Baht-uk Pound

[chiang mai]

I'll post this one here also because I think it's worth everyone seeing - the point of the chart below is to show Thailand's position in the GDP rankings amongst Asian and Pacific countries. Interesting to see that Thailand is number eleven and ahead of a whole host of countries many people might expect to be much higher - seeing this data somewhat dilutes the idea that Thailand is a backwards country when it comes to the economic matters and hopefully will change some perceptions.

http://en.wikipedia.org/wiki/List_of_Asian_countries_by_GDP

[HardenedSoul]

Yet the only conditions that would see the UK and it's currency collapse (let's not forget the topic and the point I'm arguing against) in the manner suggested would need to be worldwide and not peculiar to the UK.

Tell that to Iceland.

[cocopops]

Fractional banking was a later phenomenon that was not fully adopted by Asian banks by virtue of the foregoing controls.

Obvious bullshit. Or at least very deceptive. The fractional reserve banking system is ubiquitous. And hundreds of years old.

Well not total BS, some Asian countries were not able to partake, it was not an option. Pity that regulation did not apply to the world!

Which part of it is not bullshit? The assertion that fractional reserve banking was invented after 1997? Or the assertion that there exists or has existed within recent memory any commercial bank anywhere in the world that practices anything else?

To which Asian country do you refer? What year?

[chiang mai]

I will not steal Mommeysboy thunder on this subject and no doubt he will respond regardless.

But since I started this aspect of the debate and have already admitted that I may well be wrong, I have subsequently looked into the practice of fractional banking and conclude that probably everyone here is correct! The reason for this is because the degree to which any bank can lend a specific percentage of it's assets is governed by the Central Bank of any given country and these amounts vary. In recent years that percentage was very high in the US and the UK but twelve years ago was relatively low in Thailand at least. I revert to my early statement whereby I understood that fractional banking was not allowed by the IMF during the Thai bail out but now believe that it may well have been allowed but that the percentage allowed was quite small. I will continue to search and see if I can't find the IMF regulations on this subject.

And for anyone wishing to understanding fractional banking better, yawn, go for it:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

[cocopops]

I'll post this one here also because I think it's worth everyone seeing - the point of the chart below is to show Thailand's position in the GDP rankings amongst Asian and Pacific countries. Interesting to see that Thailand is number eleven and ahead of a whole host of countries many people might expect to be much higher - seeing this data somewhat dilutes the idea that Thailand is a backwards country when it comes to the economic matters and hopefully will change some perceptions.

http://en.wikipedia.org/wiki/List_of_Asian_countries_by_GDP

Maybe a per capita measure would be more illustrative. If we're just comparing the nominal GDPs of countries we might conclude that Thailand is twice as developed as New Zealand.

Per capita Thailand comes in at somewhere around 90th in the world. Better than China, but not as efficient as Colombia or Jamaica.

[chiang mai]

I'll post this one here also because I think it's worth everyone seeing - the point of the chart below is to show Thailand's position in the GDP rankings amongst Asian and Pacific countries. Interesting to see that Thailand is number eleven and ahead of a whole host of countries many people might expect to be much higher - seeing this data somewhat dilutes the idea that Thailand is a backwards country when it comes to the economic matters and hopefully will change some perceptions.

http://en.wikipedia.org/wiki/List_of_Asian_countries_by_GDP

Maybe a per capita measure would be more illustrative. If we're just comparing the nominal GDPs of countries we might conclude that Thailand is twice as developed as New Zealand.

Per capita Thailand comes in at somewhere around 90th in the world. Better than China, but not as efficient as Colombia or Jamaica.

Good idea, why don't you research it and post the results?

I think however for the purposes of this exercise we should remain at a manageable and understandable level for everyone since none of us is trying to attain degree certification through it all, just an indicator of the probable longer term view - I think that we need to consider the sum of each country's parts rather than its individual components rather than get too finite. But, up to you and I encourage you to go for it if you wish and I for one will be interested to see the results.

