Monday, January 26, 2009

Government Must Fear the Falling Pound

Pound Plunge May Push U.K.’s Brown Off Currency Fence

John Major, James Callaghan and Harold Wilson each had to cope with currency-market turmoil that weakened their reputation for managing the economy. A dispute over aligning with other European currencies forced Margaret Thatcher to resign in 1990. “It has certainly undermined prime ministers before,” said Philip Whyman, professor of economics at the University of Central Lancashire. “It could do for Brown.”

Posted by mountain goat @ 07:39 PM (1369 views)
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9 thoughts on “Government Must Fear the Falling Pound

  • Brown and Darling keep banging on about how exporters would do great etc with a weakened currency, what about us importers, we are getting s&rewed + noticed the cost of fruit etc in the supermarkets??

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  • The question must be: will these guys cut interest rates to nothing, soon?

    If so, I think the pound will drop alarmingly and they will be forced to raise IRs quickly. I think its time to lock in on a fixed rate mortgage for the next 2 or 3 years while the UK rides out the storm.

    Brown said 4 years ago that a weak currency was the sign of a weak government, so what does that say about him as a chancellor?

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  • japanese uncle says:

    Zero IR should mean £=$1.00=100 yen. If they really want this, then go ahead and make my day! Bang!!!

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  • tyrellcorporation says:

    As we are a net importer of goods I can see retail margins being destroyed in the next 6 months by the weak Pound and IMO 50% of high street shops will be gone by the end of this year. Nice one Gordon, you’ve sacrificed everyone to try and keep your bubble inflated.

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  • amjidk as an importer didnt you ever consider hedging in the forward markets? As the dollar went under 2.10 didnt you think “this might just NOT last forever?”

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  • Importers should have to hedge (gamble), we should have sound, debt free, gold backed currency.

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  • i did, but theres only so much hedging you can do + the extent of the fall in the pound was unforeseen..

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  • well i am sorry amjidk and i dont want to rub salt in but thats incorrect , you can do as much hedging as you want, for as long as you want. (depending on how you do it there are transaction costs involved but they are minimal). The extent of the fall was unforseen? No i dont agree with that either. I foresaw a fall to between 1.50 and 1.45 from 2.03. Admittedly i didnt buy @ 1.45 (yes i did sell @2.03) .

    Hedging should be treated as just another business cost. Otherwise its all dandy when the £ is strengthening , for importers that results in either increased margins or reduced prices but if you are naked on the way up you cant complain when it goes the other way,

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  • techieman, how would i go about doing this?? sorry if this sounds stupid, but our company is relatively small and i’m not familiar with the details, i assumed when you say hedging you mean transfering money into a forex account!!

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