Sterling plummets like a stone and we are all saved?

house123

Sterling is being manipulated down by Merv and he, the economists and the media say this is the best thing since sliced bread. It means that it’s cheaper to buy British products, which in turn will benefit the whole British economy.

Not being funny. If it’s so great for the British economy why an earth didn’t we do this years ago? Surely there must be a downside apart from the cost of spending abroad, which for some of us we only actually do a week or two every year, if we are lucky.

abaxas

Ermm,

So no-one will a TV or any fruit and veggies out of season?

I think not.

ILW

Practically everything we buy is imported so will cost more.

Degenerate

house123 wrote: »

Not being funny. If it’s so great for the British economy why an earth didn’t we do this years ago? Surely there must be a downside apart from the cost of spending abroad, which for some of us we only actually do a week or two every year, if we are lucky.

That's kind of like saying why didn't we have a 0.5% base rate years ago - there's a time for stimulus and a time for putting on the brakes.

Sir_Humphrey

The alternative is even higher unemployment. Devaluing the pound is exactly what the Tories did after Black Wednesday. Only in internet-land, that was a good thing, whereas when Labour do it, it is bad thing.

Has we not done so, we would be in the same state as Spain now.

My signature gives the best explanation!

Generali

The pound falling in value is good for some and bad for others.

It reduces your standard of living as you wages and savings are worth less than previously.

It's good in the short term if you're exporting as it reduces your prices in foreign currency terms. In the longer term, the inflation created by a weakening currency will return a country's terms of trade to the status quo ante.

I'm not sure that the weakening of Sterling had anything to do with Labour. My understanding is that the Labour Governments since 1997 haven't had an exchange rate policy and still don't. Most politicians will seek advantage where they can including where their stated policies have failed.

Mr_Matey

Last night I was thinking:
Weaker Sterling -> Higher Inflation (oil prices in $, most goods imported)
Higher Inflation -> BoE raise rates
BoE raise rates -> Decrease in property values

Your thoughts?

It's bad news for my holidays and if I decide to move money back to Aus, but good news if I decide I want to stay and move my Aus money here. I've never seen the AUD so strong against the GBP.

Generali

Mr_Matey wrote: »

Last night I was thinking:
Weaker Sterling -> Higher Inflation (oil prices in $, most goods imported)
Higher Inflation -> BoE raise rates
BoE raise rates -> Decrease in property values

Your thoughts?

It's bad news for my holidays and if I decide to move money back to Aus, but good news if I decide I want to stay and move my Aus money here.

That's kinda it however there's a short and a longer term impact from where everybody's sitting right now.

Let's say the European and US economies just kinda sit where they are, bumping along the bottom. The UK gets a bit of inflation as a result of the devaluation of the pound caused by import prices rising and wages rising due to exporters needing to recruit more workers.

So what happens next? BoE increases interest rates to stave off inflation. Pound rises which is good for Mr Matey.

or....

BoE sits on it's hands. Pound falls further as investors lose faith in the real value of their investment. Mr Matey ends up with a long weekend in Whistable rather than a month cruising in the Whitsundays.

lostinrates

I'm itching to echange some Euros for sterling again.

CLAPTON

well

weaker sterling leads to higher prices for imported products and services
but people will tend to substitute other things for these ... uk holidays instead of spain, uk beer rather than foreign wine, uk produced food rather than imported, buy more UK produced cars etc etc

this will stimulate UK producers to produce more

so overall whether or not inflation goes up depends upon what level of 'spare' resources (e.g unemployment or under producing factories) there were priory to the devaluation

so thats how it works

basically when unemployment is high its a good thing and doesn't necessarilly lead to inflation..

Mr_Matey

Whistable huh? Never heard of it so I just googled. Apparently it's the "Pearl of Kent". I'm not keen on oysters, so times would have to be pretty dire. Maybe Whistler instead...

I think the BoE would go with option 1 although 2 is possible.

I'm not sure what's best for me in terms of the £ as I don't know where I'll be living in 2 years, but a weaker AUD would be advantageous as most of my investments are overseas.