Help . . . Is The £ Going Into Free-fall?

[cmsally]

Maybe it's just me but I thought the UK budget was a bit of a non-event, too much of the same old stuff. I guess the markets felt the same way because whilst GBP/THB went up to 53.01 and GBP/USD gained to 1.51, it doesn't feel like it's going to stick for very long. Oh well, back to the drawing board perhaps.

Definitely a non event, but why do we have to double the National debt. Where is all the money going?

I just don't see what is going on; either the country does not have enough money to keep going and has not for years, in which case how are the books going to be balanced in the future. Or we need to increase the National debt drastically to service the loans we have , bail out banks, replace money lost in Iceland etc. I think I smell a fish, a very stinky one at that.

Edited November 25, 2008 by cmsally

[JimsKnight]

Yes, the EU is the biggest wastage for sure, started by the continentals, FOR the continentals!

RAZ, yes I was slightly hasty in my words. Subsitute 'Commie Dreamland' on my last post for 'Socialistic'

I believe in a "meritocracy".

"Those of great worth shall get great reward"

(paraphrasing the words of Oswald Mosley)

Are you going to call me fascist now?

RAZZ

hehehe. You can be whatever you want to be Mr Razzle, this is the internet and TV and we can be anything and say anything within reason.

Meritocracy, not my bag really. Good in theory, worked back in the days of sending a gunboat out and having a mighty empire.

But in these days of the UN controlling everything not a great one.

With the EU holding us back we're a bit stuck. Unless you count reward as being forced to rely on Brussells all the time.

Those of great worth chucking tons of cash into Brussells and getting fck all back apart from 'You do this, obey our daft rules all the time'

Socialism is the cornerstone of it, control over sovereign nations.

One reason why the Swiss and a fair few of the Nordic countries keep out of it.

The £ will rise again though, it's just a question of when.

Edited November 25, 2008 by JimsKnight

[chiang mai]

Maybe it's just me but I thought the UK budget was a bit of a non-event, too much of the same old stuff. I guess the markets felt the same way because whilst GBP/THB went up to 53.01 and GBP/USD gained to 1.51, it doesn't feel like it's going to stick for very long. Oh well, back to the drawing board perhaps.

Definitely a non event, but why do we have to double the National debt. Where is all the money going?

I just don't see what is going on; either the country does not have enough money to keep going and has not for years, in which case how are the books going to be balanced in the future. Or we need to increase the National debt drastically to service the loans we have , bail out banks, replace money lost in Iceland etc. I think I smell a fish, a very stinky one at that.

I'm not an avid Daily Mail reader although they sometimes write some good stuff on the economy and finance. One such piece will answer your questions in pictorial format and can be found at:

http://www.dailymail.co.uk/news/article-10...ve-economy.html

You need to scroll down the page to see the pie charts. From the article you will see that about one third of the spend is going on Social Services, cough, cough.

Edited November 25, 2008 by chiang mai

[cmsally]

Maybe it's just me but I thought the UK budget was a bit of a non-event, too much of the same old stuff. I guess the markets felt the same way because whilst GBP/THB went up to 53.01 and GBP/USD gained to 1.51, it doesn't feel like it's going to stick for very long. Oh well, back to the drawing board perhaps.

Definitely a non event, but why do we have to double the National debt. Where is all the money going?

I just don't see what is going on; either the country does not have enough money to keep going and has not for years, in which case how are the books going to be balanced in the future. Or we need to increase the National debt drastically to service the loans we have , bail out banks, replace money lost in Iceland etc. I think I smell a fish, a very stinky one at that.

I'm not an avid Daily Mail reader although they sometimes write some good stuff on the economy and finance. One such piece will answer your questions in pictorial format and can be found at:

http://www.dailymail.co.uk/news/article-10...ve-economy.html

You need to scroll down the page to see the pie charts. From the article you will see that about one third of the spend is going on Social Services, cough, cough.

Crikey, Social Services doesn't even include education and health!

Somehow I think bailing out the banks has been listed as a Social Service.

[beginner]

I am puzzled by all this discussion.

Isn't it a basic economic concept/belief that if the money supply is increased then inflation follows.

At a common sense level, if an economy makes a certain quantity of goods and services and the money in circulation is doubled then the price of those desired goods and services will also increase and eventually double.

