Further Gbp Falls?

[chiang mai]

It seems likely to me that GBP is going to fall further than it already has: the country is still in recession, there are no sensible or firm plans in place to mitigate debt and the perceived panacea of a change in government next year now seems very unclear with the potential for the UK to loose it's credit rating heightened. Well that's what Morgan Stanley (MS) sets out as one scenario in a recent client briefing note, not by any means the gospel but a fair assessment in my book. The other little gem that MS forecasts is a surprise US Dollar rebound later in 2010 although I would have thought of that as more of a certainty at some point rather than anything else.

The question is, which GBP holders are feeling sufficiently brave to switch out of GBP and into USD or do you have other plans? I for one see that as a fairly sound strategy although as with all these things, it's down to the timing.

[alant]

i think that the gbp will gain a little as the country moves towards the election and the life of the current fiscal bunch becomes finite.

there is little evidence that a new government or at least the probable new government will do any better but logic is not the prime mover here, spin is.

the fx world is quite a gamble with logic that escapes me. certain countries have printed huge quantities of money as has happened in history before and yey i have never in history books read about fiscal easing. more critical to this subject how does the thai baht maintain its strength?

oh well

[chiang mai]

Well if you are right then you'll remain in a good position to change GBP to THB at a decent rate, but if you are not .....! A risky bet I reckon.

[PhilHarries]

I currently have my financial assets split between USD and GBP, even my Vietcombank account is USD, and I totally ignore the ramblings of the so called economists. It's the likes of Morgan Stanley that has got the world into this mess so why in hel_l should we listen to a word they say? No matter how they couch their words in complicated language they are guessing as much as anyone.

So I have no plans to change and my only advice would be to split your money between GBP and USD or Euros or Yuan or Rupees dpending on how adventurous you may feel.

[chiang mai]

I currently have my financial assets split between USD and GBP, even my Vietcombank account is USD, and I totally ignore the ramblings of the so called economists. It's the likes of Morgan Stanley that has got the world into this mess so why in hel_l should we listen to a word they say? No matter how they couch their words in complicated language they are guessing as much as anyone.

So I have no plans to change and my only advice would be to split your money between GBP and USD or Euros or Yuan or Rupees dpending on how adventurous you may feel.

A good strategy, you've covered the bases, unfortunately there are many who have not.

[hustlehouse]

Question is not where the GBP is going, but rather how it will perform against the other currencies. Although some say the USD will rebound (when remains to be seen) I believe that right now is as much of a gamble and fortune telling for you as is for the rest of the guys out there in the market. Try the Canadian Dollar as it seems that is pretty attractive to Russia (they star buying into it heavily). Me personally I stick on gold and other precious metals.

Edited December 1, 2009 by hustlehouse

[neil324]

US dollars is an option. As you say its going to rebound at some point, its just a matter of timing. Certainly gold might have much further to go but to buy in at the current price takes a brave man.

[chiang mai]

US dollars is an option. As you say its going to rebound at some point, its just a matter of timing. Certainly gold might have much further to go but to buy in at the current price takes a brave man.

Takes a braver man than me at current prices.

[badge]

Unfortunately there are alot of currency restrictions with the CNY or INR, and they are certianly not the kinds of currencies I would feel safe holding anyway.

A balanced basket seems the most sensible suggestion to me, with as many as possible perhaps

These stand out:

USD - will remain the global default crncy, a must.

CHF - A prudent, neutral, independent bank, not shackled by the EZ.

SGD - An asian version of the CHF, actively managed against a basket of asian crcnys.

NZD, or perhaps AUD.

And GBP simply because Im a Brit.

[Naam]

Question is not where the GBP is going, but rather how it will perform against the other currencies. Although some say the USD will rebound (when remains to be seen) I believe that right now is as much of a gamble and fortune telling for you as is for the rest of the guys out there in the market. Try the Canadian Dollar as it seems that is pretty attractive to Russia (they star buying into it heavily). Me personally I stick on gold and other precious metals.

