Is The British Pound Doomed

[misterman21]

By Sean O'Grady – The Independent March 7, 2009

A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (ฃ700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London.

Some $597.5bn was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5bn haemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter

[churchill]

No - because the Euro and $ are in the same boat - The pound has already been devalued so the Euro and $ will soon follow IMO . Perhaps the pound is already close to its lows .

[mommysboy]

No - because the Euro and $ are in the same boat - The pound has already been devalued so the Euro and $ will soon follow IMO . Perhaps the pound is already close to its lows .

I agree.

[loverboy44]

IMHO the Pound will loose even more against the Dollar and the Euro. The devaluation was simply because Britain has no more important production like the Euro zone and the US. The British simply bet on the wrong horse when they switched from production to the banking sector. Everywhere where there is a strong banking sector they are hurt the most if they don't have a strong back up like Switherland or Singapure. The UK nearly sold all their gold reserves a couple of years ago for very small money. If the Uk would have joined the Euro it would have been feathered up by the other countries of the European Union.

It can happen as well that the Dollar and the Euro go down but then the pound will follow the same way.

[mommysboy]

IMHO the Pound will loose even more against the Dollar and the Euro. The devaluation was simply because Britain has no more important production like the Euro zone and the US. The British simply bet on the wrong horse when they switched from production to the banking sector. Everywhere where there is a strong banking sector they are hurt the most if they don't have a strong back up like Switherland or Singapure. The UK nearly sold all their gold reserves a couple of years ago for very small money. If the Uk would have joined the Euro it would have been feathered up by the other countries of the European Union.

It can happen as well that the Dollar and the Euro go down but then the pound will follow the same way.

rubbish - sorry but it's absolute nonsense !

[loverboy44]

Rubbish is where someone post something like this!!!!!!!!!!!!!!!

[Merangue]

No - because the Euro and $ are in the same boat - The pound has already been devalued so the Euro and $ will soon follow IMO . Perhaps the pound is already close to its lows .

Agree completely but i think more than the £ $ and Euro are in trouble. All major currencies and eventually all minor currencies will be in deep soon.

Edited March 10, 2009 by Merangue

[Naam]

No - because the Euro and $ are in the same boat - The pound has already been devalued so

1. the Euro and $ will soon follow IMO .

Perhaps the pound is already close to its lows .

Agree completely but i think more than the £ $ and Euro are in trouble.

2. All major currencies and eventually all minor currencies will be in deep soon.

1. devalued vs. which currency? please define "trouble".

2. in deep vs. which currency?

3. what exactly are you learned people talking about? would you please share your knowledge with an ignorant?

[Merangue]

No - because the Euro and $ are in the same boat - The pound has already been devalued so

1. the Euro and $ will soon follow IMO .

Perhaps the pound is already close to its lows .

Agree completely but i think more than the £ $ and Euro are in trouble.

2. All major currencies and eventually all minor currencies will be in deep soon.

1. devalued vs. which currency? please define "trouble".

2. in deep vs. which currency?

3. what exactly are you learned people talking about? would you please share your knowledge with an ignorant?

Perhaps i should have said economy rather than currency. The strength of the currency is merely a reflection of the current Economic trend of the day.

£ devalued? perhaps undervalued is a better word.

Or do you feel here is any economy and therefore currency, which is safe from the current global trouble?

[Naam]

No - because the Euro and $ are in the same boat - The pound has already been devalued so

1. the Euro and $ will soon follow IMO .

Perhaps the pound is already close to its lows .

Agree completely but i think more than the £ $ and Euro are in trouble.

2. All major currencies and eventually all minor currencies will be in deep soon.

1. devalued vs. which currency? please define "trouble".

2. in deep vs. which currency?

3. what exactly are you learned people talking about? would you please share your knowledge with an ignorant?

Perhaps i should have said economy rather than currency. The strength of the currency is merely a reflection of the current Economic trend of the day.

£ devalued? perhaps undervalued is a better word.