One explanation of the increase in house prices over the years (talking about USA/UK here not LOS) is that loans were once made against a single income (usually male breadwinner). Then the partner' s income was factored in leading to increasing prices of existing housing stock. Then the 3-times-income type rules were relaxed and more money was available for those same houses. Prices shot up to use the cash.

Why won't the massive injections of money into the system lead to similar increases in all prices from a can of beans to a new car?

Why are economists forecasting deflation and not inflation?

How can governments keep throwing huge sums of money at banks etc without a rise in general prices following? Again, at a common sense level....if the value of money now halves or more. Then, the nominal price of houses will be roughly back where they were in the more stable and predictable past, ie 3 or 4 times average earnings.

The value of the pound on the foreign exchanges must also half to keep real prices at the true international market level. The pound is on its way already but another big drop/adjustment still to go.

Can any economists out there explain it all to me? My arithmetic above isn't precise, its just the principles that interest me.

[chiang mai]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated “big downside risks” and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

[Super Hans]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated “big downside risks” and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

What is the likely effect of zero interest rates on the pound's exchange rate with the baht?

[HardenedSoul]

GBP back up to $1.52 on news that the Fed's launched yet another bailout to go with the others. This time, they're buying credit card and auto loan backed securities not to mention Fannie & Freddie mortgage-backed securities.

"The cost ?", I hear you ask. Oh, not much . . . $1 TRILLION

Obama's stimulus is reportedly going to cost another $700bn.

[chiang mai]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated “big downside risks” and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

What is the likely effect of zero interest rates on the pound's exchange rate with the baht?

There are two problems with a ZIRP: the first is that money on deposit will achieve a very low rate of return, can you imagine fixing for one year at 1.5%! The second is that the currency itself no longer attracts the premium it once did hence exchange rates will almost certainly be lower, but by how much I cannot guess - I believe that in financial circles this is called a double whammy!!!

[Naam]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated “big downside risks” and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

i might sound harsh but the afore-mentioned folks should hurry up and look for alternatives to invest at least a good part of their cash, even though some penalties might have to be paid.

[LaoPo]

i might sound harsh but the afore-mentioned folks should hurry up and look for alternatives to invest at least a good part of their cash, even though some penalties might have to be paid.

:D

Happy to see you back Naam and wish you a prosperous recovery ! Well done ! I have been thinking of you since last Friday !

Remarkable that you're posting again but...old soldiers.....right ?

LaoPo

[cmsally]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated “big downside risks” and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

i might sound harsh but the afore-mentioned folks should hurry up and look for alternatives to invest at least a good part of their cash, even though some penalties might have to be paid.

C'mon I'm all ears, suggest some alternatives. Always up for a new idea.

[lannarebirth]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated "big downside risks" and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

i might sound harsh but the afore-mentioned folks should hurry up and look for alternatives to invest at least a good part of their cash, even though some penalties might have to be paid.

I thought they were going to bypass that old grumpy heart? Great to see you you didn't end up on the Barge Of The Dead, drifting down The River Of Blood, like some lesser Klingon warriors have.

[JimsKnight]

Name would probably make economic predictions and end up as advisor to the gods of commerce! LOL

On a plus note the £ will likely rise with the Airport adventures going on around us

EDIT: Whoosh! Up she goes! £ just whooshed up to 53.29. Go go go do your good thing sterling, bling bling bling!

Edited November 25, 2008 by JimsKnight

[ArranP]

Been following Bloomberg alot on this £/$.

Between now and February/March direction downwards anywhere from here to 1.40.

After Feb/March, US Fiscal Stimulas takes affect, risk apetite returning in equities and commodities, back up above 1.60.

Edited November 25, 2008 by ArranP

[bingobongo]

what is a sexpat to do, bangers and mash or asian harlots? nevermind the inability to land in LOS....luckily i am not a brit

Britain's going bankrupt - keep selling sterling

http://www.moneyweek.com/news-and-charts/e...ling-14124.aspx

Edited November 25, 2008 by bingobongo

[thucydides]

Uncle Sam is going to be busy with the printing presses. A given now and I suppose the $ is heading a tad south. Where the $ goes perhaps the Baht will follow. The £ was over vaued during the final phase of the boom and is dwelling in familiar territory but the Brown gamble on liquidity is at least based on an identifiable source i.e taxing the wealth generators from 2011 onwards......markets do like structure and I suppose some may see this as a boost to certainty and sentiment may well push the £ upwards.

