Thursday, Nov 30, 2006

Anyone fancy a bit of inflation?

BBC: Pound hits 14-year dollar high

The pound has hit a 14-year high against the dollar amid speculation that the Bank of England will raise interest rates in the New Year.

Posted by harold @ 02:59 PM (453 views)
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5 Comments

1. sold 2 rent 1 said...

harold,

How does a strong pound cause inflation?
Surely a weak pound causes imported inflation
With interest rates looking likely to rise again the pound should strengthen more

The key thing here is if the economy stalls with inflation not beaten then the fall in the pound will cause inflation to take off
We are still 6 months or so away from this secenario

Thursday, November 30, 2006 03:35PM Report Comment
 

2. harold said...

sold 2 rent 1

I was thinking more from the perspective of the US.

The scenario for the UK is more complicated but no less perilous than it is for the US. World stocks are still high due to unprecedented liquidity in the global economy (not because of acquisitions and mergers as the BBC would have us believe), and as a result the City and, prima facie, the UK economy appear to be doing well. However, if and when the equity markets do finally head south, i.e., when the global interest rates reach a critical level (say, Japan +2%) and the risk versus return in equities becomes too great, the UK economy - with its high debt levels - and currency will come crashing down with huge inflationary implications. For the UK it all rests on our last remaining wealth creator - the City. As for Sterling's performance - at some point Soros and co. are going to take the mother of all short positions against it. Me? I fancy either the Swiss franc (because it is the only currency backed by gold) or the main challenger to the dollar, the euro (no sniggering please).

Thursday, November 30, 2006 07:14PM Report Comment
 

3. Headmelter said...

For those of us with savings where does this leave us.

Do we leave our savings in isa's? or invest but in what?

I'm a newcomer to this as I currently have no debt and a bit of spare cash in savings. I'm not looking to buy a house as I own the one I live in but am confused about how to protect my savings as they are my comfort blanket. I'm not looking to make a fortune just to protect them as far as possible.
I had considered gold but haven't a clue how to go about investing. Same goes for the stock market, I don't know enough about it and I'm not really a gambler.

Any suggestions or advice greatly appreciated.

Thursday, November 30, 2006 10:09PM Report Comment
 

4. Blindleadtheblind said...

Harold
You make some good points and I agree with the scenario you paint, Sterling will follow the $ down. Just one point, the Swissy is not backed by gold, it is a fiat currency as everywhere else, although there is a lot of gold in Switzerland...hence the relative security of their currency.

Friday, December 1, 2006 04:12AM Report Comment
 

5. Urine Truble said...

Is sterling a fiat currency? If so Fix It Again Tony.

Friday, December 1, 2006 10:35AM Report Comment
 

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