Or do you feel here is any economy and therefore currency, which is safe from the current global trouble?

i have no answer for this question. but add my view on statements without explanations as below:

-strength of the currency is merely a reflection of the current Economic trend = false

evidence: United States USD, Japan JP¥

-The pound has already been devalued so the Euro and $ will soon follow = does not make any sense

question: against which currencies will €UR and GBP devalue?

-All major currencies and eventually all minor currencies will be in deep soon = does not make any sense

assuming that "all" major and minor currencies will be "in deep" soon what is the yardstick to measure that development and what are the implications?

[englishoak]

The £ is on very bad ground and probably will continue to be one of the weakest major currencies for the next few years at least, very likely to need IMF intervention before a recovery. But lets have a look at some others while we're here.The $ is currently the flight of choice and having the current effect, i suspect this will begin to unwind as the bad news continues ( 6mths -3 years ), this could tailspin if panic sets in.

the EUR is holding up due to stronger member economies however the baltic states and smaller members are having serious problems and will have a knock on effect in the not too distant future. Turkey is about to become the latest IMF client.The NZ$ is tanking and will be lucky to escape IMF intervention. Aus is feeling the pain but not so much yet.

The IMF is down to it's last $200B it will need a lot more. Out of the 26 countries on the IMF danger list 15 are in Africa. Brazil has had a sharp drop off in the last quarter, expect interest rates to be seriously cut over the next few months. Japan is in the same boat with no reductions left to make, Korea is in serious trouble and so are Taiwan.

China its desperately attempting to turn an export dependent economy into a domestic driven one. The problem there is a serious lack of consumer liquidity. Given the timescale that will take to build it's possible the populace will intervene before that can happen. The rest of Asia are feeling the pain but again not too bad yet.

Tourist dependent economies are beginning to seriously sag and will continue to do so as people reduce spending even more. To top it all QE is the theme of the day, a measure that has never succeeded for anyone in the past FACT. And whilst agreeing it is a fatal route to follow the US are talking of protectionism. Others are undoubtedly considering the same.

Sorry to rain on the parade but it's very possible there will be more than one currency that will disappear into the ether before this is all over. IMO the death of the £ is likely and sooner or later the $. If Europe fragments which is also possible then the € will collapse with it.

Make no mistake this is probably going to go down in history as the end of the current ( call it what you will ) age. The 30's will look like a walk in the park before this is finished.

The immediate future is not good but things will turn around and a new age will dawn. The question is will the opportunity created out of these current problems be both seen and/or acted upon ?

I suspect a world banking system will have to be brought in and mabe 3 or 4 currencies representing the major continents. Probably an Asian one which has been touted around for a while anyway, the Amero or similar which is already in the pipeline and the Euro ( if it Survives ) the fourth could be based on the rand or an arabic currency. Mabe some of these will be PM backed or other commodities. The other option would be to try to go electronic in some format but we are a long way from that being a worldwide option.

This may take a decade to unwind and many will think it's all getting better but beware the calm before the storm. It will be like patching a terminal wound, temporary at best.

Bottom line for me.

The current system is broken and it's time for a new model to take it's place. History has taught us that nothing stays the same forever, and resisting change stops nothing from actually changing, but mearly delays it. Which is not to say that it is bad to delay but countries must use that time to actually devise a workable, sustainable system, together. This is essential to forge on to a new chapter in the development and preservation of a world that we have very nearly bled dry.

FACT Exponential growth is impossible, the sooner that is accepted the better chance we and the future generations will have. If that means a drastic change and drop in living standards then so be it. Bring it on and lets deal with it.

Edited March 11, 2009 by englishoak

[Naam]

The IMF is down to it's last $200B it will need a lot more.

total capital of the IMF is ~$310 bb. outstanding loans are approximately $25 bb as of feb 28, 2009 = remaining capital ~$285 bb. what do you mean by "down to its last $200 bb"?

[tijnebijn]

As usual when talking about currencies and financials ,

I totally agree with Naam !

Devalue against what ?

Perhaps uptrend here and downtrend there , but most currencies are all going down and up

simultanously . I don't think its strange the pound has gone down rapidly , as a single country

with an overvalued currency for years , as an financial centre , its not strange that in this credit

doom this particular country is feeling it the hardest in their currency . When its getting to an end

the Pound will rise back to where it should be .