[chiang mai]

I'll post this one here also because I think it's worth everyone seeing - the point of the chart below is to show Thailand's position in the GDP rankings amongst Asian and Pacific countries. Interesting to see that Thailand is number eleven and ahead of a whole host of countries many people might expect to be much higher - seeing this data somewhat dilutes the idea that Thailand is a backwards country when it comes to the economic matters and hopefully will change some perceptions.

http://en.wikipedia.org/wiki/List_of_Asian_countries_by_GDP

Maybe a per capita measure would be more illustrative. If we're just comparing the nominal GDPs of countries we might conclude that Thailand is twice as developed as New Zealand.

Per capita Thailand comes in at somewhere around 90th in the world. Better than China, but not as efficient as Colombia or Jamaica.

Good idea, why don't you research it and post the results?

I think however for the purposes of this exercise we should remain at a manageable and understandable level for everyone since none of us is trying to attain degree certification through it all, just an indicator of the probable longer term view - I think that we need to consider the sum of each country's parts rather than its individual components rather than get too finite. But, up to you and I encourage you to go for it if you wish and I for one will be interested to see the results.

I'll save you the trouble, but whilst you're looking, check out the murder rate ratio also, scary!

http://www.nationmaster.com/graph/eco_asi_...-gdp-per-capita

Important however that we remain focused on the primary issue of exchange rates.

Edited May 27, 2009 by chiang mai

[churchill]

Sterling hits $1.60 versus dollar

Sterling rose above $1.60 for the first time in nearly seven months on Wednesday after Britain’s service sector companies revealed improving sentiment, while mortgage approvals crept higher.

continued at http://www.ft.com/cms/s/0/8803a2ce-4aa1-11...;nclick_check=1

[chiang mai]

Sterling hits $1.60 versus dollar

Sterling rose above $1.60 for the first time in nearly seven months on Wednesday after Britain’s service sector companies revealed improving sentiment, while mortgage approvals crept higher.

continued at http://www.ft.com/cms/s/0/8803a2ce-4aa1-11...;nclick_check=1

And THB reaches 1.55! Great, but Intraday rates don't mean much!

[citizen33]

Re the loss-making UK banks, NW Building Society's annual results were published today. The profit level is slightly down on expectations but still well into the black. Santander is also in the news because it is going to rebrand its three UK banks and start a rationalisation programme. Overall, I think it is very finely balanced as to whether there is further major trouble ahead: it is far from a certainty.

[churchill]

Sterling hits $1.60 versus dollar

Sterling rose above $1.60 for the first time in nearly seven months on Wednesday after Britain’s service sector companies revealed improving sentiment, while mortgage approvals crept higher.

continued at http://www.ft.com/cms/s/0/8803a2ce-4aa1-11...;nclick_check=1

And THB reaches 1.55! Great, but Intraday rates don't mean much!

I think if sterling stays above 1.60 we could see sterling / baht going between 55 and 60

which to me seems a fair rate at this time .

[chiang mai]

Re the loss-making UK banks, NW Building Society's annual results were published today. The profit level is slightly down on expectations but still well into the black. Santander is also in the news because it is going to rebrand its three UK banks and start a rationalisation programme. Overall, I think it is very finely balanced as to whether there is further major trouble ahead: it is far from a certainty.

I see that Nationwide results were effectively halved because they had to pay some 215 million Pounds to the FSA for Bank insurance, what kind of nonesence is that? But, this thread is about GBP/THB so let's not digress.

[chiang mai]

Sterling hits $1.60 versus dollar

Sterling rose above $1.60 for the first time in nearly seven months on Wednesday after Britain’s service sector companies revealed improving sentiment, while mortgage approvals crept higher.

continued at http://www.ft.com/cms/s/0/8803a2ce-4aa1-11...;nclick_check=1

And THB reaches 1.55! Great, but Intraday rates don't mean much!

I think if sterling stays above 1.60 we could see sterling / baht going between 55 and 60

which to me seems a fair rate at this time .

I wish so also.

[tmd5855]

...now that's a crash.

We prefer 'uncontrolled descent' if you don't mind old bean...

Or?

"We took our eye off the ball"

"What crash, mearly part of a grand plan, my boy"

"No, No, No, not those figures those ones"

"We were expecting this turn of event"

[12DrinkMore]

while mortgage approvals crept higher.

I am fed up with all the conflicting data.

