The Pound Sterling Is Becoming Toilet Paper!!

kaiser sauze

ei.sdraob wrote: »

their economy is still shrinking and exports are still falling, and the are planning to printy printy more

now compare that to Germany and France which are out of recession already

I haven't heard anything about the UK government preparing for more quantitative easing. I do prepare to be corrected.

However, you are not correct about Germany and France.

SkepticOne

I think the sterling is probably at the appropriate level currently to stimulate jobs. While savings, of course, suffer, jobs are probably more important at present.

Low sterling is probably more of a worry for Ireland since we export a lot to Britain yet our currency determined by the economy of the EU as a whole.

eoinbn

It's widely expect that many of the world's leading economic powers will be defaulting on debt over the next few years-this is just the first stage.

ei.sdraob

SkepticOne wrote: »

I think the sterling is probably at the appropriate level currently to stimulate jobs. While savings, of course, suffer, jobs are probably more important at present.

Low sterling is probably more of a worry for Ireland since we export a lot to Britain yet our currency determined by the economy of the EU as a whole.

so what do you propose

we make everyone in Ireland 30%+ poorer

just so a section of the economy keeps exporting to UK?

yeh thats gonna work, look at the murder that the PS are screaming when asked to accept cuts....




how this for an idea?!

why not stop all this meddling in the markets? thats what got alot of economies so screwed up in the first place

or how about the business's being affected learn a new word > diversification

and yes my own company exports to the US, so we get hit by currency fluctuations too, but you learn to take advantage of it not sink because of currency changes

SkepticOne

ei.sdraob wrote: »

so what do you propose

we make everyone in Ireland 30%+ poorer

just so a section of the economy keeps exporting to UK?

yeh thats gonna work, look at the murder that the PS are screaming when asked to accept cuts....

Nevertheless we have to recognise that low sterling relative to the euro is a problem for those euro countries that export to Britain. Ultimately Ireland's economic survival depends on its ability to export.

murphaph

Devaluing your currency is indeed a cut in the spending power of the people. Ireland is tied closely to the UK as it is still our largest trading partner. Ireland cannot devalue its currency anymore so we need to cut real wages and export at a competitive price to the UK (and elsewhere). There really is no other option. Wages are and will fall further in the private sector as a matter of course (or jobs will be lost completely), whereas the govt needs to step up to the plate and cut the public sector costs to a level where they are actually affordable to a lower paid private sector.

RiverWilde

Ah no the govt. won't stand up to the public service. They'll magnanimously step back from the precipice and gleefully hammer social welfare recipients and cut a large chunk from child benefit and/or pensions.

Riv

Curious Geroge

edited

sceptre

This thread isn't about the costs of the Irish public service (as a jaded hint, *every* thread doesn't have to be). Read the first post or even the thread title for a better idea of what the thread is about. Then post with that in mind.

ei.sdraob

Curious Geroge wrote: »

Yes, its a easy solution..

you dont understand

devaluation makes everyone equally poorer

everyone

SLUSK

If depreciating a currency is a good way to "create" jobs Zimbabwe should have zero unemployment

On a more serious note look at the US, their currency has depreciated alot but they still have lots of trouble with unemployment.

ei.sdraob

SLUSK wrote: »

If depreciating a currency is a good way to "create" jobs Zimbabwe should have zero unemployment

On a more serious note look at the US, their currency has depreciated alot but they still have lots of trouble with unemployment.

US tried to get China to stop keeping their currency artificially low and devalued (and keeping average Chinese alot poorer than they should be)

so US are now embarking on their own race the bottom with the Chinese, making own citizens poorer

anyways if everyone is engaging in devaluation, then the net effect is nothing

SkepticOne

ei.sdraob wrote: »

US tried to get China to stop keeping their currency artificially low and devalued (and keeping average Chinese alot poorer than they should be)

It all depends on the priority of the country. If wealth preservation is the priority then you don't devalue. If economic stimulus is the priority then devaluing is one of the options. Neither approach is appropriate in all situations and both approaches can be carried to excess and are ultimately unsustainable. The Chinese policy of keeping the dollar high and the Yuan low is now coming to an end. It will be interesting to see the effects on the world as well as within China.

creeper1

The pound is dropping so fast and if it does level with the euro or drop below it will have some interesting consequences.

