Monday, Sep 25, 2006

Another reason to lower interest rates?

The Independent: Bank: Strong pound has ravaged exports

High pound, caused by increasing interest rates, is hitting UK manufacturing. Market conditions prevent UK firms from passing on price increases - eventually, it will no longer be possible to drive costs down though. Part of a case for lower IRs?

Posted by talking rot @ 12:26 PM (567 views)
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1. Surfgatinho said...

The strong pound has got nothing to do with IRs. In fact I haven't yet heard a good explanation as to why the pound is still so strong. The best so far is 'it's better than the dollar'!

Monday, September 25, 2006 12:41PM Report Comment

2. waitingfor hpc said...

I though Crash Gordon told us that manufacturing exports were picking up where retail left off?????

Monday, September 25, 2006 03:07PM Report Comment

3. sovietuk said...

This report comes from the Independent, enough said

Monday, September 25, 2006 03:10PM Report Comment

4. the bald man said...

A high pound also reduces import costs thereby reducing inflation. Any sign of lower interest rates (especially when real inflation is so high) would probably cause an unwelcome run on the pound

Monday, September 25, 2006 04:44PM Report Comment

5. Mrmickey said...

I didn't know we manufactured anything anymore, everything in my house has made in China on it. The only thing we export now are the finance and banking services which are based in London, if that goes belly up were done for, oh and we have tourism which is classed as an export also.

Monday, September 25, 2006 05:10PM Report Comment

6. Mjchum said...

It is most likely that any increase in exports directly correlates with any increase in VAT missing trader carousel fraud. I would find the true economic situation hilarious in this country if it was not so serious. Trade deficit running between 4 and 6bn/month, debt increasing at over 100bn year. Remember that with the left-wing (I am neither left, right or liberal - given up caring really it's all nonsense), the perception of reality must without exception fit their ideologies. Many of you have recently made the accurate observation that the BBC is no more than a propoganda machine for Blair (sorry, Bliar). This will become more apparent as the economic situation slides into reality, away from the ideology.

Monday, September 25, 2006 05:22PM Report Comment

7. devil's advocate said...

Does anyone have any intelligent comments on this article?? Why is the pound so strong, I imagine it will have an effect on inflation?? Any comments welcomed.

Monday, September 25, 2006 05:57PM Report Comment

8. Retired Banker said...

As I have hypothesised on here before, the (mainly American Controlled) financial community will not
stage an attack on Sterling whilst we are helping the US in Iraq.

It is essential for the continued survival of the existing banking system that supplies of Middle East
oil are secured to ensure the continued growth of the Western economies, without which the entire
house of cards collapses.

This is very widely stated on the various oil depletion sites by Colin Campbell et al.

You can see that Blair and Brown both know this, and it explains why the Tories do not attack Labour's
dismal economic performance.

Monday, September 25, 2006 06:15PM Report Comment

9. Mjchum said...

Why is Sterling so strong? Because Britain is the only plance on Earth that is FOR SALE!

Monday, September 25, 2006 06:20PM Report Comment

10. indiablue19 said...

Retired Banker hits the heart of the matter. I disagree only in that citing "American Controlled" financial interests is a bit broad in scope. America's banking is controlled by a very small group who to my mind also dictates international policy to the White House with the threat that they can pull the plug on the USA economy on a moment's notice. You have only to check out the common feature in the relevant surnames to figure it out.... So far as I can tell, this is the same group in power worldwide and entirely connected worldwide, including in the UK. That's where the puzzle begins, others like Bush with family oil stakes are a secondary feature, but essential, since it would be impossible for the core financial control group to get a candidate elected. Bush has no real power on his own. I believe that JU is alluding to this constantly on this site, if I'm not mistaken in his references.

I've watched sterling very carefully and tried to understand the economic relationships in its actual value and that of the dollar. There don't seem to be any. US interest rate goes up/sterling goes higher. US interest rate remains on hold/sterling stays high. US stock market falls/sterling remains high. US stock market excells/sterling remains high anyway. The only major difference I've noticed in six or eight years is that when Clinton was prezz sterling was between 1.39 and 1.45 or thereabouts to the dollar. As soon as Bush came into office, the currency was going to "float" he said, and float it has, straight out of sight. So obviously the US can dictate a great deal of the value of sterling with just that statement. One only wonders "why" sterling is allowed to inflate so unbelievably, except that the inherent risks to trade and industrial health will result in a rosier immediate trade deficit picture and give the common Brit a sense of clout when buying a Spanish holiday home. Are these good enough reasons to kill off whatever remains of British industry? Apparently. The fact that the pound makes no sense at all in context of the dollar, smacks of a cross the pond political deal to assist in the Downing Street blue smoke and mirrors economy. Unless, of course, the point was to encourage Brits to shop on 5th Avenue.

Saw a story on the news tonight about shrimp fisheries here sending frozen shrimps to be cleaned in China, then shipped back here for sale. Put half a town out of work, but was deemed "best" for the industry since workers here can't be paid enough in the shrimp factories to compete for homes and food within their local economy. Even as a food-handling method this makes no sense. Beyond that, I'm wondering how these workers will compete in the local economy with no job at all.

Monday, September 25, 2006 10:55PM Report Comment

11. Geed said...

Thanks for you insight indiablue, quite simply Sterling behaves uniquely in international markets. Can anyone else on this blog shed any more light?