And to conflict with the Financial Times how about

http://business.timesonline.co.uk/tol/busi...icle6333072.ece

Mortgage lending slumps 60 per cent in April

Hopes of a turnaround in the housing market were dented todat as new figures revealed that mortgage lending dropped by 9 per cent between March and April.

HIgh street banks and building societies lent £10.4 billion to homebuyers and remortgage customers last month, according to the Council of Mortgage Lenders (CML), down from £11.4 billion in March and 60 per cent lower than the £26.1 billion lent in April 2008.

The figures were even more dismal since Easter, which fell in April this year, which would usually have served to boost buyer numbers.

But then

In March, the number of first-time buyers, crucial to the health of the housing market, rose by 36 per cent from February, the CML said. But today's figures suggest that the pickup in first-time buyers may not be sustained.

and finally

The number of homes sold was 41 per cent higher than January, although sales were still 34 per cent. lower than in April last year.

So how the f%^k do we begin to work out what is really happening? Surely the only way this can be compared is using year on year statistics, as house purchases are very seasonal. So, using this basis:

Year on year lending was down 60% over (April) last year

and

sales were still 34 per cent. lower than in April last year

And indeed, this was noted above

The figures were even more dismal since Easter, which fell in April this year, which would usually have served to boost buyer numbers.

So there you have it, sales are dismal and well down on last year with no signs of any recovery except in your dreams.

Edited May 27, 2009 by 12DrinkMore

[churchill]

One can always find data to back up your view but try to look on the bright side sometimes -

[12DrinkMore]

One can always find data to back up your view but try to look on the bright side sometimes -

A classic, but that great sense of UK humour that produced and WAS ALLOWED to produce such comedy has been both lost and banned, due to political correctness. Doubtless today there would be some two faced frock-lifter from the Vatican or CoE preventing that particular scene. Now we have sunk to the depths of "shock" comedy, where some old biddy utters "fuc_k me" every few minutes and the studio audience collapses in laughter.

Still got another 10 large ones in the fridge :D :D

"go on, get a smile on yer face, you old bugger!"

Edited May 27, 2009 by 12DrinkMore

[chiang mai]

Timeless and priceless for Brits of a certain age, many thanks for that, I'd almost forgotten how good that is.

[mommysboy]

In no way do I see anything other than a hard slog for all economies most especially the western ones. I don't see an easy rebound for the UK which is encumbered by debt, and predict huge cuts in public spending, and house prices perhaps as much as 50% lower than from the peak and good job too. I also see the housing market staying sluggish and sterling remaining weak now that it has recovered from it's undershoot. Personal debt seems the only factor likely to lessen, and this already happening.

Yet the only conditions that would see the UK and it's currency collapse (let's not forget the topic and the point I'm arguing against) in the manner suggested would need to be worldwide and not peculiar to the UK. If this were to happen we'd be talking about just about every major economy going under, and no other economy would be able to survive this either, China included.

Regarding bt/pound. The only other scenario for a low currency rate would be the extreme success of the Thai economy and this is not a situation likely to happen, quite the opposite judging by current figures. Further Thailand as a performing economy is absolutely conditional on it's performance as an exporter, which as we have seen is conditional on world demand. Beyond that it also depends on Thailand's ability to compete, a strong bt would hamper that, in fact it is hampering that.

I'm attempting to find out just how Thailand is faring compared to it's neighbours via another thread, if anybody could contribute on that fair enough, but please contribute on that and only that.

You over dramatize Mommysboy, I for one have never suggested the collapse of the Pound merely that THB may well revert back to pre 1997 levels in the next decade and I have set out the reasons why I think this in this thread and others. But in summary, the pre 1997 THB peg against USD of 25 would result in a GBP/THB rate of around 40, assuming a fair value rate of GBP/USD at 1.60. A reader in another thread chastised me recently and pointed out that the current fair value of GBP/USD is seen as 1.55 hence a slightly lower rate for GBP/THB. Indeed, we have already seen GBP/THB at 45 earlier this year during the fall of GBP against USD during the so called "undershoot" thus a return to that and the pre '97 levels are not totally unthinkable!

You've said in your posts that you think money is pouring back into UK equities, QE is over and done with and that the UK banks have been bailed out and have now returned to profit. Do you still believe those things or were they merely throw away lines? The answer to that question is important here because in part it shows the rate of recovery and may influence the longer term view of exchange rates.

