Why is the UK struggling more than other countries?

[Mike Teavee]

59 minutes ago, placeholder said:

How would that work? One morning citizens in the UK wake up and the currency is gone? Because the EU says so? It is to laugh. 

It is a laugh as the UK has always had a veto on not having to adopt the Euro so could never have been forced to do so... 

 

BUT... if it were agreed that we would adopt the Euro then there would have to be a "Transition" period where both currencies would be valid for a certain period of time (Just like the Euro countries did when they moved from Francs, Pesos, Deutsche Marks, Litas  etc...)  

 

Nightmare for businesses as they would have to update all of their billing, tills, receipts etc... to dual report Sterling & Euros but has been done many times before & will be done when the next country joins the EU. 

 

 

 

 

[placeholder]

4 minutes ago, Mike Teavee said:

It is a laugh as the UK has always had a veto on not having to adopt the Euro so could never have been forced to do so... 

 

BUT... if it were agreed that we would adopt the Euro then there would have to be a "Transition" period where both currencies would be valid for a certain period of time (Just like the Euro countries did when they moved from Francs, Pesos, Deutsche Marks, Litas  etc...)  

 

Nightmare for businesses as they would have to update all of their billing, tills, receipts etc... to dual report Sterling & Euros but has been done many times before & will be done when the next country joins the EU. 

That's all well and good when in economy is doing well. But as we saw during the last economic crisis terrible idea 4 Nations to share a currency might be fiscally separate. The fastest and least painful way to get out of a fiscal crisis is to let your currency float. Otherwise, the only route open is through deflation. And that is far slower and crueler.

[nigelforbes]

1 hour ago, NanLaew said:

What's the "acceptable range"? A person more learned in all things forex once told me that of the world's 'major' currencies, historically, the pound sterling has been the most volatile. The highs and lows aren't persistent. In all my years of working around the world and getting paid in US$ while living and banking mostly in the UK, the 'roundabouts and swings' experience hasn't been too arduous or detrimental. You can't be a winner all the time.

The forex system or market forces is designed to let water find its own level. The problem with Sterling is that the level was fixed unrealistically high after the second world war and the currency has been correcting ever since. After WWII, the US owned UK debt equal to 250% of UK GDP. Prior to the war the Pound was valued close to $5 so when the rate was set after the war it was set around $4 in the expectation the Pound would at some point return close to its old levels but there was no economic basis to believe this would happen. By 1950 it became clear that rate was not sustainable so Sterling was devalued by 30% to $2.80. When Bretton Woods collapsed in 1971 the Pound was further devalued to $2.40 and the era of fixed exchange rates ended. Despite a Pound positive period during the 1970's the currency continued to fall as a result of Dollar devaluation but it soon resumed its decline and the UK had to borrow from the IMF. By the mid 1980's the Pound was back down to a record low of $1.05 which is close to where it has been this year, in the time since then it has roller coasted from $2 to close to parity.  

 

“Over the long term, the pound has been weak against the dollar, depreciating over the past 116 years by an annualised 1pc - that is largely attributable to Britain's higher inflation rate, which had the effect of debasing the purchasing power of the pound". (and this is reflected in the money supply which is ever increasing, year on year)

 

 

Dimson added, “If you look at the real (inflation adjusted) exchange rate of the pound against the dollar, it has weakened over the past 116 years by a minuscule 0.22pc per year."

 

Commenting on the chart above, professor of pension economics at Cass Business School, David Blake, seconded Dimson’s interpretation, “The chart shows precisely what you would expect - that the real exchange rate shows no real trend from when sterling started floating against the dollar following the collapse of the Bretton Woods agreements,” adding, “This is because the nominal exchange rate will adjust to reflect differences in inflation rates in order to maintain 'purchasing-power parity'."

 

https://www.exchangerates.org.uk/articles/1325/the-200-year-pound-to-dollar-exchange-rate-history-from-5-in-1800s-to-todays.html

 

Edited November 21, 2022 by nigelforbes

[thaibeachlovers]

9 hours ago, Mac Mickmanus said:

Oh ,it was a serious post .

The British Empire is  a thing that is in the past and British people no longer want any colonies , the U.K are still in the commonwealth , which form colonies also belong to  , but the UK doesn't want to go back to colonisation 

You seem to have missed the nuance in the reply. One needs an old fashioned British sense of humour to get it though.

Seems to me a lot of people mislaid a sense of humour during lockdowns and can't find it again. Rare to see a happy person any more.

Sad, angry world we live in now.

