Jump to content

Will the euro crash in 2011


Devon
 Share

Recommended Posts

  • Replies 556
  • Created
  • Last Reply

Top Posters In This Topic

[quote user="Jako"][quote user="zarathustra"] I've been working more or less at 1 pound = 1 euro, so anything extra is considered a bonus.

[/quote]

It would be wise to start planning for 1 pound = 50 eurocents.

[/quote]

I'd love to know where you obtained that little pearl of wisdom .................

.

Link to comment
Share on other sites

[quote user="Jako"][quote user="zarathustra"] I've been working more or less at 1 pound = 1 euro, so anything extra is considered a bonus.
[/quote]
It would be wise to start planning for 1 pound = 50 eurocents.
[/quote]

Oh come on Jako thats silly, I would think 90 cents would be more realistic. [:D]

Link to comment
Share on other sites

  • 2 weeks later...
Yep and on the telly last night they said after that it would be either the Spain or the UK next and that the Euro zone was more worried about Spain than the UK because the UK is not in the Euro. But look it's helped the pound to get up to 1.14 again.
Link to comment
Share on other sites

Interesting article in Monday's FT where JPMorgen currency division are recmmending a sell on pounds and US Dollars and a buy on Swiss Franc and Euros - seems the money men had already factored in the debt problems in PIGIES.
Link to comment
Share on other sites

Its interesting that in the UK budget statement which I perused on HM Treasury's website last week, the OBRs central economic forecast gave a predicted £/euro exchange rate of 1.16 for years 2011-12, 2012-13, 2013-14 and 2014-15, then 1.15 for 2015-16.  Nothing resembling £1.20 but nothing resembling parity either.  As usual isn't it just the case that que sera sera and nobody really has a clue?   
Link to comment
Share on other sites

It always makes me laugh, these experts that is, this are the people who helped these economies to get in the mess they are now in. You can't possibly predict where it really will be in six months time let alone two or three years because there are just too many variables and you just don't know whats going to happen next. I read today that one of the Japanese car manufacturers are going to half production because they can't get the parts from Japan because of the current problems there after the great earthquake. How would an economist predict that (the earthquake) for example? This in turn will not help UK exports as around 80% of the Japanese cars built in the UK are LHD for export. That in turn will effect our balance of payments which then will effect the pound. What I and others were sort of joking about is that if you move in to the Euro zone from the UK and you work on parity then every cent you get above that will be a bonus.
Link to comment
Share on other sites

Well I'm afraid you are all wrong. I won on the Euromillions this week, two numbers and a star (wow). According to the UK lottery site I had won £5.10, however I in fact won 8.20€.

Now I calculate that to be an exchange rate of 1.6 € to the £. This is what I expect to get when things get back to normal. Forget all the doom and gloom forecasts from those plonkers in the banking world, they have not been right so far and I'm sure most of you out there would rather believe me!

Link to comment
Share on other sites

Daft Doctor, HM Treasury are not trying to forecast the exchange rate, just taking a median for budgetary purposes.

The consensus amongst currency analysts is that the euro is overvalued against the US$ and £ and this is supported by any number of purchasing power comparatives.

However, when the £ might strengthen is anyones guess, but more than likely when the UK starts to increase its base rate and the markets anticipate that it might need to go above the ECB rate, where traditionally until 2008 it usually was, because of higher inflationary trends in the UK.
Link to comment
Share on other sites

Interest rates are only one of Quillan's variables. If investors believe UK plc is heading down the toilet, the £ will suffer even if rates increase. And it still depends on how the UK outlook stacks up against the economies with which you are comparing it.
Link to comment
Share on other sites

Amidst all the 'it might go up / might go down' stuff, all I really want is some degree of stability.

The last year or so has seen £ / € at (say) 1.10 average - no statistical backup for that, but let's just assume that's more or less right.

What I can't handle is a rate see-sawing by up to 10pts either side of that, which it has over that period. If it makes my budgetting hard, what does it do for UK exporters?

Link to comment
Share on other sites

[quote user="Bugsy"]

I'd love to know where you obtained that little pearl of wisdom .................

[/quote]I mentioned that earlier in this thread: The BoE has tripled the monetary base since the pound was at € 1,50

The ECB did  not print money, just provided liquidity. As the liquidity will automatically return to the ECB and the extra printed pounds will not, the pound will gradually move to 50 cents and all the printed monopoly pounds will do is generate inflation. ( is already generating inflation)

Ony if the BoE will retract the money (yea right) or economic growth in the UK will be triple that of the Eurozone (yea right) then sterling will not fall.

As the UK now has both the largest deficit (11%) and the largest debt (150% of GDP  when you include the bank bailouts as is done in the Eurozone click) of all 'advanced' economies it is likely that the UK and not Spain will be the next on the list of the 'bond vigilantes' . If this happens the pound will be pushed faster down than inflation rate differential to be ahead of the curve.

Link to comment
Share on other sites

So the UK has.

High inflation.

Low interest rates.

Massive Deficit.

Low productivity and getting worse re my example about cars and Japan but then not forget the companies that produce all the other bits the cars use in the UK.

Is printing money.

Large proportion of the income from the tax collected going on public services that it can't afford.

Currency down against the 'major' currencies.

Can't borrow from the ECB because it's not in the Euro so will have to borrow from the IMF (remember last time).

Price of diesel going up due to middle east problems which will have an effect on food and other prices so inflation accelerates even more.

So yes as Jako says it's not bright by any means for the UK or the pound and the UK could be next after Portugal.

So no its not just interest rates its a load of things, some that could have been controlled and some that can't (like natural disasters).