Yes the UK economy is not in good shape and yes the Thai economy is suffering as a result of the global recession, but I would ask you to put aside your strongly pro-British Pound stance for a moment and look objectively at a point in the future when normal service has been resumed, when the value of the Pound is not sitting at 107% of its true value and when export flows have resumed. All factors considered, where is the rate likely to be then and is it totally incomprehensible to you that THB might be that much stronger?

The assertions you make regarding currency valuations would mean the UK had started to default on payments, that's dramatic. A halving of the value of a currency against another would be dramatic.

Yes, I think it best to revise those statements as they are too emphatic, money is now being reinvested back in to UK equities, I don't think there will be further need for QE though unless there is a severe downturn again in the world economy, that's curtains for all!

I think the reality of what is going to happen is considerably more prosaic and painful in it's own way, UK will grow at a slow pace fom mid 2010 onwards, the housing market will not recover until 2013 earliest and then only modestly. My prediction for the pound now stands at 1.60 give or take to the dollar over the medium term, and in a range of 45 -60 to the bt. I'd say the norm is 55. The bt in my view will weaken by 15% against a basket of western currencies over the medium to long term, and there remains the possibility of a strong run against the bt as an outside chance. Ironically, the softish landing for the UK economy is the weak currency as it was in the 80's, much to the chagrin of it's competitors. The financial sector will make a strong recovery and is indeed showing strong signs already and that's the only thing that will for sure, and the export base will hold it's own as UK is involved in non elastic demand, high tech items as a general rule, or unique brands. If and when the world's mega car producers get a chance again, then UK would be a hub of European production again due to irrestible land prices, competitive govt subsidies, and the relatively low currency. This follows the 80's pattern that I grew up with, and it's been my misfortune to now be part of 4 recessions. The only positive in this one has been the speed at which UK reacted, and the co-ordinated world response - Thailand naturally excepted.

Regarding Thailand as an economy : that it is suffering worse than most G7 countries is not a point that can be dismissed so easily nor that it appears to have done very little about it. the obvious line would have been the one taken by China, ie, a competitive devaluation ot it's currency and vigorous public spending on major projects. However Thailand went in to the recession in good fiscal standing and this is important to emphasise and remains the reason why it is encumbered by a strong currency. As many have mentioned before it was not doing so well b4 the crash and it faces a big credibility problem, it's also no longer competitive really, nor ever will be again in my view, at least not at what it's previously done. In part this is because it has gone through it's early stage of developement and is already first world in many ways; save for it's woeful social welfare. The challenge is then to compete on it's own merit, and on an even playing field, whilst being encumbered with the same sort of relative public sector spending requirements as are on the west. I think too you have to look at what's gone on here, on the back of great need and a very radical, modernising govt Thailand did very well for a few years, but it is clear that it is now sinking back to it's old ways, and indeed is this not what most want really? Thailand will be Thailand, good and bad, and aloofness to the rest of the world is a defining trait. So all in all no Asian tiger performance expected and I'd say it's growth would be similar to the UK, probably a little stronger.

I don't think I have a strong pro British stance, it's just that many of the arguments I've heard are just not credible, and further assume conditions in isolation. Further I was aware of the size Of Thai GDP and it's ranking in terms of overall wealth, 23rd, at least 2 years ago anyway. A large part of my judgements do come from my experiences of living and working in Thailand.

This figure of the pound being overvalued 107%, I assume you mean then that it should be 25 bt or so, and 75 US cents. That's a frightening valuation, how does it come about? JUST AS YOUR ARGUMENTS START TO SOUND A LITTLE MORE SANE YOU THROW THAT ONE IN!

[mommysboy]

Moodys about to place Thai Banks on negative watch.

http://nationmultimedia.com/2009/05/28/opi...on_30103780.php

Is this some kind of joke!

Maybe they know more!. What possible explanation is there?

Sometimes I suspect that things get orchestrated for one reason or another, merited or not.

Could be the bt will be in for a rough ride.