[thaibeachlovers]

18 minutes ago, nigelforbes said:

Despite a Pound positive period during the 1970's the currency continued to fall as a result of Dollar devaluation but it soon resumed its decline and the UK had to borrow from the IMF.

Oh the irony! A country that before WW2 still had an empire having to go cap in hand to the IMF to beg for money only about 30 years later.

[nigelforbes]

2 minutes ago, thaibeachlovers said:

Oh the irony! A country that before WW2 still had an empire having to go cap in hand to the IMF to beg for money only about 30 years later.

Yes, if you think about that transition from being an uber wealthy world super power to pauper, all in a relatively short period of time, it demonstrates how events can change nations 180 degrees in a virtual blink of an eye.

[placeholder]

3 minutes ago, thaibeachlovers said:

Oh the irony! A country that before WW2 still had an empire having to go cap in hand to the IMF to beg for money only about 30 years later.

Actually, a good portion of the blame for that belongs to the US. After WW2, the United States refused to forgive any of the debt that the UK had incurred for financing their war effort. Instead the US gave the UK a loan. While the interest rates were favorable it still had to be paid back. For some reason, Harry Truman had acquired some sort of animus against Brits during his service in WW1.

[placeholder]

1 hour ago, placeholder said:

That's all well and good when in economy is doing well. But as we saw during the last economic crisis terrible idea 4 Nations to share a currency might be fiscally separate. The fastest and least painful way to get out of a fiscal crisis is to let your currency float. Otherwise, the only route open is through deflation. And that is far slower and crueler.

This was composed via dictation to my phone and I failed to check it before sending. Here it is again in a form that's at least closer to what I mean.

 

That's all well and good when in economy is doing well. But as we saw during the last economic crisis it's a terrible idea for nations to share a currency when they're fiscally separate. The fastest and least painful way to get out of a fiscal crisis is to let your currency float. Otherwise, the only route open is through deflation. And that is far slower and crueler.

[thaibeachlovers]

Just now, nigelforbes said:

Yes, if you think about that transition from being an uber wealthy world super power to pauper, all in a relatively short period of time, it demonstrates how events can change nations 180 degrees in a virtual blink of an eye.

It's only my opinion, but I believe Britain's present problems were directly caused by the unfortunate practice in WW1 trench warfare of sending the best and brightest young men to lead the men ( as junior officers ) in the futile frontal attacks against an enemy with machine guns. I believe so many died in that insanity that Britain lost it's "brains" that would have led Britain had they lived.

WW2 just compounded the decline.

[nigelforbes]

55 minutes ago, placeholder said:

Actually, a good portion of the blame for that belongs to the US. After WW2, the United States refused to forgive any of the debt that the UK had incurred for financing their war effort. Instead the US gave the UK a loan. While the interest rates were favorable it still had to be paid back. For some reason, Harry Truman had acquired some sort of animus against Brits during his service in WW1.

From my previous link:

 

"Despite the soft-loan agreement between the UK and US in which the UK would repay a wartime $3.75B loan at 2% over fifty years, the Pound Sterling remained under intense pressure. Rumours abounded that the Sterling was heading for devaluation and on the business front the UK’s inability to rapidly switch from a wartime production footing to service the growing demand from consumer goods from British colonies saw foreign purchasers turn to the US and US Dollar.

In September of 1949, speculation became fact when at the time Chancellor of the Exchequer, Sir Stafford Cripps, announced a 30% devaluation for the Pound, reducing the Pound-to-Dollar rate from $4.03 to $2.80".

 

I'd hardly call it blame! Why should the US forgive debt financing of that scale, as well as intervene to help win a the war they didn't start and weren't a party to at the outset. 

[Chomper Higgot]

1 hour ago, placeholder said:

Actually, a good portion of the blame for that belongs to the US. After WW2, the United States refused to forgive any of the debt that the UK had incurred for financing their war effort. Instead the US gave the UK a loan. While the interest rates were favorable it still had to be paid back. For some reason, Harry Truman had acquired some sort of animus against Brits during his service in WW1.

Holding the UK to repay its wartime debt was a deliberate policy of the US with the aim to divest the UK of its empire.

 

It worked.

 

Those paying attention understand what this means for claims of a special relationship.

 

 

[Chomper Higgot]

Last week Jeremy Hunt made the statement that ‘unfettered trade with the UK’s nearest neighbours would be good for growth’.

 

It doesn’t take a lot of thinking to work out what he was referring to.

 

For those that struggle to do so there is this little gem, reports of the UK Government seeking a Swiss-Style trade agreement with the EU.