IF my memory serves me right then the minimum wage in the UK is around five pounds fifty. Let's say you are one of the thousands of people in the UK busting your ass for the minimum wage. You work full time 37.5 hours

Let's do some simple mathematics 37.5 x 5.50 equals 206.25. :eek:
The dole in Ireland is 205 euros.

So in other words busting your ass in the UK gets you the same amount of money as being on the dole in Ireland.

Ireland should be on the guard for lazy chavs entering for the good benefits. This is a serious issue.

creeper1

It is a good correlation that is drawn between Zimbabwe and the UK because the two economies are beginning to resemble each other.

As for the comment that a devalued pound will be good for exports, well that would be fine and dandy if they did export anything.

Off the top of my head I can only think of three things they export - Rolls Royce (I am sure they are just selling like hotcakes in a recession :rolleyes:), beef and Manchester United merchandise.

IF things keep going the way they are they WILL export something that will be useful to THEIR economy - benefit hungry chavs.

ei.sdraob

Oct. 27 (Bloomberg) -- Germany has clawed its way out of recession. France is growing again. The U.S. is starting to expand. Even Ireland, one of the countries worst hit by the credit crunch, isn’t contracting anymore.

And yet the U.K. economy keeps on getting smaller. Last week, the government said gross domestic product dropped 0.4 percent in the third quarter. Expectations that Britain would join most of the rest of the world in staging a modest recovery turned out to be misplaced.

At this rate, even Iceland will pull out of recession before the U.K. does.

Prime Minister Gordon Brown keeps boasting he has the right policies to guide the country out of the woods. The truth is that they aren’t working and they won’t anytime soon.

Before it can recover, the U.K. needs a 180-degree change in direction. It must curb the budget deficit, support the pound, stop printing money, and cut taxes.

This is now the longest recession since records began in 1955. While the rest of the world recovers, the U.K. hasn’t. There is no sign of life in manufacturing, nor much in retail or services. The pound edges closer to parity with the euro every week: When it does, expect it to go into freefall.

Household Debt

It isn’t hard to figure out why. The U.K. economy was puffed up on a wave of borrowing and speculation. According to Dublin-based Goodbody Stockbrokers, U.K. households have debts worth 183 percent of disposable income. That is the highest of any major economy. Even the U.S. is only on 134 percent, while in comparable European countries, the ratios are far lower: In France, it is just 100 percent, and in Germany 99 percent.

The U.K. used to have a private debt problem. Now it has a private and a public debt problem. A collapse in tax revenue coupled with rising welfare bills to pay for the increase in unemployment has led to a widening gap between what the government receives and what it pays every month.

In September, it ran a 14.8 billion-pound ($24.6 billion) deficit, the biggest ever recorded for that month. The half-year shortfall was the largest since records began in 1946, when the country still had the small matter of World War II to pay for.

The U.K. is disappearing under a tidal wave of borrowing.

So far, the response from the government and the Bank of England has been straight out of the economics textbooks.

Ballooning Deficit

Interest rates have been cut, the government has maintained spending and allowed the deficit to balloon, the pound has depreciated against the euro, with the tacit support of the Bank of England and the government, and a program of “quantitative easing” has pumped cash into the system.

The economy has been stimulated, stimulated and stimulated again. It has failed to respond.

So what’s the answer? Yet more stimulus? More debt? Printing more money? Devaluing the pound by another 30 percent? There are plenty of people who would argue for all those.

And yet, as any doctor will tell you, when the patient doesn’t respond to the treatment, it’s time to change the medicine. In reality, the U.K. needs a total change of direction. It needs to do four things right away to get it back on the road to recovery.

First, stop printing money. There is no evidence to suggest the program of quantitative easing has done anything other than re-ignite another bubble. Stocks are soaring, the banks are minting money, and the property market, which never had a chance to correct, is starting to fizz again. But the U.K. didn’t need more debt-financed froth. It needed to start building new industries, and printing money isn’t helping that.

Unsustainable Debt

Two, get the budget deficit under control. At more than 12.5 percent of GDP, the U.K. is running up debts at an unsustainable rate. Everyone knows that taxes must rise to pay for it, and services are going to be cut as well. All it does is undermine confidence, and stop people spending now, because they know they will have to pay higher taxes further down the road.