[chiang mai]

In no way do I see anything other than a hard slog for all economies most especially the western ones. I don't see an easy rebound for the UK which is encumbered by debt, and predict huge cuts in public spending, and house prices perhaps as much as 50% lower than from the peak and good job too. I also see the housing market staying sluggish and sterling remaining weak now that it has recovered from it's undershoot. Personal debt seems the only factor likely to lessen, and this already happening.

Yet the only conditions that would see the UK and it's currency collapse (let's not forget the topic and the point I'm arguing against) in the manner suggested would need to be worldwide and not peculiar to the UK. If this were to happen we'd be talking about just about every major economy going under, and no other economy would be able to survive this either, China included.

Regarding bt/pound. The only other scenario for a low currency rate would be the extreme success of the Thai economy and this is not a situation likely to happen, quite the opposite judging by current figures. Further Thailand as a performing economy is absolutely conditional on it's performance as an exporter, which as we have seen is conditional on world demand. Beyond that it also depends on Thailand's ability to compete, a strong bt would hamper that, in fact it is hampering that.

I'm attempting to find out just how Thailand is faring compared to it's neighbours via another thread, if anybody could contribute on that fair enough, but please contribute on that and only that.

You over dramatize Mommysboy, I for one have never suggested the collapse of the Pound merely that THB may well revert back to pre 1997 levels in the next decade and I have set out the reasons why I think this in this thread and others. But in summary, the pre 1997 THB peg against USD of 25 would result in a GBP/THB rate of around 40, assuming a fair value rate of GBP/USD at 1.60. A reader in another thread chastised me recently and pointed out that the current fair value of GBP/USD is seen as 1.55 hence a slightly lower rate for GBP/THB. Indeed, we have already seen GBP/THB at 45 earlier this year during the fall of GBP against USD during the so called "undershoot" thus a return to that and the pre '97 levels are not totally unthinkable!

You've said in your posts that you think money is pouring back into UK equities, QE is over and done with and that the UK banks have been bailed out and have now returned to profit. Do you still believe those things or were they merely throw away lines? The answer to that question is important here because in part it shows the rate of recovery and may influence the longer term view of exchange rates.

Yes the UK economy is not in good shape and yes the Thai economy is suffering as a result of the global recession, but I would ask you to put aside your strongly pro-British Pound stance for a moment and look objectively at a point in the future when normal service has been resumed, when the value of the Pound is not sitting at 107% of its true value and when export flows have resumed. All factors considered, where is the rate likely to be then and is it totally incomprehensible to you that THB might be that much stronger?

The assertions you make regarding currency valuations would mean the UK had started to default on payments, that's dramatic. A halving of the value of a currency against another would be dramatic.

Yes, I think it best to revise those statements as they are too emphatic, money is now being reinvested back in to UK equities, I don't think there will be further need for QE though unless there is a severe downturn again in the world economy, that's curtains for all!

I think the reality of what is going to happen is considerably more prosaic and painful in it's own way, UK will grow at a slow pace fom mid 2010 onwards, the housing market will not recover until 2013 earliest and then only modestly. My prediction for the pound now stands at 1.60 give or take to the dollar over the medium term, and in a range of 45 -60 to the bt. I'd say the norm is 55. The bt in my view will weaken by 15% against a basket of western currencies over the medium to long term, and there remains the possibility of a strong run against the bt as an outside chance. Ironically, the softish landing for the UK economy is the weak currency as it was in the 80's, much to the chagrin of it's competitors. The financial sector will make a strong recovery and is indeed showing strong signs already and that's the only thing that will for sure, and the export base will hold it's own as UK is involved in non elastic demand, high tech items as a general rule, or unique brands. If and when the world's mega car producers get a chance again, then UK would be a hub of European production again due to irrestible land prices, competitive govt subsidies, and the relatively low currency. This follows the 80's pattern that I grew up with, and it's been my misfortune to now be part of 4 recessions. The only positive in this one has been the speed at which UK reacted, and the co-ordinated world response - Thailand naturally excepted.

