tag:blogger.com,1999:blog-6214838.post7549705068987030776..comments2024-03-04T17:54:32.559+00:00Comments on Iain Dale's Diary: Pound Breaks $2 BarrierIain Dalehttp://www.blogger.com/profile/03270146219458384372noreply@blogger.comBlogger59125tag:blogger.com,1999:blog-6214838.post-63224623517487136272007-04-18T07:25:00.000+01:002007-04-18T07:25:00.000+01:00Or has my memory warped with time?Yes, completely....<I>Or has my memory warped with time?</I><BR/><BR/>Yes, completely. It was to resist the Bundesbank desire for Britain to DEVALUE within the ERM which was logical, and instead to fight to retain parity with the D-Mark after German Unification when the D-Mark needed to REVALUE upwards.<BR/><BR/>The Tories could not bear to have "devaluation" on their charge sheet so spent a fortune resisting the inevitable.<BR/><BR/><BR/><BR/>The Us has the world's biggest trade deficit; followed by Britain.<BR/><BR/>The Dollar will crash first....then Sterling...then interest rates will climb and climbAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-75866032467716361872007-04-18T02:49:00.000+01:002007-04-18T02:49:00.000+01:00i) Sterling is not the issue. It has been remarkab...i) Sterling is not the issue. It has been remarkably stable against the euro and has even been depreciating against the NZ$ and the AUD$.<BR/><BR/>ii) The US$ is the issue. Two of the world's major currencies have been steadily depreciating for a number of years now - the USD$ and the Japanese Yen.<BR/><BR/>iii) This is a good thing because the US is running an enormous trade deficit. A weaker $ will reduce this deficit.<BR/><BR/>iv) The US$ is also losing out from its 'reserve currency' status as Asian Central Banks have started to buy euros as well as $$.<BR/><BR/>v) The UK has an inflation problem. RPI is nearly 5% (the highest since 1991) and Mervyn King now has to write a letter to the Chancellor explaining how this happened on his watch. This will inevitably lead to higher rates and a slower economy. This is far more important than the level of $/GBP.pommygranatehttps://www.blogger.com/profile/06913108500217273049noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-70332388309931841182007-04-18T02:11:00.000+01:002007-04-18T02:11:00.000+01:00sell all assets borrow as much as you can.inflatio...sell all assets borrow as much as you can.inflation will put you a head of savers.buy back assets when they fall in price.ubprdAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-75068373077970281592007-04-18T00:19:00.000+01:002007-04-18T00:19:00.000+01:00This news has been coming for years. The Dollar ha...This news has been coming for years. <BR/><BR/>The Dollar has so many fundamental weaaknesses that it is surprising it has taken so long for the psychological $2/£1 barrier to be broken.<BR/><BR/>Consider:<BR/>1. Rise of Asian exports and the IT revolution that helped to reduce prices in US (thus resulting in lower interest rates; sapping the dollars strength). Note due to housing pressures and less open economies European markets have suffered less price depression as a result of this trend.<BR/><BR/>2. Rise of the Euro as a competing store of value for 'international investors'. (Previously if you wanted to store your money in a stable and, most importantly, liquid currency, you had little option but to get hold of dollar denominated asset classes; with the rise of the Euro (which incidentally is governed with less political pressure than the dollar) this monopoly has dramatically disappeared; with the result that year on year foreign investors (such as those selling oil for example) are gradually switching from dollar holdings to Euro's.<BR/><BR/>3. US balance of trade deficit stands at $2 BILLION DOLLARS A DAY! Roughly meaning that each day the US needs to attract net investments to that amount to merely keep their currency stable.<BR/><BR/>There are of course a myriad of other reasons; including post 9/11 tax cuts, but the key factor is that the US needs to undertake a structural repositioning of its currency/economy. From being number one exporter (2004) it is now looking at third place for 2007; and within probably 4 years the Chinese economy will be larger than the US on a Purchasing Parity basis. <BR/><BR/>In short, the next American president needs to follow a sensible and sustainable fiscal policy and thus stop subsidising industry's that will not be able to compete in the global economy of the near tomorrow. <BR/><BR/>We have all heard about the stupidity of trying o 'spend your way out of a recession'; well, it looks like the US is trying to 'spend its way into one!'Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-11285555381912356152007-04-17T22:18:00.000+01:002007-04-17T22:18:00.000+01:00I'm happy because it means cheaper US-based hostin...I'm happy because it means cheaper US-based hosting and bandwidth packages. However, it can always work the other way over time if you're not able to move your hosting to the cheapest country quickly enough.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-40417882702411247482007-04-17T19:17:00.000+01:002007-04-17T19:17:00.000+01:00Buy dollars at say $2.10. Wait for the crash, whic...Buy dollars at say $2.10. Wait for the crash, which appears looming, and then buy pounds at $1.50.<BR/><BR/>Bob's your second cousin twice removed! Sizable pound profit to dump into the old mortgage. <BR/><BR/>If you're a capitalist bastard with an eye for a buck, there's always a chance to make a few squids, even with Gorgeous Gordon in charge of the economy.<BR/><BR/>That still doesn't mean I wouldn't love to see the bugger being sent back to the drafty, dank manse from whence he came with his tail between his legs, though.The Remittance Manhttps://www.blogger.com/profile/13104149259707414863noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-62720784910133908722007-04-17T19:01:00.000+01:002007-04-17T19:01:00.000+01:00I order a lot of stuff from America so this is ple...I order a lot of stuff from America so this is pleasing to me.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-18296029042229379172007-04-17T17:24:00.000+01:002007-04-17T17:24:00.000+01:00Not very good at economics did you say? Not half! ...Not very good at economics did you say? Not half! American is drowning in a swamp of its own devising. "Everybody hates us, we don't know why, let's drop the big one now." Randy Newman, political science - recommended.Chris Paulhttps://www.blogger.com/profile/15679067503215414300noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-81556102391259796532007-04-17T15:07:00.000+01:002007-04-17T15:07:00.000+01:00Ouch ouch ouch.btw. It's not even that great for t...Ouch ouch ouch.<BR/><BR/>btw. It's not even that great for tourists. Hotels in Manhattan now are charging twice as much as they were a year ago even in the off season because of the influx of tourists thinking they're getting a great rate.<BR/><BR/>So that iPod that's 50 pounds cheaper is costing you an extra 200 dollars on the cost of your hotel room per night.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-2597302812412032132007-04-17T15:00:00.000+01:002007-04-17T15:00:00.000+01:00Bad news for ex-pats. Even back in 1998 it was far...Bad news for ex-pats. Even back in 1998 it was far cheaper ordering English books from the US rather than from the UK.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-3264760139783025332007-04-17T13:46:00.000+01:002007-04-17T13:46:00.000+01:00So perhaps now isn't the time to buy a houseWhoops...<I>So perhaps now isn't the time to buy a house</I><BR/><BR/>Whoops. I am one of those responsible for the recent (final?) surge in prices having overpaid to get onto the ladder. I'm giving up all unecessary (non-food) spending as of today. Hopefully my one-man effort will bring inflation back down to Earth.Old BEhttps://www.blogger.com/profile/06974090439936326476noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-84285741039593853042007-04-17T13:37:00.000+01:002007-04-17T13:37:00.000+01:00All of you waiting to get on teh housing ladder ha...<I>All of you waiting to get on teh housing ladder have only to wait for 18 months and they will be throwing the keys at you.</I><BR/><BR/>Possibly not, because when house prices are falling banks aren't stupid enough to lend money on them.