 

I know, Brexit is done, except clearly it is not and very clearly the divisions in the Tory Party are bubbling up under the surface:

 

https://www.dailymail.co.uk/news/article-11448055/Government-considering-putting-UK-road-Swiss-style-relationship-EU.html

 

 

Edited November 21, 2022 by Chomper Higgot

[nigelforbes]

5 minutes ago, Chomper Higgot said:

Holding the UK to repay its wartime debt was a deliberate policy of the US with the aim to divest the UK of its empire.

 

It worked.

 

Those paying attention understand what this means for claims of a special relationship.

 

 

Looking for hidden reasons why something happened, far too often obscures the obvious. The US didn't start the war, they responded favorably for assistance when asked, the intervened to help end the war, they responded with extremely highly favorable loan terms when asked....it's not unreasonable to expect the loan might be repaid. The US is hardly to blame for any of those things, neither is it to be blamed for the slow recovery of UK manufacturing. I know it's fun sometimes to bash the US for everything but really!

[placeholder]

1 minute ago, nigelforbes said:

Looking for hidden reasons why something happened, far too often obscures the obvious. The US didn't start the war, they responded favorably for assistance when asked, the intervened to help end the war, they responded with extremely highly favorable loan terms when asked....it's not unreasonable to expect the loan might be repaid. The US is hardly to blame for any of those things, neither is it to be blamed for the slow recovery of UK manufacturing. I know it's fun sometimes to bash the US for everything but really!

You believe that the huge sacrifice the UK made during WW2 didn't warrant forgiveness of the loan? This is just as bad as when the allies ini WW1 demanded reparations from Germany. The UK economy was in a terrible state after the war. The US could easily have afforded forgiveness of the loan.

[Chomper Higgot]

4 minutes ago, placeholder said:

You believe that the huge sacrifice the UK made during WW2 didn't warrant forgiveness of the loan? This is just as bad as when the allies ini WW1 demanded reparations from Germany. The UK economy was in a terrible state after the war. The US could easily have afforded forgiveness of the loan.

Doing so would have left the UK with the resources to maintain control of its empire.

 

The empire had to go and it did.

[RayC]

15 hours ago, nauseus said:

I came to the same conclusion in 1975 and 2016. The Treaty of Rome answered my questions, although sorting through that mess was time-consuming and very difficult, the first time. Successive treaties have just made the decision easier. For the EEC/EU to function as the original treaty envisioned, then that means the eventual creation of a single European state - this would have to mean that member states would eventually lose their sovereignty to become just regions. This is neither desirable nor acceptable to me. 

 

It was never about economics but about preservation of the nation as it is, for future generations.

 

Europe could easily have a "common market" without this appointed political clan ruing over it.  

 

 

 

The Treaty of Rome states that the aim should be "even closer union among the people of Europe ..." Does that inevitably mean a single European state? Imo no, but it's an interesting and valid point which you raise.

[thaibeachlovers]

26 minutes ago, nigelforbes said:

I'd hardly call it blame! Why should the US forgive debt financing of that scale, as well as intervene to help win a the war they didn't start and weren't a party to at the outset. 

Hmmmm. They didn't want to join the European war, but after Hitler declared war on the US what choice did they have?

 

[RayC]

13 hours ago, thaibeachlovers said:

Whatever the tribulations may be for a few years, it'll be worth it not to be beholden to Brussels.

Different wording but still a false argument.

[nigelforbes]

Just now, thaibeachlovers said:

Hmmmm. They didn't want to join the European war, but after Hitler declared war on the US what choice did they have?

 

None. But the fact remains they weren't the cause of the UK entering the war in the first place and the UK decision to take on the debt.

[DaLa]

2 hours ago, nigelforbes said:

The forex system or market forces is designed to let water find its own level. The problem with Sterling is that the level was fixed unrealistically high after the second world war and the currency has been correcting ever since. After WWII, the US owned UK debt equal to 250% of UK GDP. Prior to the war the Pound was valued close to $5 so when the rate was set after the war it was set around $4 in the expectation the Pound would at some point return close to its old levels but there was no economic basis to believe this would happen. By 1950 it became clear that rate was not sustainable so Sterling was devalued by 30% to $2.80. When Bretton Woods collapsed in 1971 the Pound was further devalued to $2.40 and the era of fixed exchange rates ended. Despite a Pound positive period during the 1970's the currency continued to fall as a result of Dollar devaluation but it soon resumed its decline and the UK had to borrow from the IMF. By the mid 1980's the Pound was back down to a record low of $1.05 which is close to where it has been this year, in the time since then it has roller coasted from $2 to close to parity.  