Regarding Thailand as an economy : that it is suffering worse than most G7 countries is not a point that can be dismissed so easily nor that it appears to have done very little about it. the obvious line would have been the one taken by China, ie, a competitive devaluation ot it's currency and vigorous public spending on major projects. However Thailand went in to the recession in good fiscal standing and this is important to emphasise and remains the reason why it is encumbered by a strong currency. As many have mentioned before it was not doing so well b4 the crash and it faces a big credibility problem, it's also no longer competitive really, nor ever will be again in my view, at least not at what it's previously done. In part this is because it has gone through it's early stage of developement and is already first world in many ways; save for it's woeful social welfare. The challenge is then to compete on it's own merit, and on an even playing field, whilst being encumbered with the same sort of relative public sector spending requirements as are on the west. I think too you have to look at what's gone on here, on the back of great need and a very radical, modernising govt Thailand did very well for a few years, but it is clear that it is now sinking back to it's old ways, and indeed is this not what most want really? Thailand will be Thailand, good and bad, and aloofness to the rest of the world is a defining trait. So all in all no Asian tiger performance expected and I'd say it's growth would be similar to the UK, probably a little stronger.

I don't think I have a strong pro British stance, it's just that many of the arguments I've heard are just not credible, and further assume conditions in isolation. Further I was aware of the size Of Thai GDP and it's ranking in terms of overall wealth, 23rd, at least 2 years ago anyway. A large part of my judgements do come from my experiences of living and working in Thailand.

This figure of the pound being overvalued 107%, I assume you mean then that it should be 25 bt or so, and 75 US cents. That's a frightening valuation, how does it come about? JUST AS YOUR ARGUMENTS START TO SOUND A LITTLE MORE SANE YOU THROW THAT ONE IN!

Prior to its recent fall The British Pound, on a trade weighted basis, was at 107% of its true value for a long period of time, several years (this was why the Baht/Pound stood at 75) - everyone was aware of that fact but the UK government was not prepared to do anything about it, it was simply a feature of the "good times" and was in part responsible for its large fall subsequently. Google the subject, the Pound being overvalued was hardly a secret.

So which part of my arguments are not credible? Go back and take a look at my "baseline" post and compare what I said there versus anything I have said subsequently or anything I have said in previous posts on this subject, my story has remained exactly the same and I don't see that I have had to acquiesce on any part of it - I also have not seen any successful challenge to any part of it! Yet still you write that what I have written is not credible, I mean really.

OK so moving on, UK equities have not finished their fall, there will be further QE and more UK banks will require assistance and likely be nationalized - I think we are in a lull period and those green shoots of recovery are mostly moss and fungus. Unfortunately we'll find out the answer to that part of my opinions long before we know the long term position of the Baht.

So your prediction for the Pound is 1.60 and 55, interesting that's where it stands today! But interesting to see that your range is now 45/60, not that far away from my long term view of 35/40, glad to see that you're finally getting there.

Edited May 28, 2009 by chiang mai

[churchill]

Why Britain May Fare Better Than Expected

Britain's finances are indeed a mess, but the economy is no worse than the rest of Europe and the United States -- and housing is even picking up speed.

Is Britain in danger of once more becoming the sick man of Europe? A return to the chronic economic malaise of the 1970s and 1980s is easy to imagine, given the government's frantic efforts to save the country's biggest banks and restore confidence to a demoralized public. On top of everything else, Standard & Poor's on May 21 shocked the country and the world by warning that Britain's soaring public debt might eventually force the ratings agency to withdraw its AAA seal of approval.

S&P says Britain's recently passed budget "underscored that U.K. public finances are deteriorating rapidly," with debt now looking likely to approach 100 percent of gross domestic product by 2013, rather than the 83 percent the ratings agency had earlier assumed. But by many measures the British economy doesn't look any worse than that of its European neighbors or the US. The once-moribund housing market is showing signs of life, while retail sales actually recorded a sharp 4.6 percent increase in April, possibly influenced by a balmy Easter. "The cycle is no worse here than everywhere else," says Ben Broadbent, U.K. economist at Goldman Sachs in London.

The S&P move has some economists scratching their heads. Jamie Dannhauser, senior economist at Lombard Street Research in London says the U.S. and Britain "will suffer far less severe recessions than Japan, Germany, and others. The idea of singling out Britain as a desperate case is ridiculous," he says. Goldman, in fact, forecasts that Britain will top the big mature industrialized economies in growth next year with a 1.9 percent uptick in GDP, compared with 1.2 percent for the U.S. and 0.7 percent for the 16 countries comprising the euro zone. Some British companies, such as Richard Branson's Virgin Atlantic, which reported a near doubling of pretax profits for the fiscal year through February 2009, to $109 million (€79 million), already are bucking the gloomy trend, though Virgin warns this year will be tougher.

