The value of the British Pound

eDicky wrote: »

I can understand panic being felt by those with substantial travel or other foreign expenses and who have all their money in GBP. I'm one of the former but not the latter, fortunately for me, but I can sympathise.

I'm off to Iceland (the country rather than the shop!) in a few weeks. It was looking to be very expensive but that's now become VERY EXPENSIVE. A few weeks after that I'll be in India but that'll just be 'less cheap' rather than expensive.

In the grand scheme of things, though, I'll survive. I'm of the opinion that if I can afford a holiday then I've got little to worry about. It seems pretty clear that unless Sterling strengthens fairly soon (which I see as being unlikely) we will see inflation rise rapidly which'll hurt those close to the breadline tremendously.

schiff wrote: »

People with savings and an income will survive, people with plenty of savings and an income will find it an irritation, a small inconvenience, but they will survive. As always, even in the fairer Britain that the PM has promised and is hopefully working on, it's the people without who will bear the brunt. Has it ever been different?

Well if they can't afford to travel abroad or buy imported cars they'll probably have the fewest issues. Let's see how wild inflation gets before we make any more sweeping statements.

colsten wrote: »

Ah, that's alright then. Really nothing to worry about, and all those experts who say that the pound is having a bad time by any measure should just shut up as we have had enough of experts.

I think the FT chart risks making the opposite point. Seen in a historical context, this looks like it's been the destination for a long time. It's not just this sudden shock of Brexit, we've been falling down here for decades. If we stop that chart in February 2016, before the Brexit vote was announced, does it look hugely different? We're at 168 year lows mostly because of all the lows we'd fallen through before Brexit. Brexit hasn't upturned 168 years' of £ strength, it's merely continued its weakness.

That's not to deny that the £ only buying $1.22 isn't painful, just that it isn't as unexpected or drastically unforeseeable. Yes, Brexit has pushed it here today, this year. But the story of that chart is that's where we've been heading for a long time. Have we simply arrived sooner than expected, after a quick ride on the Brexit Express?

Apart from a few people born in the gold standard period, most people in Britain were born into a country where their currency was set to become less valuable against the dollar throughout the course of their life time than when they were born. I think that was also true for people born recently, Brexit or not.

If we rewind the clock to June, Brexit doesn't happen, that long-term trend still stands. The £ was $1.50, maybe it would have jumped to to $1.60. That chart would not look hugely different. It wouldn't be paining people's wallets, of course, because they would have been fairly used to that level in recent times. But historically? Weak and towards the bottom of that chart.

This isn't just a "Brexit" motivated defence. I take this view to also call into question the idea some people might have that now's the time to sell $ (or € or whatever) assets because the £'s sure to be back up. A minor rebound might occur, but I would think the post-2016 side of that chart will eventually look a lot like what came before.