The pound is on the brink

[AnOther]

[quote user="Braco"]I for one look forward to the day that the UK joins the Euro, and we can all plan our futures with a degree of confidence.[/quote]Whilst I don't necessarily disagree with the sentiment it's nevertheless a very blinkered and selfish view. Yes, it might help a few hundred thousand expts who have hitched their wagons to Euroland, but there are myriad other far more crucial factors to consider before such a move is even on the cards and I think I can safely say that their (our) needs or desires will not even make it onto the list.

[Gluestick]

[quote user="Braco"]I for one look forward to the day that the UK joins the Euro, and we can all plan our futures with a degree of confidence.[/quote]

What? Sort of plan for bankruptcy?

[:)]

Amazes me that the myth that joining the Euro mechanism is like some sort of fiscal analgesic still persists!

In all probability, by the time Britain has sorted out its massive public debts (The very last thing Germany and France would agree to is Britain joining with those extant liabilities hanging around!), the core Euro mechanism will have already broken up and son of Euro or Euro II will be the new attempt.

Worth bearing in mind that the Euro is now the fourth try: Snake and Super Snake both failed; as did the ERM, if one remembers 1992.................

It is also perhps worth recalling that the Euro is only part of the insane plans under EMU (Economic and Monetary Union): and EMU has been a central plank of European Integrationist dreams since the early 1950s.

Unfortunately, the wholly disparate economic condition of the current members of Euro, can only be exacerbated by those micky mouse states recently joined and waiting in the wings. Not ignoring the current basket case members anyway.

Perhaps it is really worthwhile recalling which states are hoping to join.

http://news.bbc.co.uk/1/hi/world/europe/7529707.stm

 

[Braco]

Amazes me that the myth that joining the Euro mechanism is like some sort of fiscal analgesic still persists!

I for one do not see it as a economic pain killer, but a very desirable first step in tackling the UK problems (socio, political, and economic) while strengthening Europe.

 

I am a strong believer in the market, and while the initial entry might be painful the future could be very bright with efficient companies expanding.

 

[cooperlola]

[quote user="powerdesal"] I believe its called ''consideration for those less well off than oneself''

[/quote]Unfortunately, this is a tough concept for some to get their heads around.

[Gluestick]

[quote user="Braco"]

Amazes me that the myth that joining the Euro mechanism is like some sort of fiscal analgesic still persists!

I for one do not see it as a economic pain killer, but a very desirable first step in tackling the UK problems (socio, political, and economic) while strengthening Europe.

 

I am a strong believer in the market, and while the initial entry might be painful the future could be very bright with efficient companies expanding.

 

[/quote]

So you really consider that Britain ceding its current powers on such trifling matters as Interest Rates, Money Supply and fiscal management would solve our Social, Political and Economic problems then?

Please do expand your hypothesis: I'm keen to enjoy the critical conceptions..............

 

[Braco]

The list of benefits is long and probably best suited for a political web page, but here are just a few:

 

The first duty of a government, especially in the absence of a true democracy (representative parliaments are at best just that) should be to preserve the status and value of the currency – who is best place to do this – at this moment I say the European Bank.

 

A government should function within its means – unless each and every citizen is allowed a say as to the level of expenditure (with an opt out clause if you wish to not partake) then my view is that governments should only be allowed to budget and spend monies that are raised. This will have the benefit of forcing people to directly decide on what if any of the current spending programme warrant support.

 

Thirdly a move to the Euro will be a massive step in emancipating the UK from the malignant influence of the USA, and its pressure groups.

 

Forced to live within its means you may find the government has to reign in its bloated social spending and that illegal immigrants are no longer queuing up at Calais.

 

Bottom line I am a supporter of a pure free market. Do we have this in Europe – at the moment no. Can it be achieved yes.  

 

A market will not ultimately support waste. Changing money at 0.5% + is the economic equivalent of us taking in each others washing and calling it an industry.