Its all negative and hard news at the moment , cause I think , we are in the middle of the worst right now ,

They need to regulate and control the banking system , if and when this happens my guess is that most gets rolling again ,

the negative news gets less and uptrend will go over the top , before we know this all will be in the past and ' almost '

forgotten . When things change people forget quick is my experience .

But all the positive will take a long time , if they cannot make the banking system and credit flowing again , thats all it takes .

[colibra]

Dream on, the pound is done and probably the dollar as well. Either that or hyper inflation will make them worthless. In either case the result is the same. The politicians of the US and England are only making matters worss, let capitalism work. Let the banks and car companies and others go bankrupt. The sooner it happens, the sooner we can get on with rebuilding whats left.

[churchill]

"-The pound has already been devalued so the Euro and $ will soon follow = does not make any sense

question: against which currencies will €UR and GBP devalue?"

I would not expect the $ and Euro to devalue ( or revalue ) at the same time - I think the pound still has a bit further to fall in this climate perhaps to parity with the Euro and IF markets are seen to be recovering could start to regain some strength ( 3-6 months ) . I think later in the year as the US is seen to be starting to recover then the $ will weaken - and perhaps further down the line as Europe is seen to be lagging behind the Euro will weaken .

Perhaps the main currency to strengthen over the medium-long term will be the chinese yuan and Asian currencies .

and as I said IMO .

[Naam]

As usual when talking about currencies and financials, I totally agree with Naam !

Devalue against what ?

the problem with Thaivisa is that any Bill, Buck, Hank or Joe can make any statement as he pleases and if nobody checks and contradicts even the most ridiculous statements based on pure ignorance and/or wishful thinking will be taken at face value by those readers/members who are inexperienced but eager to inform themselves.

:D

[Naam]

"-The pound has already been devalued so the Euro and $ will soon follow = does not make any sense

question: against which currencies will €UR and GBP devalue?"

I would not expect the $ and Euro to devalue ( or revalue ) at the same time - I think the pound still has a bit further to fall in this climate perhaps to parity with the Euro and IF markets are seen to be recovering could start to regain some strength ( 3-6 months ) . I think later in the year as the US is seen to be starting to recover then the $ will weaken - and perhaps further down the line as Europe is seen to be lagging behind the Euro will weaken .

Perhaps the main currency to strengthen over the medium-long term will be the chinese yuan and Asian currencies .

and as I said IMO .

for the record: my last posting has nothing to do with your above-mentioned one Churchill. in fact i consider your posting as clear and fair!

[AlexLah]

The IMF is down to it's last $200B it will need a lot more.

total capital of the IMF is ~$310 bb. outstanding loans are approximately $25 bb as of feb 28, 2009 = remaining capital ~$285 bb. what do you mean by "down to its last $200 bb"?

Please correct me if I am wrong.

Total resources IMF = 334.3 Billion USD

Non usable = 107.4 Billion USD (Includes credit outstanding and Gold)

One year capacity = 142.1 Billion USD

http://www.imf.org/external/np/tre/liquid/2009/0109.htm#II

Edit: Oops I forgot that Japan recently made available another 100 Billion?

Edit 2: Correct Japan commited to make available 100 Billion incase the IMF would need to borrow more, that is if they run out of their 227 Billion.

Edited March 11, 2009 by AlexLah

[BygonKeaw]

The £ is on very bad ground and probably will continue to be one of the weakest major currencies for the next few years at least, very likely to need IMF intervention before a recovery. But lets have a look at some others while we're here.The $ is currently the flight of choice and having the current effect, i suspect this will begin to unwind as the bad news continues ( 6mths -3 years ), this could tailspin if panic sets in.

the EUR is holding up due to stronger member economies however the baltic states and smaller members are having serious problems and will have a knock on effect in the not too distant future. Turkey is about to become the latest IMF client.The NZ$ is tanking and will be lucky to escape IMF intervention. Aus is feeling the pain but not so much yet.

