Friday, February 19, 2010

Not seen this for a while!

Forgetting about the loss of buying power!

Our currency has been heavily devalued over the last year. In fact, £100 is now worth about $154. 18 months ago it would have been worth nearer $200. Your trips to the US will now, as a result require around 30% more sterling to have the same experience. Not only this, inflation is waiting in the wings once again. Oil priced in dollars, imported goods, travel, it is all getting more expensive when you own pounds! Anyway, at least house prices go up always and forever so we shoudl be fine! Oh, and it is great for manufacturers too, wherever they are.

Posted by brickormortis @ 07:52 AM (1662 views)
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7 thoughts on “Not seen this for a while!

  • At about 8am on Wednesday we were at 1.58 against the $, we came off and then broke 1.58 to the upside again by lunchtime. We are now at 1.54. I wouldn’t be surprised to see 1.52 conservatively soon, before we have another more serious counter-trend move.

    Although what you say is correct – oil is priced in $, its a bit of a red herring. The pound is off 1.5% whereas oil against the dollar is also off 1.5% (since last night – as i write). Of course $ strength can (and probably will be) used as an argument to drive forecourt prices higher. Therefore in that case yes the oil companies are the people to “blame” but really because of profiteering, and government because of tax rather than because of them dumping the currency.

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  • ontheotherhand says:

    Surely devaluation is better for exporting service companies than manufacturing since more of the inputs are local people paid in pounds rather than inputs of metals, plastics and oil which are imported? I used to work for a software company called Misys selling the software abroad which was developed in the UK and it was much easier to sell and no more expensive to make when the pound fell.

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  • The US is just about the last place our pounds buy us a cheap holiday now. Fortunately at 1.54 a great trip can still be had due to the cost of things over there being much cheap than over here. To be honest I see no reason why one pound should buy many more of any other currency. When you look at what Americans earn and what one Dollar buys in the USA it is not much different to what we earn and what one pound buys here. The fact £1 gets $1.54 gives us very good buying power indeed. Actually there is one difference. You can buy a decent house in the US for a fraction of what you can in the UK.

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  • OTOH,

    A very good point. The proportion of value of our [future] exports that are services rather than manufactured products makes a big difference to the equation.

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  • It does get tedious when people act as if the pound at $2.00 was some sort of reasonable level. People realised that the US economy was collapsing, thus the fall in the dollar. Now that the UK is also seen as a collapsing economy, the two currencies have moved closer to the typical rate of the past 20-25 years — around £1.63.

    Good that people see that the typical American is no richer than the typical Brit. Yes, things cost less there, but people earn less. Houses can be cheaper, but lots of them are not in nice areas. I know from personal experience since we fled the US in 2004 before things got really bad. Americans live in fear of losing their jobs, and therefore their health insurance.

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  • brickormortis says:

    the purpose of the post was to draw attention to an important issue irrespective of the importance of previous rates. I was attempting to draw further attention to the loss of faith in sterling against one currency in particular but could have chosen many. I fear that a serious loss of faith is around the corner. I have already benefitted nicely from calling the £/$ movements for the last few years and I call it again to move towards $1.50 in the coming weeks. I think I might be right in saying that many other traders are thinking the same.

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  • I know Americans doing the same job as me that earn more and who have a far better standard of living than I do. Their housing is far superior and also cheaper as are their goods and services. It’s a complete fallacy that we are in any way equivalent in standards of living – they win hands down over us.

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