[velcorin]

Now, here's a first. I actually agree with Gluestick. But, my reasons are different.

UK public debt is currently around 47% of GDP, obviously it will increase over the next few years, France's is 68%, Germany 73% and Italy 98%, again they will increase significantly. Would I want to get into bed with such a bunch of economic basket cases, probably not. The members of the ECB Board bickering in the media, the total lack of co-ordinated action between the EuroZone countries to combat this massive global recession, the lack of co-ordinated political action, the lack to coherent economic policy. The debacle surrounding GM Europe is a perfect example, Germany, Italy, Belguim all bickering over who gets what, which country doesn't lose jobs, etc, meanwhile the Opel/Vauxhall train speeds towards the ravine. If anything this recession is showing precisely why the UK should stay well away from the EUR.

Certainly I'm no Little Englander. I work in Finance for a German manufacturer in France.I have a French wife of 15 years. I get paid in EUR. However, I get the German media, French media and UK media in version originale, so I reckon I can delude myself that I know what's going on.

[Gluestick]

So, why has no one been preapred to audit and sign off the Eu accounts for so many years?

Love the bit about real democracy!

So how come the EU Commissionares are unelected: and make most of the critical decisions?

Free Market: yes indeed; nice theory.

So how do your emasculate the vested interest and hegemonies of the monopolists: such as Big Oil?

Loved this one!

[quote].................has to reign in its bloated social spending [/quote]

Have you examined the social spending of France, Germany et al recently?

[quote]

A market will not ultimately support waste. Changing money at 0.5% + is the economic equivalent of us taking in each others washing and calling it an industry.

[/quote]

So, how do you rationalise the financial wheeler dealers adding layer upon layer of cost in buying and selling what already exists?

For our investments, pension funds, savings etc.

We have experienced in the USA and UK the unfettered so-called "Free Markets" of recent.

Strange to me how we are all suffering hugely, yet the architects of this financial utopia are still living in their mansions and enjoying obscene pension pots.

Funny that...................

[quote] Changing money at 0.5% + is the economic equivalent of us taking in each others washing and calling it an industry.[/quote]

And banks et al offering, say 0.1% interest on deposits and then via their credit card operators lending it out at 29.6%  APR is fine then?

Best one of the lot today are the pay check vultures: Here:

Quite how one justifies charging 2,356% APR when bank base rate hovers around 0% is beyond me.

Of course however: silly me; that's the Free market.

Wonderful concept.

If you are Fred the Shred etc.

 

[Braco]

Gluestick

Change is never easy. The current level of borrowing and spending are simply unsustainable. Without hard choices the end result will be hyper inflation and collapse.

As to the 'free market' where exactly did you experience a free market? Do not take the statements of politicians at face value.

 

[chessfou]

Ooh, levels of public debt are so hard to put a finger on, not least because as soon as something pops up that ought to be tacked on, governments fight tooth, nail and "special accounting" to get them moved sideways.

"Current" "public debt" based on May 2008 IMF figures can be found on wiki:

UK 52%

DE 66%

FR 68%

IT 106%

..

IE 43%

ES 40%

but what about current changes? The IMF prediction is that UK public debt will grow over the next four years to £1.4Tn. (about 80% of 2008 GDP and I would happily bet my granny that 2012 GDP will be less).

What if you include the bank guarantees?

UK ca £3Tn (say €3.5Tn)

FR ca €0.33Tn

And unfunded pensions ...?

As ever our politicians (perhaps UK ones even more than average) follow SOP (standard operating procedure) - obfuscate, obfuscate, obfuscate.

[Braco]

Looks like its time to borrow money to buy shares in De La Rue then.

[Gluestick]

[quote user="Braco"]

Gluestick

Change is never easy. The current level of borrowing and spending are simply unsustainable. Without hard choices the end result will be hyper inflation and collapse.

As to the 'free market' where exactly did you experience a free market? Do not take the statements of politicians at face value.