 

“Over the long term, the pound has been weak against the dollar, depreciating over the past 116 years by an annualised 1pc - that is largely attributable to Britain's higher inflation rate, which had the effect of debasing the purchasing power of the pound". (and this is reflected in the money supply which is ever increasing, year on year)

 

 

Dimson added, “If you look at the real (inflation adjusted) exchange rate of the pound against the dollar, it has weakened over the past 116 years by a minuscule 0.22pc per year."

 

Commenting on the chart above, professor of pension economics at Cass Business School, David Blake, seconded Dimson’s interpretation, “The chart shows precisely what you would expect - that the real exchange rate shows no real trend from when sterling started floating against the dollar following the collapse of the Bretton Woods agreements,” adding, “This is because the nominal exchange rate will adjust to reflect differences in inflation rates in order to maintain 'purchasing-power parity'."

 

https://www.exchangerates.org.uk/articles/1325/the-200-year-pound-to-dollar-exchange-rate-history-from-5-in-1800s-to-todays.html

 

Thank you. Excellent post . As a footnote and to remind readers that the governments during that period were, ( in no particular order) Liberal,Conservative, Labour and Coalitions.

[James105]

2 minutes ago, nigelforbes said:

None. But the fact remains they weren't the cause of the UK entering the war in the first place and the UK decision to take on the debt.

Yes, no good deed should go unpunished.. right?  Shame that the UK didn't make put the burden of repayment of this loan on the shoulders of Germany as a condition of their surrender and then this headline may well have read "why is Germany struggling more than other countries".

[nigelforbes]

25 minutes ago, placeholder said:

You believe that the huge sacrifice the UK made during WW2 didn't warrant forgiveness of the loan? This is just as bad as when the allies ini WW1 demanded reparations from Germany. The UK economy was in a terrible state after the war. The US could easily have afforded forgiveness of the loan.

The US suffered more fatalities in WWII than did the UK. 

 

https://www.nationalww2museum.org/students-teachers/student-resources/research-starters/research-starters-worldwide-deaths-world-war

[nigelforbes]

11 minutes ago, James105 said:

Yes, no good deed should go unpunished.. right?  Shame that the UK didn't make put the burden of repayment of this loan on the shoulders of Germany as a condition of their surrender and then this headline may well have read "why is Germany struggling more than other countries".

Economics has at least some rules and consistency over time, charitable gestures have none, they don't debate well together.

[Bkk Brian]

4 minutes ago, nigelforbes said:

The US suffered more fatalities in WWII than did the UK. 

 

https://www.nationalww2museum.org/students-teachers/student-resources/research-starters/research-starters-worldwide-deaths-world-war

Really, not when you factor in civilian deaths as well and certainly not when going on a per capita basis of forces size:

 

United Kingdom 383,600 (Military) 450,700 (civilian & military)

United States 416,800 (Military)  418,500 (civilian & military)

[nigelforbes]

4 minutes ago, Bkk Brian said:

Really, not when you factor in civilian deaths as well and certainly not when going on a per capita basis of forces size:

 

United Kingdom 383,600 (Military) 450,700 (civilian & military)

United States 416,800 (Military)  418,500 (civilian & military)

Even if those numbers are assumed correct, the difference does not amount to the degree of sacrifice alluded to by the prior poster. And not to side track too far on this, per capita ratio is hardly relevant to the argument or the point.

[Bkk Brian]

Just now, nigelforbes said:

Even if those numbers are assumed correct, the difference does not amount to the degree of sacrifice alluded to by the prior poster. And not to side track too far on this, per capita ratio is hardly relevant to the argument or the point.

Well you posted the link................lol

[nigelforbes]

2 minutes ago, Bkk Brian said:

Well you posted the link................lol

Yes, and the statement still stands, the difference doesn't warrant the assertion.

[Bkk Brian]

3 minutes ago, nigelforbes said:

Yes, and the statement still stands, the difference doesn't warrant the assertion.

I've clearly pointed out that imo your statement does not hold true based on your claim.

 

21 minutes ago, nigelforbes said:

The US suffered more fatalities in WWII than did the UK. 

 

 

[nigelforbes]

5 minutes ago, Bkk Brian said:

I've clearly pointed out that imo your statement does not hold true based on your claim.

 

 

And I have repeatedly stated that the difference doesn't warrant the assertion! Move on.

Edited November 21, 2022 by nigelforbes
spelling

[nauseus]

5 hours ago, placeholder said:

How would that work? One morning citizens in the UK wake up and the currency is gone? Because the EU says so? It is to laugh. 

Oh I don't know. They'd probably just follow the same time-scale and procedure used already for the French and everyone else. Quite easy really, when you look back. Laughing now?