Moneyweek's article is typical of the current financial journalism but was conspicuous by its absence when it counted. Funny how the press are just soooo insightful now?

[whiterussian]

ArranP Today, 2008-11-26 02:17:57 Post #765

Been following Bloomberg alot on this £/$.

Between now and February/March direction downwards anywhere from here to 1.40. After Feb/March, US Fiscal Stimulas takes affect, risk apetite returning in equities and commodities, back up above 1.60.

Thats assuming the traditional end of the financial 'season' ("sell in may and go away") doesnt apply.. and plus half the money movers will be out of work by then.... heads are rolling in instituitons everywhere... be ready for an influx of economic refugees from wall street and the city of london!

still think the GBP/USD has further to go... doesnt make sense to stop before testing support (if the doomsday propoganda is to be believed) maybe it will make a 'wedge' shape ► and slowly test it...

Edited November 25, 2008 by UKWEBPRO

[Mosha]

Uncle Sam is going to be busy with the printing presses. A given now and I suppose the $ is heading a tad south. Where the $ goes perhaps the Baht will follow. The £ was over vaued during the final phase of the boom and is dwelling in familiar territory but the Brown gamble on liquidity is at least based on an identifiable source i.e taxing the wealth generators from 2011 onwards......markets do like structure and I suppose some may see this as a boost to certainty and sentiment may well push the £ upwards.

Moneyweek's article is typical of the current financial journalism but was conspicuous by its absence when it counted. Funny how the press are just soooo insightful now?

The BBC this morning suggested the Federal rearve would probably print more money to pay for the bail out

[chiang mai]

An extract from a daily newsletter I receive, the words in bold being the key ones:

The Pound found resistance overnight at 1.5150 as it failed to break above after a number of tests. The Sterling may trade heavy going forward as dovish comments today from BoE governor King and other committee members signaled that a ZIRP (zero interest rate policy) is being discussed. The MPC leader stated that in order to enact a ZIRP the central bank would need to coordinate with the government which may make it more difficult to achieve, but signals that a 1% benchmark rte is a near certainty. The governor painted a grim outlook when he stated that the credit squeeze has generated “big downside risks” and that further recapitalization of banks was needed.

A frightening thought for all those fixed income/deposit folks out there.

i might sound harsh but the afore-mentioned folks should hurry up and look for alternatives to invest at least a good part of their cash, even though some penalties might have to be paid.

Well done Naam, welcome back and get better soon. Tell me, are the nurses prettier in German hospitals than in the LOS?

[HardenedSoul]

Uncle Sam is going to be busy with the printing presses. A given now and I suppose the $ is heading a tad south. Where the $ goes perhaps the Baht will follow. The £ was over vaued during the final phase of the boom and is dwelling in familiar territory but the Brown gamble on liquidity is at least based on an identifiable source i.e taxing the wealth generators from 2011 onwards......markets do like structure and I suppose some may see this as a boost to certainty and sentiment may well push the £ upwards.

Moneyweek's article is typical of the current financial journalism but was conspicuous by its absence when it counted. Funny how the press are just soooo insightful now?

Actually, MoneyWeek advised binning sterling as long ago as January this year. They called the credit crunch when all the idiots were out borrowing 6X income to buy property.

[Mosha]

GBP 54.12/Baht just now.

[chiang mai]

GBP 54.12/Baht just now.

I haven't taken the time to understand how much of the rise is as a result of the political unrest and how much is a function of the GBP/USD downturn, 1.5384 currently. Have to hand it those guys though, if you wanted to kill your tourist industry stone dead in the face of a global recession, this is exactly what you might do!

EDIT: I've just looked and the rise is entirely USD related, nothing to do with the airport shenanigans.

Edited November 26, 2008 by chiang mai

[JimsKnight]

The airport occupation will surely have an impact though?

[phupaman]

Hi All.

You have got to hand it to Bingo.After much ridicule on his forcast for the SET, in the end he was 100% right, I hope he is wrong about Sterling, but I wont hold my breath.

phupaman

[chiang mai]

The airport occupation will surely have an impact though?