The IMF is down to it's last $200B it will need a lot more. Out of the 26 countries on the IMF danger list 15 are in Africa. Brazil has had a sharp drop off in the last quarter, expect interest rates to be seriously cut over the next few months. Japan is in the same boat with no reductions left to make, Korea is in serious trouble and so are Taiwan.

China its desperately attempting to turn an export dependent economy into a domestic driven one. The problem there is a serious lack of consumer liquidity. Given the timescale that will take to build it's possible the populace will intervene before that can happen. The rest of Asia are feeling the pain but again not too bad yet.

Tourist dependent economies are beginning to seriously sag and will continue to do so as people reduce spending even more. To top it all QE is the theme of the day, a measure that has never succeeded for anyone in the past FACT. And whilst agreeing it is a fatal route to follow the US are talking of protectionism. Others are undoubtedly considering the same.

Sorry to rain on the parade but it's very possible there will be more than one currency that will disappear into the ether before this is all over. IMO the death of the £ is likely and sooner or later the $. If Europe fragments which is also possible then the € will collapse with it.

Make no mistake this is probably going to go down in history as the end of the current ( call it what you will ) age. The 30's will look like a walk in the park before this is finished.

The immediate future is not good but things will turn around and a new age will dawn. The question is will the opportunity created out of these current problems be both seen and/or acted upon ?

I suspect a world banking system will have to be brought in and mabe 3 or 4 currencies representing the major continents. Probably an Asian one which has been touted around for a while anyway, the Amero or similar which is already in the pipeline and the Euro ( if it Survives ) the fourth could be based on the rand or an arabic currency. Mabe some of these will be PM backed or other commodities. The other option would be to try to go electronic in some format but we are a long way from that being a worldwide option.

This may take a decade to unwind and many will think it's all getting better but beware the calm before the storm. It will be like patching a terminal wound, temporary at best.

Bottom line for me.

The current system is broken and it's time for a new model to take it's place. History has taught us that nothing stays the same forever, and resisting change stops nothing from actually changing, but mearly delays it. Which is not to say that it is bad to delay but countries must use that time to actually devise a workable, sustainable system, together. This is essential to forge on to a new chapter in the development and preservation of a world that we have very nearly bled dry.

FACT Exponential growth is impossible, the sooner that is accepted the better chance we and the future generations will have. If that means a drastic change and drop in living standards then so be it. Bring it on and lets deal with it.

So is this the planned work of the illuminati to in the end have one world goverment one world currency???

Hey its gonna be a ball on prison planet!!

[Merangue]

As usual when talking about currencies and financials, I totally agree with Naam !

Devalue against what ?

the problem with Thaivisa is that any Bill, Buck, Hank or Joe can make any statement as he pleases and if nobody checks and contradicts even the most ridiculous statements based on pure ignorance and/or wishful thinking will be taken at face value by those readers/members who are inexperienced but eager to inform themselves.

Another problem with Thai Visa is those who believe they have the knowledge to pick everyone else apart but fail to make any actual statement themselves.

I have said many times, that i am certainly no expert and i may have used the incorrect terminology. Being insulting as you normally are, is not only rude but outright nasty.

Or are you saying my 'ridiculous' statement has no right to be on the forum?

Whilst i am not on the inside with the terminology and do not happen to be an expert in global financial matters, i am a student of human nature and have a good enough brain to extrapolate what may or may not happen in the future.

Many here seem to be reliant on reading the input from a myriad of self interested bankers and so called finance experts who failed to see what was coming, lost collossal amounts of money in the crash and generally were the cause of the problem in the first place.

Sorry but i do not set too much store in what many of them spout now. Most of what they are saying conflicts with what they said a week or a month or 6 months ago.

Most of the doom and gloom merchants are so pessimistic it makes my eyes bleed.

So when i see a post that has at least some optimism or is at least trying to see that the sky is not actually falling, i tend to agree with it on the grounds that whilst those with stocks and bonds in large amounts are hurting, many of us who are not relatively rich are actually not being hit all that much yet.

Some of us are actually earning more now than before and being asked to come into work more and more due to the very thing that others are moaning about on a daily basis.

Some of us actually believe that all life as we know it is not going to end but that there is still something left to live for.

