I hope I am not labouring the point here, but New Labour's fiscal madness is pushing the UK economy towards disaster. We are drifting towards a currency crisis. Why can't anyone in authority see what seems so obvious to anyone who bothers to look at the Sterling:euro exchange rate?
The pound dropped to a fresh record low against the euro on Thursday, breaking through the 95p for the first time, as the prospect of further interest rate cuts from the Bank of England continued to punish the currency.
The pound was also undermined as a government report showed the UK’s budget deficit widened to a record level in November as tax revenue declined in the face of the worsening recession and takes the losses for the week against the euro to more than 6 per cent.
9 comments:
It's funny, isn't it. The graph from 1999 to today is most comical.
Suits me... I don't need to spend abroad. To think that France and Germany almost came to blows week-in; week-out over competitive devaluation... while Britain has devalued Sterling with consummate ease... probably without establishing a competitive advantage, either.
A competitive advantage has undoubtedly been achieved - the euro was above 1.40 to the £ a year ago. Unfortunately there's not a great deal of UK industry left to take advantage. But what there is will prosper - at £/euro parity an exporter can raise its prices and still be competitive against foreign companies.
I work in an primary industry (agriculture). You can be sure that there will be increased food exports on the back of this devaluation. If you make stuff you should do well. We need more people doing just that, not running shops selling foreign imports.
I think our European neighbours are being a little naughty. Giving a false indication in my opinion that there will be a 2% floor in the interest rate level set by the ECB. Their comments appear to have accelerated the flow of money out of the UK this week. One has to ask oneself why the Eurozone should be different. Surely it will be hit just as hard by the recession and will need to bring down the rates to near zero for a very long time. Just like in the US and previously in Japan.
Ultimately monitoring the unemployment and growth figures of the Eurozone countries against the UK over the next few years will help paint a better picture as to whether the very low interest rate policy and fiscal stimulus really did help the economy.
I work for a company making stuff out of exotic materials for power stations and military applications about 75% export and we are doing very well, having to sub out about 25% of our work because we cannot cope.
Only real problem is getting the exotic alloys.
Well, I am looking to buy a PCB design package and due to Gorgo's policies I think I will buy the unlimited version:
1) It's cheap enough seen from DKK.
2) The optional extra bits may not be around later - I hope so, but...
I still stand by my position that the currency crisis has ALREADY happened. Sterling won't go much lower, it doesn't matter much (because it won't go to Icelandic extremes), and it'll help rebalance the economy away from imports.
House prices still tumble in nominal terms, as do stocks. And by the time they are low enough to be worth buying, the pound will be up again.
Depressing isn't it, first goes the interest rate and now the exchange rate. We could have switched to the euro when times were good but now we'll likely switch when they are at their worst.
Brown is like a gambler who walked into a casino with a few grand and is now down to his last fiver... so has nothing to lose by throwing that in as well.
If that fails, he is finished... just like reducing interest rates and bailing out the banks, car firms etc...will fail.
I expect Brown to then resign, leaving the UK in a right mess... thanks for nothing Mr Bean !
Still trotting out the old canard of the interest rates.
The basic problem is that there will be plenty of money printed by the BOE, and like most things that are in abundance, it becomes cheap.
As for rejoicing in the low value of the pound, I really cannot understand how it is anything else but making us poorer.
The german currency has appreciated as far as I can remember, but they are still the largest net exporter in the world.
I would say to the comment by Mitch that if you produced crap, the level of sterling would be irrelevant. Which is pretty much what happened to the UK.
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