[Gary A]

Question is not where the GBP is going, but rather how it will perform against the other currencies. Although some say the USD will rebound (when remains to be seen) I believe that right now is as much of a gamble and fortune telling for you as is for the rest of the guys out there in the market. Try the Canadian Dollar as it seems that is pretty attractive to Russia (they star buying into it heavily). Me personally I stick on gold and other precious metals.

Naam used to be the authority on currency exchange but every since his dog buried his Chrystal ball, he is just as lost as most of us. I often wonder why the currency exchange experts here on the forum are not rich.

[Naam]

Naam used to be the authority on currency exchange but every since his dog buried his Chrystal ball, he is just as lost as most of us. I often wonder why the currency exchange experts here on the forum are not rich.

for the record: i am not, never was a currency expert and wouldn't even dare to make a forecast for any currency pair for next week. the latter notwithstanding the fact that i am very happy holding >90% €UR. but when i hear the Russians are buying CAD then i have to air my surprise.

by the way, i have a second dog now and i hope "she" will dig up what "he" has buried

[chiang mai]

Forget it!

Edited December 1, 2009 by chiang mai

[chiang mai]

Unfortunately there are alot of currency restrictions with the CNY or INR, and they are certianly not the kinds of currencies I would feel safe holding anyway.

A balanced basket seems the most sensible suggestion to me, with as many as possible perhaps

These stand out:

USD - will remain the global default crncy, a must.

CHF - A prudent, neutral, independent bank, not shackled by the EZ.

SGD - An asian version of the CHF, actively managed against a basket of asian crcnys.

NZD, or perhaps AUD.

And GBP simply because Im a Brit.

I can agree (and like) with that but I do think we've probably already seen most of the upside on AUD, from my perspective this subject at this time is about wealth preservation and not profit making.

[rabcbroon]

Britain on the brink of financial armageddon?

By James Palumbo

Last updated at 11:07 PM on 27th November 2009

• Comments (118)
  
• Add to My Stories
  

He's one of our top entrepreneurs who recently put all his investments into cash. The reason: He believes Britain faces bankruptcy. You may disagree with his bleak analysis but you can't afford NOT to read it

A year ago, the world reacted with astonishment as Iceland technically went bust. It seemed inconceivable that a modern democratic nation could have such parlous finances that only an emergency $6billion bail-out from the International Monetary Fund enabled its economy to keep functioning.

This week, we witnessed a similar crisis in the Middle East but on a far, far more dangerous scale, as Dubai effectively defaulted on £48billion of loans.

Unless its more prudent and oil-rich neighbour, Abu Dhabi, launches a rescue plan then Dubai - once a gilded monument to financial success - will effectively be insolvent.

Facing doomsday? London's Canary Wharf. Britain has been hardest hit by the credit crunch

Which leads us to a haunting question: as the country in the world hardest hit by the credit crunch, with gross domestic product (GDP) projected to decline by almost five per cent in 2009, could Britain be next?

Let's think the unthinkable for a moment. These are the facts.

Even before the financial crisis, the British Government spent roughly £30billion more per year than it earned in tax revenues. This money, of course, had to be borrowed from international investors.

Today, the Government needs up to £200billion a year for at least the next three years in order to meet its spending commitments. But the Government's estimates invariably understate its true need, and they have to be continually revised upwards.

Before the crunch, total government debt stood at roughly 40 per cent of GDP. It is now around 60 per cent of GDP, but is projected to soar close to 100 per cent in the next few years. But again, that is not the full story.

More...

• UK banks and jobs at risk from Dubai domino effect
  
• Brash, flash and built on a mind-boggling scale, it was a monument to vanity and greed ... now Dubai is sinking under £48bn debts
  

Treasury estimates of the size of the national debt ignore so-called 'off balance sheet commitments', such as Private Finance Initiatives (effectively, hospitals and schools built with money loaned by the private sector) as well as the massive unfunded government pension liability.