I don't see why unless the BOT decides the Baht is slipping in value against USD (which by all rights it should) and then decides to further prop up the Baht by selling USD - that would have an impact on GBP. Remember that the direct relationship between THB is with USD, not with GBP.

[ArranP]

Hi All.

You have got to hand it to Bingo.After much ridicule on his forcast for the SET, in the end he was 100% right, I hope he is wrong about Sterling, but I wont hold my breath.

phupaman

I'm no expert but I can comment on what I've been watching on Bloomberg as I've been watching alot over the last few months.

Currency strength has mostly been observed in USD and JPY recently, which has been a result of "money returning home"!

ie large hedge funds de-leveraging positions (due to banks reducing lending) and re-patriating the funds back to the dollar and carry traders selling positions (amongst others on oil) and returning the money back to the yen. Hence large in-flows of money back to the dollar and yen.

These are the reasons that have been given for the strengths of these two currencies.

The argument going forward is the reverse, at some point these currencies will start to be sold as positions are re-established in comodities and equities as risk-apetite returns. This means selling of the dollar and buying positions through other currencies, which will cause the dollar to weaken, the same goes for the yen.

Only with the yen, the Japanese government has an added interest to weaken the yen so their car companies Toyota and Honda can make profit on selling their electric hybrid pioneering vehcles to the states and europe.

As the dollar weakens this will in-turn push up again the price of oil as it becomes more attractive (due to the weak dollar) to invest in again, same goes for gold and other commodities, and again weaken the yen further because it is cheapest currency to borrow in and use to invest in commodities.

Apparently the turning point in the market is when risk apetite returns which is penciled in for end of first quarter next year .. when this happens we will then observe more baht for the pound!!

Edited November 26, 2008 by ArranP

[chiang mai]

Hi All.

You have got to hand it to Bingo.After much ridicule on his forcast for the SET, in the end he was 100% right, I hope he is wrong about Sterling, but I wont hold my breath.

phupaman

I'm no expert but I can comment on what I've been watching on Bloomberg as I've been watching alot over the last few months.

Currency strength has mostly been observed in USD and JPY recently, which has been a result of "money returning home"!

ie large hedge funds de-leveraging positions (due to banks reducing lending) and re-patriating the funds back to the dollar and carry traders selling positions (amongst others on oil) and returning the money back to the yen. Hence large in-flows of money back to the dollar and yen.

These are the reasons that have been given for the strengths of these two currencies.

The argument going forward is the reverse, at some point these currencies will start to be sold as positions are re-established in comodities and equities as risk-apetite returns. This means selling of the dollar and buying positions through other currencies, which will cause the dollar to weaken, the same goes for the yen.

Only with the yen, the Japanese government has an added interest to weaken the yen so their car companies Toyota and Honda can make profit on selling their electric hybrid pioneering vehcles to the states and europe.

As the dollar weakens this will in-turn push up again the price of oil as it becomes more attractive (due to the weak dollar) to invest in again, same goes for gold and other commodities, and again weaken the yen further because it is cheapest currency to borrow in and use to invest in commodities.

Apparently the turning point in the market is when risk apetite returns which is penciled in for end of first quarter next year .. when this happens we will then observe more baht for the pound!!

A good summary that accurately describes things I think.

[chiang mai]

I just read the RBS forecast for exchange rates and historically they have been pretty close over the years - their latest report makes grim reading however. They see GBP/USD remaining in a range of between 1.48 and 1.53 for the next two years!

I don't know how useful this is but at least it's perhaps another indicator as to the future.

[bingobongo]

Hi All.

You have got to hand it to Bingo.After much ridicule on his forcast for the SET, in the end he was 100% right, I hope he is wrong about Sterling, but I wont hold my breath.

phupaman

thank you, i only tell it like it is

the next stop for sterling is around US$1.36 per 1 British pound (it is $1.53 as of this post), if that does not hold (which it will not given the UK central bank will keep slashing rates) parity to the US $ will happen US$1 = 1 British pound that is not a misrpint, all hel_l is going to break loose as inflation in the UK will be devastating.......get ready, its coming

additionally, you have a death cross on the $/pound chart (50 DMA moving below 200DMA), needless to say the crushing of British pound will affect LOS tourism

Edited November 29, 2008 by bingobongo