Three, support the pound. A modern, advanced nation can’t devalue its way out of trouble. The idea that the U.K. is going to suddenly build lots of factories that compete with Eastern Europe and China on price is ridiculous. Britain can export plenty of things, but they are high-end, design and technology- intensive goods and services. Those products depend less on prices. There is no sign of exports picking up as a result of the pound’s collapse. All it does is destroy confidence.

Investment Destination

Four, cut taxes for business. The U.K. used to be the low- cost destination in Europe. It has squandered that position, ceding ground to Ireland, Switzerland and just about everywhere else. That is crazy. It will take massive investment to build the new industries and companies to replace those that have been hit by the credit crunch. Right now, the U.K. is raising taxes. How is that going to help? Slashing corporate-tax rates to match the 12.5 percent charged in Ireland would send a clear signal that Britain was a place to invest again.

The U.K. went into this recession in terrible structural shape. It was too reliant on banking and financial services, its competitiveness had slipped, the state was expanding in size, and it was building up too much debt. Getting out was always going to be a long, painful slog. Instead, it has been going for the quick fix of an artificial stimulus.

The trouble is, it’s not a fix and it’s not working. The only way the U.K. can save itself is with radical changes.

Four Ways to Pull an Economy Out of Recession: Matthew Lynn
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYQ8dRWi2aGU


interesting article, i highlighted some bits

SkepticOne

ei.sdraob wrote: »

Even Ireland, one of the countries worst hit by the credit crunch, isn’t contracting anymore.

I'd be inclined to wait for more data before saying that.

ei.sdraob

SkepticOne wrote: »

I'd be inclined to wait for more data before saying that.

same

johnnyskeleton

ei.sdraob wrote: »

you dont understand

devaluation makes everyone equally poorer

everyone

I thought that we have already agreed that it does not.

johnnyskeleton wrote:

It's a subsidy to people who are net debtors as they now have to repay less (if their debt is held in sterling).

ei.sdraob wrote:

yep

the people who are most reckless get of easy while the sensible savers get hit

craichoe

ei.sdraob wrote: »

now compare that to Germany and France which are out of recession already

Don't know about france but Germany is not out of recession, they manufacture cars. They had a massive scrappage scheme all over the country hence increasing purchases and as a result increasing car production.

http://news.bbc.co.uk/2/hi/business/8233603.stm

Its played a big part, but has artificially increased sales and production.

ei.sdraob

craichoe wrote: »

Don't know about france but Germany is not out of recession, they manufacture cars. They had a massive scrappage scheme all over the country hence increasing purchases and as a result increasing car production.

http://news.bbc.co.uk/2/hi/business/8233603.stm

Its played a big part, but has artificially increased sales and production.

Printing money in UK (QE) also artificially increased production and GDP which would have been -10% instead of -0.x%

and they also had a scrappage scheme...

ashleey

Does creeper1 realise that it is the rolls royce that makes aeroplane engines and not the cars, that are now made by bmw that he is referring to? Best get someone clever to fill out your benefit forms.

c montgomery

I recently inherited 3000 pounds sterling and was just wondering what people though would be the best course of action.

Bring the money home and change to euro right now.

Wait for a year or 2 and hope that sterling will get stronger.

I have a car loan for 5000 euro that i pay 9% interest on so i was going to pay some of that off with the money. I guess what im asking is will sterling improve by more than 9% in the next year???

Everyone look into your crystal bowls:)

ei.sdraob

c montgomery wrote: »

I recently inherited 3000 pounds sterling and was just wondering what people though would be the best course of action.

Bring the money home and change to euro right now.

Wait for a year or 2 and hope that sterling will get stronger.

I have a car loan for 5000 euro that i pay 9% interest on so i was going to pay some of that off with the money. I guess what im asking is will sterling improve by more than 9% in the next year???

Everyone look into your crystal bowls:)

euro, dollar and pound will continue to devalue

with pound taking the highest hit and euro taking the lowest

either spend the money asap or put it into an asset thats hard to devalue (gold/silver?)

or buy stocks in renewable/green energy companies, theres a huge bubble forming being pumped/created in that sector now, as long as you sell on time there could be money to be made, if you dont sell on time (i dont know when it will pop but it will like the .com bubble before) youll lose out but thats prob another ~3 years away

im not economist just analysis from sidelines, feel free to ignore