There may be other, hidden, liabilities. After this week's shocking revelation of secret loans of £62billion made by the Bank of England to the Royal Bank of Scotland and HBOS at the height of the credit crunch, who knows how many other skeletons remain in the Treasury's closet?

It is wise to assume that the true size of Britain's debts could be much bigger than we all think.

Yet politicians of both parties can't acknowledge this. Why? Because any dispassionate analysis would spell only one thing - we need massive spending cuts and tax rises to avoid heading the way of Iceland and Dubai.

Crisis: A car abandoned by its foreign owner at a luxury development in Dubai

The news is potentially so bad that politicians simply don't want the general public to know what's going on.

Given the scale of the crisis, what then do they propose? New Labour is non-committal, suggesting that cuts will be prudent, thoughtful and spare people's worst pain. The Conservatives have targeted around £7billion of spending cuts, but these won't happen immediately and are nothing like enough to rebalance the nation's books.

Besides, one minute the Tories are preaching 'austerity', warning that savage cuts are needed, the next David Cameron is telling the City that 'our strategy has to be for growth, both now and in the long term'.

Such posturing, flip-flopping and vague promises are truly worrying. For, make no mistake, we could be teetering on the brink of a truly epic national crisis - one that makes the financial hardship of the past 18 months seem like a mere inconvenience.

For the past few years, Hollywood disaster movies have shown the world under attack by aliens or being destroyed by global warming. We have all thrilled to images of the White House being taken out by a giant laser beam or Big Ben frozen in an Ice Age snow drift.

Politicians don't want the public to know what's going on

A disaster movie involving countries going bust doesn't quite have the same dramatic appeal, but it would be every bit as deadly as a tsunami hitting London - and we have precious little left to defend us.

We've already had one big shock to Britain's financial system as many of our best-known banks teetered on the brink. The Treasury spent hundreds of billions of taxpayers' pounds trying to steady the ship. The financial cupboard is now bare. So what could cause the second wave of the disaster?

In three words - a sterling crisis. So far, containment of the crisis has focused on rescuing the banks and pumping more money into the system through the crazy Zimbabwe-esque expedient of 'quantitative easing' - effectively flooding the banking system with more cash.

This has cost hundreds of billions of pounds, all of which needs to be repaid if we are to avoid rampant inflation. That means borrowing more money from the international money markets.

But there is a problem. Until recently it was unthinkable that a sovereign nation couldn't service its debts. And yet this is exactly what's just happened with Dubai.

Alistair Darling helped conceal £62bn of emergency loans to UK banks

If international lenders begin to doubt the creditworthiness of UK plc, they will downgrade our credit rating and dramatically increase the rates of interest they charge. UK banks will have to follow suit to match these rates, putting unsustainable pressure on our struggling economy.

Thousands of businesses already hit by the recession will go bust. Trapped by soaring unemployment and welfare benefits, the Government will have to borrow more. And so the vicious debt cycle will continue to spiral down towards national insolvency - and, potentially, social anarchy.

Why won't our politicians get a grip?

The seeds of a possible future disaster were sown during the Blair years. Blair inherited a strong, stable economy which had been responsibly managed by his Conservative predecessors with acceptable levels of government debt.

He played his first term in office with textbook good sense; it was a continuation of Conservative policy to all extents and purposes, with debt kept at record lows. After that, perhaps because the Opposition was so weak, Blair and his Chancellor let rip.

The massive spending by New Labour on public services during its last two terms was a good idea in principle but a disaster in practice. This was because Blair was not a 'details' type of person.

As with the invasion of Iraq, he took wide-ranging decisions on economic planning based on little more than a broad vision, no doubt wishing to feel the hand of history upon his shoulder. Instead of the money being carefully managed, with every penny accounted for as with a household budget, it was sprayed about indiscriminately like a fire hose out of control.