Tuesday, September 26, 2006 03:53AM Report Comment

12. Rikk03 said...

They Labour government has ignored the plight of exporters for years - it has always been the case - last 20 years or so.

Tuesday, September 26, 2006 07:49AM Report Comment

13. george monsoon said...

Geed, If you want to see how the london stock exchange plays with all of our lives, go to
sign up and play the market. Its a real eye opener on how our financial market ties in with other nations, especially the US.

Tuesday, September 26, 2006 08:43AM Report Comment

14. monty said...

indiablue19 said "You have only to check out the common feature in the relevant surnames to figure it out.... So far as I can tell, this is the same group in power worldwide and entirely connected worldwide, including in the UK."

I think you'll find it's got far less to do with the Jewish bankers indiablue19 claims are ruling the world and more to do with the markets themselves and the relative perceived strengths of the underlying economies.

For example, the dollar was at it's strongest against the pound from 1999 to 2001. This period also happened to be the height of the tech boom. Anyone wanting a slice of that Nasdaq tech-stock action needed dollars to buy into the market thereby increasing the demand for them. 9/11 and the tech stock crash signalled the end of a ten year bull run in US equities and hence a lesser demand for dollars as commodities took off. The currency supply/demand effect is far more obvious in the emerging markets which usually have commodity and export-based economies and relatively small equities markets. The dollar vs sterling vs euro relationship is clearly far more complex than this. Raising interest rates, in itself, won't change the exchange rate but may lead to demand for government bonds which, if large enough, may have an effect.

Bush's "floating the dollar" just means that the Fed is less likely to intervene to stabilise it. Most central banks have stabilization or smoothing policies but you need deep pockets. George Soros used this to his advantage when he played a game of chicken with the Bank of England. The Bank lost and Sterling was ejected from the EMU. (Some would say he did us a favour.) I find it odd that the article is rabbiting on about Sterling strength when since 2003 we've been relatively low against the Euro, our largest trading partner (when considered as a whole.)

To answer the question though, I believe that Sterling is high against the dollar simply because the global markets have more faith in the stability of the UK, her currency and her markets than Uncle Sam right now. All it needs is a little wobble and that will change. (Watch this space.)

It's worth checking out the graphs yourself - I find those on quite useful.


Tuesday, September 26, 2006 10:39AM Report Comment

15. indiablue19 said...

During the period you sight, and outside of it as well, Clinton announced his support of the dollar, particularly in relation to pound sterling. This support of the exchange rate may have been easier during a "tech boom" but it wasn't the bottom line explanation so far as I can see. I do realize what it means to "float" the dollar. The question is -- why?

I'd be far more likely to accept an explanation that the pound is just impervious to the aberrations of the market and Bush not a puppet if I could explain to myself why on earth American foreign policy continues to follow Israel into the jaws of hell for oil it could live without.

Tuesday, September 26, 2006 02:54PM Report Comment

16. inbreda said...

"why on earth American foreign policy continues to follow Israel into the jaws of hell "


- the destruction of the earth is a fantastic thing, because then God will take all the true believers to Heaven, and it's going to be really good and there will be cake and everything.


I think what we are seeing is fine explanation as to why mentally retarded christians should never be allowed any authority whatsoever.

Tuesday, September 26, 2006 05:03PM Report Comment

17. indiablue19 said...

I do appreciate the appearances of the situation. There was an excellent programme on the BBC several years back before it became a mere mouthpiece, called "The Power of Nightmares" that explains eloquently how religion is the unwitting smoke-screen for so much the neo-Cons and so-called "Extremist" groups have been peddling. Christians are the dupes of the Neo-con government just as "Islam" is the dupe of the "terorrists." There are many differing brands of Christianity, as there are different camps of Islam. With fundamentalist [a VERY important word] Christianity billed as something for all to turn to in times of "terror" by the US government itself, I don't think we can reduce all Christianity to a lobby in favour of destroying the Earth so that all may ascend. Any more than we can think that Muslims, one and all, favour terrorism. Muslims I know are quite lovely people and just as appalled by Bin Laden as anyone else.

The fundamentalist version espoused by Bush is quite obviously self-serving, which the programme point out. Although I don't spend night and day in search of conspiracy theories, I believe this one programme series (4 parts if I remember) does explain an awful lot, including where the so-called Al Qaeda came from and also Bin Laden's surprise at learning he has supposedly chosen the title. [A close friend and senior renegade member of the "Times" investigative reporting ranks, sent me a copy of this programme in recognition of its validity and importance; having personally been banned from every going to Israel again for his reporting efforts there.] In addition to this, throughout the programme, there are some rather believable witnesses on hand to verify what has been done and why. Including Madalyn Albright who I wish had succeeded Clinton in the presidency instead of the Boys' Club continuing on.

More personally, although not a Christian myself, I still wish you wouldn't refer to any religious group as "mentally retarded." I understand the frustration, but you are far too intelligent to argue in that way. Where the mantle of any of these beliefs are being hijacked on behalf of the power mongers, whether they are stolen from Christians, Jews, Muslims, or anyone else, it is an absolute disgrace that partisans and terror groups of all stripes are getting away with hiding behind a sincerity and a hope they obviously don't share.

Tuesday, September 26, 2006 05:43PM Report Comment

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