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I Told You So

Short Sterling Down Even More

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There does seem to be some correlation with oil and that stuff is headed back up to $77 this morning. I would not be surprised to see $80 befeore the end of summer which could make life interesting at the world banks IR-wise.

Pound over $1.89 today which Gordon must be hating given the deteriorating balance of payments and declining exports. Over price your goods and people buy elsewhere. Not only do we have a housing bubble about to burst but a sterling bubble to go along with it.

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I understand the proposition that high £:$ eschange rate, result in British exports costing more to overseas purchasers, so we sell less to overseas. Exports down.

On the imports side, strong £, cheaper to source imports, cheaper shop prices, inflation falls?

Hence the rise in interest rates lowers inflation both directly by reducing consumer spending power, and by reducing import prices.

But the balance of payments is the net of cost of imports vs exports.

Genuine question, does the rise in cost of exports (decrease in exports) outweigh the decrease in cost of imports?

Apologies if this is a little too simplistic.

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I understand the proposition that high £:$ eschange rate, result in British exports costing more to overseas purchasers, so we sell less to overseas. Exports down.

On the imports side, strong £, cheaper to source imports, cheaper shop prices, inflation falls?

Hence the rise in interest rates lowers inflation both directly by reducing consumer spending power, and by reducing import prices.

But the balance of payments is the net of cost of imports vs exports.

Genuine question, does the rise in cost of exports (decrease in exports) outweigh the decrease in cost of imports?

Apologies if this is a little too simplistic.

For the UK as a net importer it would seem that cheaper imports would outweigh the losses to exports. It gets circuitous though as loss of exports will eventually drive up unemployment and cause recession. Bottom line seems to be that an overvalued currency is not healthy unless you have the production that goes with it--Japan for example can carry off a highly valued currency but not the UK.

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Could it be another rise next month?

And if anyone comes up the "you have to adjust it for this that and dah dah dah"

Anyone for 5.25% by year end?

Count me in! Inflation is just getting started. ;)

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Pound is soaring against the Euro also making it the most overvalued currency in the world:

http://today.reuters.co.uk/news/articleinv...EAK-VS-EURO.XML

Sterling hits 8-1/2 month peak vs euro
Fri Aug 4, 2006 2:13 PM BST146
LONDON, Aug 4 (Reuters) - Sterling hit an 8-1/2 month peak against the euro on Friday as expectations rose for further UK tightening after the Bank of England surprised markets with a rate hike the previous day. The BoE's Monetary Policy Committee raised interest rates by 25 basis points to 4.75 percent, based on firm growth and expectations that inflation would stay above target.

:o

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  • 301 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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