Sterling Crisis Looms as U.K. Unraveling Points to Budget Cuts

Thrugelmir

michaels wrote: »

Potentially Iceland type problems if our banks with their massive balance sheets have liabilities in other currencies and assets in sterling.

Interestingly enough this not the case. As banks lend long and borrow short. A fall in sterling ~ euro exchange rate helps a bank such as the RBS. As they need less deposits in Euro's to convert in £'s to balance their books.

The fall in sterling last year was extremely beneficial to the UK banks overseas exposure during the credit crisis last autumn.

Generali

Rochdale_Pioneers wrote: »

How the Brown frothers screamed at the time - "destroying the pound" was the refrain. Yeah, because an overvalued currency is just what you want in a recession, isn't that right Ireland?

Sorry, but its policies of economic madness like this that really worry me about the Tories. For all that they bleat on about how Brown has personally brought recession to the UK, they seem to have no explanation for what brought that same recession to everywhere else as hard or harder than here when they pursued different policies. What matters is how deeply we go in and how quickly recover, and the evidence so far - the actual evidence, not the rhetoric - is that we're getting off relatively lightly.

Brown might have sounded like a pillock at PMQs yesterday saying that unemployment is the Tory policy, but isn't it? It has been several times before ("Yes it hurt, Yes it worked", "High unemployment is a price worth paying" etc), and doesn't a prolonged recession with high unemployment suit their cause?

The reason for high unemployment under the Tories was that it was a way to drive out the inflation that was destroying the British economy. And yes, IMO at the time it was a price worth paying and it was a very high one too.

Inflation is currently the last of Britain's problems so I don't see the Tories following a tight fiscal policy right now.

JasonLVC

Rochdale_Pioneers wrote: »

Brown might have sounded like a pillock at PMQs yesterday

No, he DID sound like a right pillock.

The best he could come up with (bearing in mind he is supposed to be our Leader and this great analytical mind) was to say "Tories = Job cuts", I'm suprised he didn't stick his tongue out and say "nah nah nah nah nah", as Brown is now at the level of schoolboy politics.

Generali

tomterm8 wrote: »

Um, surely then we've already had one? After all, in the heady days of january I seem to remember that we had a plummet in Sterling as bad as the ERM debacle. People just didn't notice it very much, because we are on a floating exchange rate.

The irony of this, is that it was UK government policy to devalue sharply, they succeeded, and it really did help the economy.

Whilst you're right about the large fall in Sterling, it was from high levels to what has been 'normal' over the past few years, against the US dollar at least. It's clearly pretty weak vs the Euro.