 

[/quote]

I've personally never ever seen such a beast as a "Free Market", Braco.

They only exist in rather Libertarian textbooks.

It is yet another good example of Nice Idea Syndrome: rather like Supply Side Economics, Trickle Down and all the wondrous and hugely flawed nonsense of Reagan and Thatcher et al.

Who both presided over Deficit Financing economies: hence most of our current economic and fiscal malaise.

As an example, the USA passed into statute the Sherman Anti-Trust Legislation; mainly to limit the then awesome power of the railroad barons: but this act was later expanded by a number of amendments to limit the unbelievable power, wealth and influence of one John D Rockefeller.

Didn't work: which is why and how the then Seven Sisters came to dominate the global crude and gas markets.

 

[Gluestick]

[quote user="chessfou"]
And unfunded pensions ...?

As ever our politicians (perhaps UK ones even more than average) follow SOP (standard operating procedure) - obfuscate, obfuscate, obfuscate.


[/quote]

And as the Bard said, "Aye! There's the rub!"

A couple of years back on this forum I posted a complete analysis of the then public debt of all EU states: corrected for the hidden and "Off Balance Sheet" obligations.

It was, to say the least, rather worrying!

[:-))]

[Braco]

Hi Gluestick

I am not naïve enough to believe that we will ever get there. I just see it as a compass that points to the right direction. The current financial situation is rather like a man stuck in quick stand. The more he struggles (politicians interfere) the deeper we sink.

This recession was a long time building, and brought to a head by the high oil prices that followed the Iraqi crime and the threats against Iran.. The fallout and long term strategic decisions that will be required are far beyond the comprehension of the current crop of cretins (of all parties).

[Gluestick]

Interesting to note that the German government are in process of "Trying to save thousands of jobs" by agreeing to post huge financial guarantees for whoever pf the three shortlisted, actually finishes up buying Vauxhall-Opel from GM: and Anglo Irish Bank, nationalised by the Irish government, have just posted awesome losses: and the government plan to dump tens of billions of extra funding into the vehicle.

And there is much more bad news to emerge from the Eurozone I fear.............................

(N.B. Edited as bank's name was incorrect. Hat Tip and thanks to Pickles)

 

[woody234]

When you say "vehicle" do you mean vauxhall-opel or Anglo Irish bank

[Chancer]

[quote user="Gluestick"]

I did forecast that the £ : € would in all probability settle at around £= €1.45 by July and have not changed that view.

[/quote]

Did you really GS?, on this forum?

Its not that I dont want to believe you rather than want some re-assurance!

I am ready to make what is for me a big Euro purchase of block paving, the last time that I was haggling for it was in December and the pound was very low and then the weather turned, now that all the groundworks are finished, the weather is good and the pound a bit stronger I once again did the rounds of haggling with the négoce materiaux, a name which in this region at least is an oxymoron!

Anyway I have very little negotiating influence left to play with and the thing which now influences my "buy now or later" decision is which way the exchange rate is going to go.

So! If you can show me that you did indeed forecast the above then I will be guided by your wisdom and comforted by the fact that if the pound falls I will have someone else to blame for my ill fortune [:D][:D]

[Gluestick]

[quote user="woody234"]When you say "vehicle" do you mean vauxhall-opel or Anglo Irish bank
[/quote]

The bank.

Anglo also said that, if there was another 10% fall in the value of land and development assets, there could be an additional impairment charge of EUR1.5 billion. The government's National Asset Management Agency, or NAMA, will take control of those assets, and also land and development assets from Bank of Ireland PLC (IRE) and Allied Irish Banks PLC (AIB).

NAMA has said it will take up to EUR90 billion in assets from Ireland's banks, but the finance minister has said the actual value of these assets will be "significantly less" than that.

Here:

[Gluestick]

[quote user="J.Rs gone native"]
[quote user="Gluestick"]I did forecast that the £ : € would in all probability settle at around £= €1.45 by July and have not changed that view.[/quote]Did you really GS?, on this forum?