<BR/><BR/>Can't believe it's taken this long. Let's hope that we're now in for another 20 years of Conservative administration.Old BEhttps://www.blogger.com/profile/06974090439936326476noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-71859328174536627822007-04-17T13:29:00.000+01:002007-04-17T13:29:00.000+01:00Now the true genius of Brown is coming home to roo...Now the true genius of Brown is coming home to roost....teh BOE will have to raise rates and at an every increasing pace to stem the inflation in the uk economy. This will burst teh insane house price bubble leaving a massively overleveraged economy in tatters. Shared 'appreciation' mortgage anyone??? No didnt think so.<BR/><BR/>All of you waiting to get on teh housing ladder have only to wait for 18 months and they will be throwing the keys at you. Personal bankruptcies have been rising for the last 2 years and with the ease you can now dodge your debt (much easier than in the last property crash) you will getthe double whammy of both mortgages and personal loans defaulting at an ever increasing rate. <BR/><BR/>the £/$ is only a sideshow really given the main cause is $ weakness coupled with higher UK rate outlook. Whats been happening in the US housing market of late? Exactly, a huge collapse of the weakest credits in the sub-prime market.<BR/><BR/>The UK has been living in a fantasy world of economic mismanagemt, fuelled by the NuLab lies of greatest economy in years whilst the economy deteriorates at every level. We have red-tape stifling businesses, increased tax burden for all companies, a bloated and wasteful public sector sucking the vitality from the economy and its all about to implode. <BR/><BR/>The greatest of all NuLab lies has been the economic performance and it is only fitting it will be this that finally destroys the Labour party for good.<BR/><BR/>Sell short sterling, sell sterling and sell Labour seats at the next election. Thank god its nearly over.<BR/><BR/>Meanwhile deposit rates are going up so all of us who hve saved rather than chavving about borrowing money to do up overpriced houses are laughing our heads off.<BR/><BR/>Sorry to gloat but when youve had idiots bragging about how much they are worth on paper for teh last 5 years I think i can be excused......Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-58315013814322445902007-04-17T12:40:00.000+01:002007-04-17T12:40:00.000+01:00"guido faux" apologies for mistaking you for that ..."guido faux" apologies for mistaking you for that clown, Tim Ireland.<BR/><BR/>However, the growing economic crisis in the Uk is about much more than the "relationship between the US and China".<BR/><BR/>Debt levels in Britain are now at an unsustainable level (witness growing defaults, repos, bankruptcies etc) and still growing. But this is still at an early stage and much worse is to come.<BR/><BR/>Private debt is now £1.3 trillion and growing, while Govt debt is £600 billion which doesn't include hundreds of billions off balance sheet (PFI, public sector pension liabilities etc)<BR/><BR/>The economy is smoke and mirrors, several years of growth fuelled by equity withdrawal (MEW) from a huge house price bubble which has left the UK with a massive trade deficit. <BR/><BR/>Watch the bubble burst taking this Enron style economy and the over-inflated pound with it.<BR/><BR/>You can thank the prudent Chancellor for that.<BR/><BR/>Half per cent rise in rates next month anyone? The odds have shortened dramatically today, though personally I suspect they haven't got the bottle for it and will hike in .25 increments upto 6% by the end of the year.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-63672951220172287982007-04-17T12:24:00.000+01:002007-04-17T12:24:00.000+01:00Many thanks R WHITES for straightning my grey cell...Many thanks <B>R WHITES</B> for straightning my grey cells. <BR/>It would appear then that we have the very opposite of the Lamont syndrome but this "spend today pay later chancellor" has managed to screw up when what you describe should be "ideal conditions"<BR/>Could it be down to the wars we are now involved in plus the amount of money that has been wasted in the name of improving things like the NHS, education, pensions etc......<BR/><BR/>Perhaps history will now judge Brown and Blair as the most incompetant pair ever witnessed.<BR/><BR/>A title the richly deserve!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-62599334123798706882007-04-17T12:21:00.000+01:002007-04-17T12:21:00.000+01:00"US racking up multi trillion dollar debt"A declin..."US racking up multi trillion dollar debt"<BR/><BR/>A declining buck is the subtle way to default, but it's the only realistic solution. <BR/><BR/>Meanwhile what can China do? Dump Treasuries? That's a market-moving event which would render the rest of their portfolio worthless. No, they will buy more, as will the Japanese.