In the currency markets, where the economic prospects of nations are assessed by traders every minute, Britain has been on the rebound after taking a severe beating. The pound sterling plummeted an extraordinary 35% from its peak in November 2007, but since March it has climbed back about 17 percent, to $1.60 (€1.16).

The market probably has overshot, as it often does. But being outside the euro zone and not living under the monetary policy of the sluggish European Central Bank may be helping Britain. The sharp decline in the pound made British exports more competitive last year-slashing the current account deficit by almost half in 2008, to 1.7 percent of GDP or $38 billion (€27 billion). Because most British mortgages are pegged to short-term interest rates, the Bank of England's relentless hacking away at rates to 0.5 percent has trimmed many homeowners' expenses. The BoE's moves contributed heavily to last year's 6.6 percent nominal rise in household income by putting more money in homeowners' wallets. "The monetary transmission process works faster here than in other countries," says David Woo, an economist at Barclays Capital in London, who notes that many of his colleagues are now paying almost no interest on their mortgages.

As an open economy with one of the world's top two financial centers, Britain responds quickly to global trends. The recent surges in bond issuance, oil prices, and world stock indexes are bound to translate into hiring and higher pay in Britain's financial sector. Huw van Steenis, banking analyst at Morgan Stanley (MS) in London, says profits before write-offs at European banks in the first quarter of 2009 were up a fat 27 percent. The "self-belief" of bank CEOs is recovering, he says, and once again "the best people have three or four [job] offers."

Deficits Could Cost Labour

So what is S&P worried about? The Labour Prime Ministers Tony Blair and Gordon Brown reversed the trend of the Thatcher years, increasing government spending by about 5 percent of GDP -- all for what appears now to have been little gain in areas such as health care and education. In addition, S&P estimates Britain's bank bailout costs at $160 billion (€116 billion) to $230 billion (€166 billion). Yawning deficits could test Britain's ability to meet its fiscal obligations.

In the past, British governments such as Thatcher's made the tough decisions needed to straighten out fiscal messes. As S&P notes, an election must be held within the next year, and the polls suggest that Brown and Labour will be swept out. In that case, the recovery now under way could be combined with the budget discipline of a new Conservative government. "If comprehensive measures are implemented to place the public finances on a sustainable footing," S&P says, the agency would be prepared to back off and change its outlook on the U.K. rating from "negative" to "stable." The saga of Britain's recovery is far from over.

http://www.spiegel.de/international/busine...,627281,00.html

[chiang mai]

Whilst I enjoyed reading the article and typically have respect for Spiegel, I felt this piece was little more than a positive spin piece and this was confirmed to me by the authors view that the housing market is picking up, utterly incorrect I'm afraid.

Maybe it's just me but I couldn't find anything in the Spiegel article that wasn't already obvious and certainly it doesn't provide any surprises, the outcome of the next election is all but cast in stone and of course it's bound to have some positive effect. But it's all a matter of degrees isn't it, to what degree will a change in government have a positive effect and does that simply change the patient prognosis from catastrophic and terminal to dire - that change combined with the fact that the UK took early positive action may mean a smoothing of the rate of decline curve from very steep to just steep. But regardless of all the positive spin in the world the patient remains extremely sick and nothing short of a major gold find in Middlesex or the realization that the Pennines are actually made of platinum will change that prognosis, regrettably.

[mommysboy]

Whilst I enjoyed reading the article and typically have respect for Spiegel, I felt this piece was little more than a positive spin piece and this was confirmed to me by the authors view that the housing market is picking up, utterly incorrect I'm afraid.