Its not that I dont want to believe you rather than want some re-assurance!

I am ready to make what is for me a big Euro purchase of block paving, the last time that I was haggling for it was in December and the pound was very low and then the weather turned, now that all the groundworks are finished, the weather is good and the pound a bit stronger I once again did the rounds of haggling with the négoce materiaux, a name which in this region at least is an oxymoron!

Anyway I have very little negotiating influence left to play with and the thing which now influences my "buy now or later" decision is which way the exchange rate is going to go.

So! If you can show me that you did indeed forecast the above then I will be guided by your wisdom and comforted by the fact that if the pound falls I will have someone else to blame for my ill fortune [:D][:D][/quote]

JR: The only post I can immediately find was on this page at the bottom.

http://www.completefrance.com/cs/forums/2/1590255/ShowPost.aspx#1590255

Bearing in mind that forex markets are notoriously fickle (They will price in expected bad news and change and then when the forecast change actually occurs go "Quelle Horreure !" and price the same correction in once more! Just like life assurance underwriters: these buggers use actuarial tables to work out mortality  - which takes into account early death rates from illness and disease; obvious really - and then if you declare any disease illness or problem which they don't like they then load up the premium!)

All we really need now is for Jean Claude Trichet for example to say "Things is really tough! Oh dear we're in the merde!" And matters will happen almost overnight.

However, dear old Merv the Swerve may well issue an even more damning proclamation about the UK economy on Monday: and it will all go the other way for a week or two!

Buy your materials ASAP.

[:)]

[Chancer]

With my blind faith in you I will hold off the order till June, pay the 20% accompte then and the balance in July.

[bigears]

hi

my gut feeling is that sterling will settle at around 1.20, (1.25 max), there will obviously be the usual fluctuations.  I cannot envisage ever getting back to the good old days of 1.40 plus.

[Gluestick]

In which case Britain is toast: as our annual import bill is unsustainable.

And EU manufacturing industry such as Airbus Industrie is toast too.

 

[chessfou]

[quote user="Gluestick"]

In which case Britain is toast: as our annual import bill is unsustainable.

[/quote]

Been there, done that in the occasional Sterling crisis : Harold (1961), 'Arold, not forgetting Baron G-B (1964 - ah the joys of a mere £800M budget deficit - and 1966-7-8 - "what's it got in its pocketses" as Baron Gollum would have said) and I don't think Jim Fixed It (1976), then there was a handbagging (1979 Baroness elected, £ to $2.4, six years later £ to $1.05), then she and the Pound both became shadows of themselves but Sir John and Baron Lamentable rode to the rescue and set it free in 1992 since when yet another GB has been known to point to "the longest period of sustained economic growth Britain had seen for more than 150 years, achieving growth in every quarter between 1992 and 2007" ... to be continued, once more with feeling (this time round the budget deficit is ...?)

[quote]And EU manufacturing industry such as Airbus Industrie is toast too.[/quote]

Maybe, maybe not. The UK doesn't buy that much from Airbus (will the wings get cheaper, or did Bristol drop out?) and it is not beyond the bounds of possibility that the £ will simply detach itself from $ & € simultaneously.

[Gluestick]

You must remember Britain's huge annual import bill : from Europe.

And the singular reality that since NuLabour came to power, Balance of Trade has been in Disequilibrium: and the negative balance is growing.

Airbus: didn't suggest Britain did buy much: the core reality, however, is that since Airbus is compelled to invoice (Worldwide) in Euros, then as the US$ slid and the Euro took off, Boeing (e.g.) pulled back market share since it enjoyed greater competitive Value Advantage.

Additionally, other major manufacturing exporters (Especially in Germany) are now really struggling on the twin problems of collapsing global demand plus too high a currency value.

 

[woolybanana]

Sterling seems to have climbed nicely over night. Over 1.15 now.