

[Justice]

Taken from

" The coming attack on Iran has nothing whatsoever to do with concerns about the proliferation of nuclear weapons. Its primary motive, as oil analyst William Clark has argued, is rather a determination to ensure that the U.S. dollar remains the sole world currency for oil trading. Iran plans in March 2006 to open a Teheran Oil Bourse in which all trading will be carried out in Euros. This poses a direct threat to the status of the U.S. dollar as the principal world reserve currency—and hence also to a trading system in which massive U.S. trade deficits are paid for with paper money whose accepted value resides, as Krassimir Petrov notes, in its being the currency in which international oil trades are denominated. (U.S. dollars are effectively exchangeable for oil in somewhat the same way that, prior to 1971, they were at least in theory exchangeable for gold.) "

GW-Bush is so desperate to keep his pockets full and the economy afloat that he attacked his own people on 9-11 and IMHO is behind many of the current attacks on the oil pipelines. Why !

1. Oil goes up and we all need more USD$ to buy a barrel

2. American news said “What ever you do mr terrorist please do hit the pipelines as that would really hurt us”

3. Oil lines are not just being attacked in the middle east

I would not touch the US$ with a barge pole especially since the derivatives market in the USA is running at about 300 trillion and the biggest companies holding derivatives are GM and Ford motors and we all know what way they are heading.

$300,000,000,000,000 debt

"The only time the general public hears about derivatives or hedge fund problems is after the fact when the blow-up has occurred"

"Both derivatives and hedge funds have grown sharply particularly in the past decade. Since Alan Greenspan took over as Fed Chairman in August 1987 derivatives outstanding according to the ISDA reports that international interest rate and currency derivatives outstanding grew from $865 billion in 1987 to $201.4 trillion in 2005. "

Edited March 27, 2006 by Justice

[the end is a bit nigher]

not sure why the pound would fall after tomorrow - everyone is expecting a rise, many a further rise - it would only be if the Fed indicated that there may be further hikes that $ would increase against the £ significantly

[BoredTrainBuilder]

A fall in the pound would help UK manufacturing, if UK manufacturing existed. Compare Euro area manufacturing employment compared to the UK.

UK manufacturing still exists.

2005 was a record year for car exports. Eight out of 10 cars built in the UK in 2005 were exported.

http://www.bmweducation.co.uk/whatsnew/view.asp?docID=273

http://www.channel4.com/4car/news/news-sto...p?news_id=13627

This despite a relatively if not grossly high pound.

Also, your chart ony shows change in manufacturing employment, not the same as absolute manufactured output, although I believe it is falling as a % of GDP - which is probably a good thing given global macroeconomic trends.

Edited March 27, 2006 by BoredTrainBuilder

[?...!]

Taken from

GW-Bush is so desperate to keep his pockets full and the economy afloat that he attacked his own people on 9-11 and IMHO is behind many of the current attacks on the oil pipelines. Why !

1. Oil goes up and we all need more USD$ to buy a barrel

2. American news said “What ever you do mr terrorist please do hit the pipelines as that would really hurt us”

3. Oil lines are not just being attacked in the middle east

I would not touch the US$ with a barge pole especially since the derivatives market in the USA is running at about 300 trillion and the biggest companies holding derivatives are GM and Ford motors and we all know what way they are heading.

$300,000,000,000,000 debt

You think Bush was behind 9/11?

You think Bush is behind attacks on pipelines?

So President Bush is actually an ingenius super villain hell bent on amassing vast riches?

Is he working alone or are there 'others' involved?

Maybe he is taking orders from aliens?

[algor]

Nah everyone knows W is just a cheerleader

[LBoots]

not sure why the pound would fall after tomorrow - everyone is expecting a rise, many a further rise - it would only be if the Fed indicated that there may be further hikes that $ would increase against the £ significantly

Initially the £ would probably not fall , but if UK Interest rates continue to stay below the US then eventually (IMO) it would become a major Bear factor & should lead to a fall in the £ against the $.