As a result, the Conservatives accuse the Government of 'not fixing the roof while the sun was shining'. But the problem is they didn't suggest it at the time. Politics had became so centrist that for the Tories to suggest restraint at a time of economic prosperity would have been electoral suicide.

We are now reaping the harvest of that short-sighted conformism.

Yet even now, no one in power dares speak the truth.

Christmas is only four weeks away; people don't want to hear bad news. Our politicians also don't want to be the ones to deliver it (bad news equals lost votes). But unfortunately, as Dubai's predicament now shows, we've got to stop thinking that it couldn't happen to us and start having an urgent national debate if we are to have any hope of staving off disaster.

The Conservatives are odds-on to win the forthcoming General Election, to be held probably in May or June. There is a view they will not announce the full range of spending cuts they intend to make until it is safely won.

Once in office they can claim the situation is far worse than they envisaged and start swinging the axe. But do we want a party that surfs into office on a wave of optimism, only then to reveal its true character later? This is hardly the stuff of greatness.

The unfortunate reality is what we see with the Conservatives is probably what we will get; decent enough chaps but no Margaret Thatcher or Winston Churchill to save us in our time of need. An even worse result would be a hung Parliament and the ensuing political paralysis which would almost certainly cause a sterling collapse.

It is understandable that no one wants to talk the language of crisis. Spending cuts and tax rises are not popular concepts. Perhaps it is just a fact of human nature that it is only possible to begin the debate when the scale of the crisis is beyond question. But history teaches us that such obfuscation only worsens the pain in the long run.

Present times are alarmingly like 1939, when the nations didn't want to accept the prospect of a war, or - if they did - liked to feel it would be over quickly.

Even our then Prime Minister, Neville Chamberlain, delayed, entering futile peace negotiations and refusing to accept reality. It took a great man, possibly the greatest Englishman of all time, to save the nation.

What if the great danger in our lifetime is not a military but an economic war? Who then has the moral courage to take the tough but necessary action?

James Palumbo is a former City banker and founder of Ministry of Sound, the largest independent record label in the world, which had a turnover of £80million last year.

Read more: http://www.dailymail.co.uk/news/article-1231563/Is-Britain-brink-financial-armageddon.html#ixzz0YRGzbwGp

[chiang mai]

James Palumbo, move on, nothing to see here!

Not really relevant to the subject title since it doesn't address the issue of alternatives and merely confirms what has already been suggested, GBP will fall further!

[pkrv]

So is the end of all leaseholds You were never alowed to buy (freehold) there. That was reserved for other interests.

Edited December 1, 2009 by pkrv

[flying]

US dollars is an option. As you say its going to rebound at some point, its just a matter of timing. Certainly gold might have much further to go but to buy in at the current price takes a brave man.

Then again many said the same when gold was at $735 last Oct.

Then they all said wait for the 4-500 range as it is surely coming.

At this point they will say the same from now on no matter how high it goes.

Yet in hindsight............

Bottom line is the more they print the less the value of fiat becomes.

You are not getting two nickels for your dime every time they print more.

It is not like splitting stock shares.

Edited December 1, 2009 by flying

[Abrak]

So I have no plans to change and my only advice would be to split your money between GBP and USD or Euros or Yuan or Rupees dpending on how adventurous you may feel.

How do you buy Yuan except through bonds?

It is not much of a choice amongst the majors. The US$ is beaten to death and the other majors are forecast to show slower growth because of it and the yuan's increased competitiveness. (Actually I have no view on the yen but just think it should sink one day but I would have thought the same 10 years ago.)

I do think the baht, ringgit, and Korean Won are great bets against the US$. All currencies have seen massive intervention by their central banks to stop appreciation against the yuan. The BoT has sold US$50bn of baht bonds and is also selling $ spot and buying forward in the futures. To make sterilization self financing the baht still has to appreciate which it is doing even though forex reserves as a percent of GDP are greater than China's. Ultimately these countries suffer a forex loss through sterilization or a loss of competitiveness against the yuan by appreciation which will destroy export led recovery. If the dollar goes down then they will tend to appreciate more and if the dollar goes up they will try and unwind their massive short position in baht (equivalent to 20% of deposits) (baht bonds).