As for the terminology in the previous posts, I did perhaps repeat the word devalue which i suppose in the laymens world might be the right word but in the finance world is incorrect. So what?

It is obvious to me that whilst the £ is suffering right now there is a lot more coming to hit the likes of the euro and the $, just as there will be problems coming in for the other large currencies and for any export driven economies. This in turn will eventually hurt the smaller economies due to trade and the lack therof.

If you disagree then fine but try not to be so damned insufferably irritating while you do so.

[Naam]

As usual when talking about currencies and financials, I totally agree with Naam !

Devalue against what ?

the problem with Thaivisa is that any Bill, Buck, Hank or Joe can make any statement as he pleases and if nobody checks and contradicts even the most ridiculous statements based on pure ignorance and/or wishful thinking will be taken at face value by those readers/members who are inexperienced but eager to inform themselves.

Another problem with Thai Visa is those who believe they have the knowledge to pick everyone else apart but fail to make any actual statement themselves.

I have said many times, that i am certainly no expert and i may have used the incorrect terminology. Being insulting as you normally are, is not only rude but outright nasty.

Or are you saying my 'ridiculous' statement has no right to be on the forum?

you made it already clear that instead currencies you meant economies so there was no need to "insult" you. my "insults" (which i consider to be FACTS) were meant in general, referred to Thaivisa and are not limited to this thread or particular postings.

[englishoak]

The IMF is down to it's last $200B it will need a lot more.

total capital of the IMF is ~$310 bb. outstanding loans are approximately $25 bb as of feb 28, 2009 = remaining capital ~$285 bb. what do you mean by "down to its last $200 bb"?

I was merely rounding a figure of usable 200 billion USD as available current funds. AlexLah was more accurate I believe with his 227 Billion US figure. Given the history of massaged finances and estimates, spot on accuracy is not the banks forte. As they are only paper figures rather than hard cash that figure is unlikely to be true anyway IMO.

The sky is certainly not falling but expecting this all to just "blow over" without it affecting the layman is amazingly naive.

Denial is a funny thing as it seems to affect both smart and stupid alike !

I'm also incredibly optimistic about the future but expect the journey to be a little more than bumpy along the way.

[AlexLah]

So you see even herr Naam is wrong at times and therefore his triade against people posting inaccurate information is justified.

So IMF is indeed having roughly 200 Billion available, that would be like a drop of water on a hot plate if you look at the situation the UK is in at the moment.

Also country's that are in the IMF are usally not allowed to borrow more then their quota.

So is the British Pound doomed, doomed as in will it dissapear/worthless?

I think it will be worth a lot less in the near future.

[loverboy44]

As usual when talking about currencies and financials, I totally agree with Naam !

Devalue against what ?

the problem with Thaivisa is that any Bill, Buck, Hank or Joe can make any statement as he pleases and if nobody checks and contradicts even the most ridiculous statements based on pure ignorance and/or wishful thinking will be taken at face value by those readers/members who are inexperienced but eager to inform themselves.

Another problem with Thai Visa is those who believe they have the knowledge to pick everyone else apart but fail to make any actual statement themselves.

I have said many times, that i am certainly no expert and i may have used the incorrect terminology. Being insulting as you normally are, is not only rude but outright nasty.

Or are you saying my 'ridiculous' statement has no right to be on the forum?

Whilst i am not on the inside with the terminology and do not happen to be an expert in global financial matters, i am a student of human nature and have a good enough brain to extrapolate what may or may not happen in the future.

Many here seem to be reliant on reading the input from a myriad of self interested bankers and so called finance experts who failed to see what was coming, lost collossal amounts of money in the crash and generally were the cause of the problem in the first place.

Sorry but i do not set too much store in what many of them spout now. Most of what they are saying conflicts with what they said a week or a month or 6 months ago.

Most of the doom and gloom merchants are so pessimistic it makes my eyes bleed.

So when i see a post that has at least some optimism or is at least trying to see that the sky is not actually falling, i tend to agree with it on the grounds that whilst those with stocks and bonds in large amounts are hurting, many of us who are not relatively rich are actually not being hit all that much yet.

