Friday, September 25, 2009

Boosting exports or increasing inflation on food?

Sterling descends and Bank of England Governor helps to talk it down

More from the misguided old fool at the BOE: ''Speaking to The Journal, the Newcastle newspaper, Mr King said that the significant decline in the value of sterling in recent months “will be helpful” in rebalancing Britain’s economy by helping to boost exports.''

Posted by hpwatcher @ 09:25 AM (958 views)
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10 thoughts on “Boosting exports or increasing inflation on food?

  • King steps out of his remit here. His only responsibility is to maintain his received inflation target of 2%, not fiddle around to boost the export sector (as necessary as that may be).

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  • Funny how King never seemed particularly concerned about ‘rebalancing’ the economy towards more exports before now. He’s had years to try to do this and so did Eddie George so why didn’t they ‘rebalance’ before? Oh they were too busy deliberately creating a huge housing bubble as an illusion of economic growth weren’t they since they knew there was very little else left to base growth on. Now they seem to be trying to prop up the inflated assets in nominal terms by trashing the currency and claiming its good for exports. Last time there were any figures out I seem to recall the UK still was importing much more than exporting even with a dramatically weakened pound.

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  • The “talking down” seems to be working…its popped below $1.60 today.

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  • Sterling needs a new name, Knockout is more fitting as all it ever does is take a dive…

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  • Again folks you are misguided if you think that £ rate is controlled by the folks at the BofE.

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  • techieman, I don’t think anyone reckons the BoE controls the exchange rate, but their prnouncements can have a significant effect on it.

    The issue is that they are trying to talk the pound down to make property more attractive to foreign buyers. The media really should be hoodwinked so easily – Mervyn King has never given two hoots about the UK’s export ability before now.

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  • i disagree paul. As i said before the BoE can (i will concede at a stretch) speed up or slow down the move, but they cant determine direction.

    Still im fine with someone not sharing my view. Have a good one!

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  • in any case foreign buyers will not buy if they think the pound is going lower. It dont matter where it is, its where they think its gonna go thats the issue.

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  • techieman, surely raising interest rates would lift the pound?

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  • ST i think we are at cross purposes. Official IRs wont be raised unless the government is forced – i.e. to protect the pound via the market insisting. However they (HMG) then (because the rise is already discounted) will be behind the curve. So an initial IR rise wont slow it down too much. Thats the story of the ERM they raised the rate to keep in and then found they had to give up cause the market won.

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