Maybe it's just me but I couldn't find anything in the Spiegel article that wasn't already obvious and certainly it doesn't provide any surprises, the outcome of the next election is all but cast in stone and of course it's bound to have some positive effect. But it's all a matter of degrees isn't it, to what degree will a change in government have a positive effect and does that simply change the patient prognosis from catastrophic and terminal to dire - that change combined with the fact that the UK took early positive action may mean a smoothing of the rate of decline curve from very steep to just steep. But regardless of all the positive spin in the world the patient remains extremely sick and nothing short of a major gold find in Middlesex or the realization that the Pennines are actually made of platinum will change that prognosis, regrettably.

I disagree, it's a simple piece based on facts. S + P are correct in pointing out the precariousness of UK public finances and the rating sounds fair. The recent budget set the store for swingeing spending cuts.

It's important to realise UK is not alone in it's troubles,ie, http://www.telegraph.co.uk/finance/economi...-on-Europe.html

and of course a little closer to home, it would seem that Thailand is now in the cart, due to recent GDP figures and revelations about it's revenue shortfalls (basically it needs a loan far greater than the one it had during the 98 financial crisis it seems).

As I've said time and time again, they're all in a mess, and it really is absurd to isolate the UK, which is in fact weathering the storm in better shape than most.

[mommysboy]

CM - can I clarify?, are you asserting that the pound is 7% overvalued or 107% ?. I googled as suggested and the mark seemed to be 12% a couple of years ago. Obviously since then it's value has dropped significantly.

[chiang mai]

CM - can I clarify?, are you asserting that the pound is 7% overvalued or 107% ?. I googled as suggested and the mark seemed to be 12% a couple of years ago. Obviously since then it's value has dropped significantly.

The Pound WAS overvalued by 7% thus its value may be described as being 107% of true value. If indeed it became overvalued by as much as 12% last year and was therefore rated at 112%, that does not surprise me although I was not aware that was the case.

[mommysboy]

CM - can I clarify?, are you asserting that the pound is 7% overvalued or 107% ?. I googled as suggested and the mark seemed to be 12% a couple of years ago. Obviously since then it's value has dropped significantly.

The Pound WAS overvalued by 7% thus its value may be described as being 107% of true value. If indeed it became overvalued by as much as 12% last year and was therefore rated at 112%, that does not surprise me although I was not aware that was the case.

7% is not a big deal and of course since then all hel_l has broke loose. I wonder what it's fair value would be regarded as now.

And of course the Baht.

[chiang mai]

CM - can I clarify?, are you asserting that the pound is 7% overvalued or 107% ?. I googled as suggested and the mark seemed to be 12% a couple of years ago. Obviously since then it's value has dropped significantly.

The Pound WAS overvalued by 7% thus its value may be described as being 107% of true value. If indeed it became overvalued by as much as 12% last year and was therefore rated at 112%, that does not surprise me although I was not aware that was the case.

7% is not a big deal and of course since then all hel_l has broke loose. I wonder what it's fair value would be regarded as now.

And of course the Baht.

Sorry, fair value and trade weighted value are not the same things and yes, 107% trade weighted value is an important consideration.

Here's another one to help your learning process mommysboy, 107% it was:

http://www.ashraflaidi.com/charts/gbp-trad...ghted-index.asp

I think it's time for us to cease this rather one sided discussion because it's not going anywhere and is not helping move the original topic forward in any way. I've put up my opinion and my logic and you've tried to shoot holes in it but it has withstood your challenges and by this time you must have inspected under a microscope every word I have written and challenged every one. You don't agree with my view and that's fine, you are entitled to your opinion, if you really know what it is - I am not even concerned that you cannot put forward evidence to support your views. I sense however that this thread has not been a total waste of time because you seem to have become more aware of certain parts of the overall argument thus hopefully it is has improved your knowledge on this subject, I've certainly learned a couple of things. I would ask however that the next time you post on a subject about which you know little you refrain from suggesting to a wider audience that the posters remarks could cause readers to lose money since that is plainly not the case. Shall we just leave it there and move on to other things that ae more constructive.

Edited May 28, 2009 by chiang mai

[Lucifer]

This thread is getting too serious, and requires some light refreshment...

http://www.dailymotion.com/commented-week/lang/en

Now continue...

[Merangue]

Chang Mai can you point to a specific period when the £ was at 107% of its true value please?

I am not disagreeing but would be interested on that figure to work out its true value at the time at 100%

Edited May 28, 2009 by Merangue