Ultimately the baht has appreciated against the yuan but not in absolute trade weighted terms which is unusual with a 9% current account surplus and a twin surplus. People say that Korea's position is even worse.

[pkrv]

So I have no plans to change and my only advice would be to split your money between GBP and USD or Euros or Yuan or Rupees dpending on how adventurous you may feel.

How do you buy Yuan except through bonds?

It is not much of a choice amongst the majors. The US$ is beaten to death and the other majors are forecast to show slower growth because of it and the yuan's increased competitiveness. (Actually I have no view on the yen but just think it should sink one day but I would have thought the same 10 years ago.)

I do think the baht, ringgit, and Korean Won are great bets against the US$. All currencies have seen massive intervention by their central banks to stop appreciation against the yuan. The BoT has sold US$50bn of baht bonds and is also selling $ spot and buying forward in the futures. To make sterilization self financing the baht still has to appreciate which it is doing even though forex reserves as a percent of GDP are greater than China's. Ultimately these countries suffer a forex loss through sterilization or a loss of competitiveness against the yuan by appreciation which will destroy export led recovery. If the dollar goes down then they will tend to appreciate more and if the dollar goes up they will try and unwind their massive short position in baht (equivalent to 20% of deposits) (baht bonds).

Ultimately the baht has appreciated against the yuan but not in absolute trade weighted terms which is unusual with a 9% current account surplus and a twin surplus. People say that Korea's position is even worse.

Silly reply - What would happen if silly people took it into their head to just 'eject' sorry sell USD, and use their own currency instead, which of course they currently can't at global level.

[Gary A]

I only watch two currencies because they are the only two that are important to me. My income is in US Dollars and my life is here in Thailand. I now have the majority of my assets here in Thailand. I doubt that I will ever invest in any stock market again. I took a severe beating and am still down about 38 percent. It would appear that my kids are just going to inherit less.

[pjclark1]

Switch to USD, I think not, USA still looks like a financial disaster area to me.

Stay in UKP, at least I can still go home if the worst happens.

Thai BHT, with the prospect of civil war approaching fast, and maybe some Thai girl grabbing my assets, no way.

[chiang mai]

Switch to USD, I think not, USA still looks like a financial disaster area to me.

Stay in UKP, at least I can still go home if the worst happens.

Thai BHT, with the prospect of civil war approaching fast, and maybe some Thai girl grabbing my assets, no way.

Yours reminds me of a post someone made over a year ago when I said I was getting out of GBP and into USD and I did so at 2.08. A poster replied that I must be nuts to give up 6.5% interest on GBP for a paltry 2.5% at best on USD! Unfortunately I got back into GBP at 1.50 so I didn't maximise the return and now here again I'm considering getting back in again at 1.55.

[badge]

Unfortunately there are alot of currency restrictions with the CNY or INR, and they are certianly not the kinds of currencies I would feel safe holding anyway.

A balanced basket seems the most sensible suggestion to me, with as many as possible perhaps

These stand out:

USD - will remain the global default crncy, a must.

CHF - A prudent, neutral, independent bank, not shackled by the EZ.

SGD - An asian version of the CHF, actively managed against a basket of asian crcnys.

NZD, or perhaps AUD.

And GBP simply because Im a Brit.

I can agree (and like) with that but I do think we've probably already seen most of the upside on AUD, from my perspective this subject at this time is about wealth preservation and not profit making.

Where do you see the 'profit' element?

To me this is entirely geared for wealth preservation.

[chiang mai]

Unfortunately there are alot of currency restrictions with the CNY or INR, and they are certianly not the kinds of currencies I would feel safe holding anyway.