Some of us are actually earning more now than before and being asked to come into work more and more due to the very thing that others are moaning about on a daily basis.

Some of us actually believe that all life as we know it is not going to end but that there is still something left to live for.

As for the terminology in the previous posts, I did perhaps repeat the word devalue which i suppose in the laymens world might be the right word but in the finance world is incorrect. So what?

It is obvious to me that whilst the £ is suffering right now there is a lot more coming to hit the likes of the euro and the $, just as there will be problems coming in for the other large currencies and for any export driven economies. This in turn will eventually hurt the smaller economies due to trade and the lack therof.

If you disagree then fine but try not to be so damned insufferably irritating while you do so.

Well said.

If it would be so easy if everyone would have the same opinion. Then we wouldn't have to discuss about it.

What makes me angry are postings like "I agree" or "rubbish" without any arguments but maybe it was just the post of an investment banker that sold Lehmann papers to his grandma and don't know how to tell her now.

The one who could predict currency rates precisely would be a rich man anyway.

[Groongthep]

Is The British Pound Doomed

We are all doomed.

[FairwayJack]

If all currencies get devalued that means everything simply becomes more expensive. Our 85 baht quart of milk will be 150 next year. So....holding onto cash is a sure bet to lose. Pick an investment and hopefully it will appreciate. I am long oil....no sure thing but it is reasonable to expect oil to hit $70 / barrel by end of the year.

[12DrinkMore]

If all currencies get devalued that means everything simply becomes more expensive. Our 85 baht quart of milk will be 150 next year. So....holding onto cash is a sure bet to lose. Pick an investment and hopefully it will appreciate. I am long oil....no sure thing but it is reasonable to expect oil to hit $70 / barrel by end of the year.

Based on what?

With the world in depression there will be less demand for the stuff, so prices might fall or remain stable, which seems reasonable to me.

At the moment the word "reasonable" is well out of place in the context of any economic forecast, except for perhaps my beer consumption, which will reasonably remain steady or slightly appreciate.

[mommysboy]

Is The British Pound Doomed

We are all doomed.

Anyway! Back to the subject. No it is not doomed. People in the UK will continue to use it regardless of what happens elsewhere. Short of sinking GB and exterminating the population it won't go. A few people tried the latter, they got their come uppance good and proper.

Initially, the prediction was that UK would suffer worse than any other G7 economy owing to it's dependence on the financial sector, and high level of borrowing, but due to some quirk, or wrong button pressed on the global economy machine by the office junior, it seems that exporters such as Germany and Japan will be worst hit, and that goes for Thailand too. It's difficult to assess figures as each paper seems to print what it wants, but from what I can gather UK GDP will contract up to 4% this year, US 6%, and Japan a staggering 12%. Who knows- ask the local 'mow doo'.

And who knows what the deal is with currencies full stop. They seem to be very volatile and not necessarily connected to the real economy (at least at times).

I think it was Freud that came up with the concept of arguing small differences, a way of avoiding basic fundamental facts: in this instance the basic fact that all major economies are well and truly f......., with smaller ones soon to follow.

[mommysboy]

If all currencies get devalued that means everything simply becomes more expensive. Our 85 baht quart of milk will be 150 next year. So....holding onto cash is a sure bet to lose. Pick an investment and hopefully it will appreciate. I am long oil....no sure thing but it is reasonable to expect oil to hit $70 / barrel by end of the year.

Based on what?

With the world in depression there will be less demand for the stuff, so prices might fall or remain stable, which seems reasonable to me.

At the moment the word "reasonable" is well out of place in the context of any economic forecast, except for perhaps my beer consumption, which will reasonably remain steady or slightly appreciate.

Yes I agree. And that's why all people can do is convert to dollars/yen/Euros and sit and wait. As soon as the situation stabilises just watch the stampede out of these currencies.

[AlexLah]

Can I please ask for links to sites that quotes numbers when you state them.

If you make any claims to GDP, CPI make sure you understand how they are made up.

Replacing a steak with a hamburger in the CPI, just does not make sense.

Edited March 11, 2009 by AlexLah