Sterling set for 20% devaluation?

ipri

Vince Cable says so...why no outcry in media...thought it would cause some reaction.

dunstonh

The sector allocation models have been reducing the UK equity exposure in last few years. Indeed, in five of the [risk based] model portfolios we use, the UK equity exposure is 5% or less. The most adventurous model portfolio has no UK equity at all.

So, expectation is perhaps already there.

moonrakerz

Vince Cable eh ?

Good job it wasn't him who said that the world was going to end two days ago - everyone would have believed that wouldn't they ??

Loughton_Monkey

Currencies go up and down. Short term rates fluctuate mainly with interest rates.

Ultimately, however, currency rates will follow the 'wealth' of the nation. Since we have earned nothing for years, we have been getting poorer and poorer. This 'hit' can either be taken straight away by the population in the form of significantly lower wages.... which tends not to happen in UK while we 'pretend' to be the rich country we once were.

Failing that, it can only show up in devaluation of the £. This produces mega inflation since our balance of payments is direly negative. But the effect of it is to force us all to become poorer, until the point of 'equilibrium' when we can again compete in the global economy. At this point, our £ is so 'cheap' that our goods become competitive again in the global economy.

The 'saving grace' is that the emerging economies tend to follow the reverse pattern. They get mega-rich and demand greater salaries etc. Eventually they price themselves out of the market.... Other markets can then jump back in and compete.

With the extremely 'silly' baggage that this country carries in terms of employment legislation, unnecessarily high and wastful public expenditure, and reluctance of the population to live within its means, this will be an extremely slow process, and will happen over the next 30 to 50 years.

I suspect Vincie's 20% is only a short term guess. Logic dictates that our currency must fall probably around 50% before we could realistically compete with the emerging markets.

buglawton

Yes it is set for a 20% devaluation.

Wait a minute... it already happened over the last 2 years.

property.advert

People can't go to Europe now because its too expensive. Japan and Oz as well. Singapore and Thailand are much more expensive than before and even vino at home is expensive for something half way drinkable. Sterling is already a basket case currency.

DavidHayton

property.advert wrote: »

People can't go to Europe now because its too expensive. Japan and Oz as well. Singapore and Thailand are much more expensive than before and even vino at home is expensive for something half way drinkable. Sterling is already a basket case currency.

Overseas prices won't seem so bad once we have had the inevitable dose of inflation that will bring UK retail prices back into equilibrium.

David

bendix

I don't know Vince Cable is seen as some kind of economic guru. He wrote a book (stealing ideas which had been around for years) stating the obvious and as a result he's lauded as a genius.

He's not. He got lucky, and his record since actually being given some authority has been appalling.

buglawton

In the 70s UK was known as the "poor man of Europe". Under 40s cannot remember this time, having experienced the Post-Thatcher narrowing of the gap with Europe that was based on a surge of financial services industries. Looks like we're heading back that way to be the "poor man".

The talking heads say that UK is better with a Services based economy while a minority voice says we should be Manufacturing instead. Most large countries do both.

There will be no quick fix - a high standard of living starts with good numeracy and science in the schools.