A balanced basket seems the most sensible suggestion to me, with as many as possible perhaps

These stand out:

USD - will remain the global default crncy, a must.

CHF - A prudent, neutral, independent bank, not shackled by the EZ.

SGD - An asian version of the CHF, actively managed against a basket of asian crcnys.

NZD, or perhaps AUD.

And GBP simply because Im a Brit.

I can agree (and like) with that but I do think we've probably already seen most of the upside on AUD, from my perspective this subject at this time is about wealth preservation and not profit making.

Where do you see the 'profit' element?

To me this is entirely geared for wealth preservation.

Then we agree entirely.

[pkrv]

I only watch two currencies because they are the only two that are important to me. My income is in US Dollars and my life is here in Thailand. I now have the majority of my assets here in Thailand. I doubt that I will ever invest in any stock market again. I took a severe beating and am still down about 38 percent. It would appear that my kids are just going to inherit less.

I personally think this is an excellent response, your life is in Thailand and you have the majority of your assets here. That really does serve to insulate you from this stuff.

I am guessing your US income is a pension. IMO it is critical to understand that some people are still in transition. For me it is a case of transferring assets to Thailand which I have begun to do for example I made a condo purchase in 2005.

It's in the timing - I note for example that the UK has just moved the goal posts with regard to pensions - Taking them at 50 will no longer be an option it will be 55 from April 2010.

An interesting move by the UK government - I am guessing that people are able to generate more income by investing their money, previously held in pensions, themselves - I certainly have.

My enquiries (I am now 50) show a flood of requests to make the 25% tax free withdrawal and draw the pension, in whatever form, now. Annuity providers are already saying they may have problems processing all the requests and February may realistically be the closing date.

What does that bode for the UK economy? It will shore up UK government bonds, because if you take the annuity route that's what you will be buying by law, albeit via a third party. But the cash will be taken from other UK asset classes, IMO not good news.

Moving the goal posts could have accidently created an own goal. Mind you the UK was never any good at soccer . I certainly never bothered with the activity .

Edited December 2, 2009 by pkrv

[Naam]

I only watch two currencies because they are the only two that are important to me. My income is in US Dollars and my life is here in Thailand. I now have the majority of my assets here in Thailand. I doubt that I will ever invest in any stock market again. I took a severe beating and am still down about 38 percent. It would appear that my kids are just going to inherit less.

watch out according to "marketoracle" the sky will be soon falling

quote: "Major and semi-major banks are being told to obtain secure storage for new currency-dollars. They expect official devaluation by the end of the year. We do not know what the exchange rate will be, but as we have stated previously we expect three old dollars to be traded for one new dollar."

http://www.marketoracle.co.uk/Article15412.html

[Abrak]

quote: "Major and semi-major banks are being told to obtain secure storage for new currency-dollars. They expect official devaluation by the end of the year. We do not know what the exchange rate will be, but as we have stated previously we expect three old dollars to be traded for one new dollar."

http://www.marketoracle.co.uk/Article15412.html

Definitely the most imaginative suggestion I have heard all year.

Are these going to be new American dollars or Zimbabwe dollars?

[Abrak]

Silly reply - What would happen if silly people took it into their head to just 'eject' sorry sell USD, and use their own currency instead, which of course they currently can't at global level.

To be honest I dont know to what extent you are joking in every bit of the sentence or just part.

[pkrv]

Silly reply - What would happen if silly people took it into their head to just 'eject' sorry sell USD, and use their own currency instead, which of course they currently can't at global level.

To be honest I dont know to what extent you are joking in every bit of the sentence or just part.

I am only half joking - IMO it is very dangerous for the world to be reliant on just one currency for global trade. I note that others are jockeying for position to take over this function. IMO the reason they are not making more headway is because it will simply repeat the same mistake.

If I were to take a guess I would say we will see a slow unwinding as the USD moves to be just another currency in the world market - with whatever consequences that would bring.