 

Link to comment
Share on other sites

Please explain what a is "bank bailout". Recapitilisation? Liquidity?

The ECB allows Eurozone banks to borrow 100% against sovereign bonds purchased say, from Greece. Effectively all the toxic bonds now reside within the ECB. Where is the difference with QE?

I bow to your superior knowledge of the UK debt situation. Last month PwC's report had the deficit at 5.8%, one of the lowest in the G20. I will forward your analysis to them.

Link to comment
Share on other sites

A bank bailout is when you buy a bank and don't put the money on the balance sheet.

The ECB bought around 60 billion euro's worth of 'toxic' debt and mopped it up, a drop in the ocean. The BoE bought 200 billion of UK (soon toxic) debt: poring an ocean in a bathtub.

Just follow the link in my previous post to the official debt and deficit figures. 

Link to comment
Share on other sites

HMG recapitalised the banks, obtaining an equity stake in return. Previous experience eg when Sweden was forced to nationalise their banks, or the American S&L rescues all state catergorically that the State will fully recoup it's investment, with a very large cherry on top. Privatisation just before the next election, allowing a mega tax personal tax cut? Cynical moi? Must make Gordon weep. He bought the Tories the next election.

The UK toxic loan agency is a fully ringfenced private entity, with no exposure current, or future, by HMG, or the UK taxpayer. I agree the ONS Net Debt figure looks pretty eyewatering when bank intervention is included. It would also be a ridiculous agrument to make that 100% of that is taxpayer liability. Current bad debt previsions in the financial sector are 3%, and that is erring on the side of prudence. That would put (real) Net Debt at 60.7%.

You can play these silly games till the cows come home. Take France. SNCF have Net Debt of EUR150billion, but it's off the Govn balance sheet (the interest payments are more than it's entire revenue, and so is the pensions bill!!). SECU has Net Debt EUR190billion. Etc, etc. Renault shares are held at a value of EUR80, check the real price!

The issue once upon a time with exchange rates it was interest rates, economic performance and data, inflation, etc. The world has changed lightyears from those times. The traders sit London trading trillions. In fact, that is probably one danger for Sterling. The traders all watch UK TV, read UK papers, pretty much like most people on this forum. They don't see French TV, read French papers, and therefore have a pretty unbalanced view of the world!!

Link to comment
Share on other sites

From my employer's daily news digest. German business paper, very highly regarded.

The financial daily Handelsblatt writes:

"It is impossible for the political leadership of Europe's common currency union to end the debt crisis with a single move. Such expectations are unrealistic. But they could certainly do more to withdraw some of the uncertainty from the financial markets. For that, one thing is necessary above all: the courage to tell the truth. First and foremost, euro-zone countries must bring themselves to reveal the true losses their banks have experienced as a result of the euro crisis and the losses that could still be pending. Indeed, the new round of stress tests would be a perfect way to shed light on such questions. But euro-zone decision makers lack the courage. Once again, the stress tests are not testing which banks would be hit hardest in the case of a state bankruptcy in the euro zone."

"One has to assume that political interests are the reason rather than economic logic. A stress test which includes the sovereign bonds held by a bank would almost certainly reveal even larger capital shortages than are already to be expected. In Germany, it would likely be primarily the state-owned institutions, particularly the Landesbanken (eds. note: banks owned primarily by German states), which would be affected. And that is bad news for taxpayers. After they have already paid billions to prop up the banks, they would have to cough up even more. That, though, is something that Chancellor Merkel would rather not tell German citizens."

The Brits and the Yanks hammered their banks 2-3 years ago. The Europeans didn't. Particularly Germany. They've ended up owning Hypo Real and WestLB, a big chunk of Commerzbank. Truth be know they'd end up with all the regional banks as well. France would probably end up with Caisse d'E/Banque Pop, maybe BNP. Spain would end up owning all the Cajas/Caixas. Suisse, well they ended with most UBS, now been sold to some Gulf state.

European banks have not been put under the same scrutiny as Brit/Yank banks. It won't happen though. If you don't want to find something, the best answer is not to look for it! Scary thing is the chain reaction will continue, as the markets hit country after country, they are feeding on the uncertainty that the politicians are creating.

Link to comment
Share on other sites

Or UK public debt is actually 240% of GDP according to the Centre for Policy Studies: CNBC (click)

Don't  forget that the UK banks were bought and recapitalised with borrowed money. Money will eventually return to the taxpayer, but with profit?-there are already too many banks in the world, more banks need to disappear for the others to remain/become profitable.

Interest has to be paid over all the debt, not just the debt the government likes to put on the balance sheet. In order to compare between countries you have to use the same method. Ireland and Portugal were forced by Eurostat to put their bank-bailouts on the balance sheet and so should the UK.

Link to comment
Share on other sites

  • 4 weeks later...
Never mind, the experts say it will be 1.25 by Christmas or was that last year, so many experts it's difficult to remember which one said what. Don't forget that the Euro was supposed to be dead by now. Excellent news if your looking to buy a property in the UK with Euros. Perhaps the French will go on a spending spree buying second homes for their holidays in the UK.
Link to comment
Share on other sites

[quote user="Quillan"]Never mind, the experts say it will be 1.25 by Christmas or was that last year, so many experts it's difficult to remember which one said what. Don't forget that the Euro was supposed to be dead by now. Excellent news if your looking to buy a property in the UK with Euros. Perhaps the French will go on a spending spree buying second homes for their holidays in the UK.[/quote]Is that 1.25 euros to the pound or 1.25 pounds to the euro?
Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share


×
×
  • Create New...