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-67038076071754122902007-04-17T12:19:00.000+01:002007-04-17T12:19:00.000+01:00Just seen that while CPI has gone up by 50% from a...Just seen that while CPI has gone up by 50% from a year ago, RPI (which until it started rising was the preferred measure) has nearly doubled to 4.8% since the measure was changed.<BR/><BR/>That is shocking. This government is going to go down in flames in exactly the same way that all Labour governments do, it's just taken longer this time.Old BEhttps://www.blogger.com/profile/06974090439936326476noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-79890561144472834432007-04-17T12:17:00.000+01:002007-04-17T12:17:00.000+01:00Oh poor savers - not getting enough return on your...Oh poor savers - not getting enough return on your money....<BR/><BR/>So if interest rates increase - does it put your house at risk? No. In this political climate think yourself lucky you've got any money to save.<BR/><BR/>If you live in the real world you might find that saving just isnt an option.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-75832235175774886442007-04-17T12:15:00.000+01:002007-04-17T12:15:00.000+01:00Guido Faux said...Milk price misbehaving?Why, simp...<I>Guido Faux said...<BR/><BR/>Milk price misbehaving?<BR/>Why, simply remove it from the CPI basket of goods and replace with something in a downward trend - et voila! low-inflation economy. </I><BR/><BR/>That's what the Tories did in the 1980s. Nigel Lawson was a master of manipulating tax rates like duty and VAT on items to ensure favourable inflation figures.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-47240796507796878562007-04-17T12:14:00.000+01:002007-04-17T12:14:00.000+01:00"There's nothing worse for a trading business than..."There's nothing worse for a trading business than a fluctuating exchange rate."<BR/><BR/>Iain are you pro Euro then? Surely you must be if there is "nothing worse"...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-4522670271904217042007-04-17T12:11:00.000+01:002007-04-17T12:11:00.000+01:00Even if interest rates rise by 0.25% in May and th...Even if interest rates rise by 0.25% in May and then again in the summer, it's still miserable for savers. Interest, net of basic rate tax, on even the highest paying savings account, is lower than RPI inflation. Which means that even saving makes you poorer, although of course it's better than putting the cash under the mattress.<BR/><BR/>In other words, rates need to rise a lot more to make it attractive to save and not spend.<BR/><BR/>As for inflation, as others have said, the cat is out of the bag. The Bank of England's dithered for too long.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-66996437354954217642007-04-17T12:09:00.001+01:002007-04-17T12:09:00.001+01:00Milk price misbehaving?Why, simply remove it from ...Milk price misbehaving?<BR/><BR/>Why, simply remove it from the CPI basket of goods and replace with something in a downward trend - et voila! low-inflation economy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-69575060850085905032007-04-17T12:09:00.000+01:002007-04-17T12:09:00.000+01:00Just read Gordon's response. He signed it with a f...Just read Gordon's response. <BR/><BR/>He signed it with a felt-tip pen!!<BR/><BR/>Do they not let him have anything sharp in case he does stabs anybody during one of his outbursts?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6214838.post-52443319039833171752007-04-17T12:07:00.000+01:002007-04-17T12:07:00.000+01:00Now the genie is out of the bottle it's going to b...Now the genie is out of the bottle it's going to be very painful to get it back in. Roll on 7%.Old BEhttps://www.blogger.com/profile/06974090439936326476noreply@blogger.comtag:blogger.com,1999:blog-6214838.post-7883294404040744412007-04-17T12:06:00.000+01:002007-04-17T12:06:00.000+01:00Yes, but it is the US racking up multi trillion do...Yes, but it is the US racking up multi trillion dollar debt which cannot be sustainable long term.Anonymousnoreply@blogger.com