Tuesday, January 15, 2008

Great tool for seeing how much trouble the GBP is in

Pound vs Singapore Dollar

We are going to be seeing a lot of pain here. Think 2.45% inflation? What happens to inflation when we drop 30% of the GBP's value? Hint: It goes up at least 30%. Look at

  • GBPEUR
  • USDEUR
  • GBPCHF
  • USDCHF

Posted by lvmreader @ 04:27 PM (3304 views)
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10 thoughts on “Great tool for seeing how much trouble the GBP is in

  • True, but my 400k Euro villa in portugal sure looks more valuable at todays exchange rate!
    Anybody know anything about the portuguese economy? I notice on that CIA post about current accounts they were only just behind us at the bottom of the world league table for terrible savers.
    I want a million quid pad… so the sooner they drop to 600-700k the better!
    It’s not just the first time buyers that want a house correction!

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  • japanese uncle says:

    30 drop in GBP value should not directly translate into 30% inflation, but, say, 10% inflation taking account of the share of domestic production and market competition, squeezing corporate profits.

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  • I want to believe that, but what do we produce domestically apart from some food. What proportion of consumption of the UK is home produced?

    Weaker Sterling erases need for IR cuts, but people who owe in Sterling in the UK get no breaks, unless they earn in foreign currencies.

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  • In the short term, a 30% drop in GBP value seems a bit unrealistic. The worst short-term fall in the currency that I can think of is Black Wednesday, 16th Sept 1992, when the pound fell significantly against the Deutsche Mark (at the time the strongest currency in Europe). Ignoring the day-to-day fluctuations, the pound was worth 2.81 DEM in August 1992 and by October it had fallen to 2.45. That’s a drop of 13%.

    Over a longer term the pound could well fall by more. In late 1988 the pound traded at 3.2 DEM, from where it fell steadily to a low in late 1995 at 2.2 DEM. That’s a fall of 31% over a seven-year period. (Incidentally, 1988-9 was more or less the high point in the property market; 1995-6 was the low point. Do currency market trends mimic property market trends? If so, what are the parallels with today?)

    You could take any long-term statistics from history and compare with today. In 1971 the pound was over 8 DEM (my figures don’t go back any further) giving a 75% fall over 24 years. In the long run, we’re all dead. If I want to get on the housing ladder it’s the short term which is of concern!

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  • japanese uncle says:

    drewster

    Thanks for your valuable info.

    Incidentally I am not sure if I like the term ‘property ladder’ which implies continuous upward pressure to climb up. I appreciate people want to get rid of one bed flat to move to two or three bed houses. But once you own a reasonable house, why do you need to struggle to go further upward. This word reminds me of a rat race on treadmills. Besides I cannot imagine one can foresake a garden one developed, despite obvious emotional attachment to the plants in there.

    .

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  • look at 1982-84 dollar-sterling crisis £1=$1 , sultan of brunei, etc, etc

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  • @Japanese Uncle

    The word is “Hamster” – ハムスター

    Hamusutaa.

    Hamsters is what most people actually end up resembling.

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  • Is there a better term for Hamster?

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  • @lvmreader: how about Mr Creosote? And we all know what happened to him 🙂

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  • drewster – 30% relative to some currencies is not unreasonable. For instance August 1998 to January 1999 saw a drop of JPY/GBP from 240 to less than 180. This continued down to less than 150 by September 2000. In the past 6 months we have seen a drop from 251 to about 210. Depending on what decisions are made by various central banks, what blows up etc., 170 is certainly possible by the end of this year, in my opinion, which would be over a 30% drop since the middle of 2007

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