FYI: Pound hits three-year low against euro

wotsthat

CLAPTON wrote: »

not really: the inflation measure reflects the change in prices and doesn't account for the level of substitution of dearer goods by cheaper ones, at least in the short terms : so the inflation as meausre by ONS will be higher, in general, than that experienced by ordinary people (on average of course). Its good to see you are behaving like an 'ordinary person'.

Yes really. The inflation measures are a more than reasonable proxy for stuff getting more expensive. Any lag in the basket of goods being updated to account for behaviour changes, I'd suggest, is inconsequential.

CLAPTON wrote: »

We know the nominal price of stuff continues to rise (at least for the last 70 years ) althought the real price has dropped enormously.
We also note that the vast majority of economist (pre brexit) used to think that a modest level of inflation (say 2%) was a 'good thing'. I don't know whether they have changed their minds after brexit.

The national debt is unchanged regardless of Brexit so I can see why government continues to welcome inflation.

CLAPTON wrote: »

No that's not my view : the current a/c deficit occured for a lot of interconnecting reasons; clearly the high level of the pound was supported by a wall of foreign money buying UK assets, businesses, property etc. : It used to be called 'inward investment' before brexit although it seems to be called a 'fire sale' by remainers now. I've posted many times on how undesirable this is as it means we are selling future income streams in exchange for short term consumption.

This I don't understand. Forget Brexit and remainers for a minute. Future UK income streams, if you're foreign, are 10-15% cheaper than last year - will that encourage or discourage people into buying the family silver?

Why exactly would inward investment stall when there's a sale on.

My view is the UK isn't going to be a basket case so current assets, businesses, property will be looking like cheap yield to foreigners at the moment. I suspect the real reason for the fall in Sterling is that the 'good' sort of inward investment where foreign money invests in factory, plant and people is expected to fall because it's much more risky given the uncertainty of the Brexit plan/ outcome.

Slightly off topic but I don't see inward investment as undesirable If foreigners are funding consumption then maybe we should be ensuring we generate new UK assets, businesses and properties to be built which can be sold at a profit?

wotsthat

Bit of a piece about the price of tuna which was discussed on these boards..

http://www.bbc.co.uk/news/business-37100382

Of course, it could always be substituted for something else to mitigate the price increase but if you happen to quite like tuna, olive oil, wine, oranges, bananas then you're a bit stuck.

CLAPTON

wotsthat wrote: »

Yes really. The inflation measures are a more than reasonable proxy for stuff getting more expensive. Any lag in the basket of goods being updated to account for behaviour changes, I'd suggest, is inconsequential.

check out the text books : many people seem to behave just like you (and I do), that is susbstitute dearer goods for less expensives ones.

The national debt is unchanged regardless of Brexit so I can see why government continues to welcome inflation.

I don't believe the level of national debt is the only reason that economist welcome inflation. There is the general view that deflation discourages people from spending because they expect things to be cheaper in a few months time : this drop in demand feeds through to falling sales, increased unemployment, lower investment etc.

This I don't understand. Forget Brexit and remainers for a minute. Future UK income streams, if you're foreign, are 10-15% cheaper than last year - will that encourage or discourage people into buying the family silver?
Why exactly would inward investment stall when there's a sale on.

you may be right ; too early for any real evidence whether inward investment is holding up or not .
It does seem strange though, that if the UK is still attractive to foreign capital why the pound would fall in the first place.

My view is the UK isn't going to be a basket case so current assets, businesses, property will be looking like cheap yield to foreigners at the moment. I suspect the real reason for the fall in Sterling is that the 'good' sort of inward investment where foreign money invests in factory, plant and people is expected to fall because it's much more risky given the uncertainty of the Brexit plan/ outcome.

sems somewhat mixed message

Slightly off topic but I don't see inward investment as undesirable If foreigners are funding consumption then maybe we should be ensuring we generate new UK assets, businesses and properties to be built which can be sold at a profit?

Welcome though it may be as a concept, who do you see responsible for generating new UK assets, businesses and property? And if it doesn't happen then the future for the young is somewhat more bleak than it might otherwise be.

wotsthat

CLAPTON wrote: »

check out the text books : many people seem to behave just like you (and I do), that is susbstitute dearer goods for less expensives ones.

I'm not saying it doesn't happen (of course it does). I'm saying any difference between published inflation figures and 'real' inflation as a result of the delay in the basket changing probably is of the order of a rounding error.

CLAPTON wrote: »

you may be right ; too early for any real evidence whether inward investment is holding up or not. It does seem strange though, that if the UK is still attractive to foreign capital why the pound would fall in the first place.

seems somewhat mixed message

On June 24th a foreigner would be more likely to buy shares in Astrazeneca because the currency change gave them a 10 - 15% discount. Conversely, they'd be less likely to build a new pharmaceutical facility because of the uncertainty of the UK's future trading relationships. It may well be that it's investment postponed rather than cancelled but IMO the fall in Sterling is because, on aggregate, demand for Sterling is expected to fall.

As I don't expect Brexit to be the equivalent of a nuclear winter I don't see a conflict of mixed messages.

CLAPTON wrote: »

Welcome though it may be as a concept, who do you see responsible for generating new UK assets, businesses and property? And if it doesn't happen then the future for the young is somewhat more bleak than it might otherwise be.

We don't need anyone to be responsible but continue to cultivate an environment where businesses can thrive and retain the option to exit by selling to overseas investors if they wish. Not sure if or why it should be discouraged; unless there are national security issues or something I don't see why anyone but the shareholders get to decide who they sell their shares to.

EDIT - I didn't ignore the unquoted points you made - I agree with them

buglawton

Should this topic be called "£ returns to sensible 2013 value against the Euro, after soaring to giddy overoptimistic heights, nothing whatsoever to do with Brexit"

Thrugelmir

wotsthat wrote: »

The national debt is unchanged regardless of Brexit so I can see why government continues to welcome inflation.

QE is a neat way of writing down the value of Government debt.

CLAPTON

wotsthat wrote: »

I'm not saying it doesn't happen (of course it does). I'm saying any difference between published inflation figures and 'real' inflation as a result of the delay in the basket changing probably is of the order of a rounding error.

clearly this is a matter of fact that can be looked up in a textbook and ONS publications; so no point in arguing the case until some-one looks it up.

On June 24th a foreigner would be more likely to buy shares in Astrazeneca because the currency change gave them a 10 - 15% discount. Conversely, they'd be less likely to build a new pharmaceutical facility because of the uncertainty of the UK's future trading relationships. It may well be that it's investment postponed rather than cancelled but IMO the fall in Sterling is because, on aggregate, demand for Sterling is expected to fall.

that may indeed be the case and as I perceive that you welcome any and all foreign 'investment' then that is a bad thing for you : I do not welcome so much foreign investment so do not see it is a bad thing.

As I don't expect Brexit to be the equivalent of a nuclear winter I don't see a conflict of mixed messages.



We don't need anyone to be responsible but continue to cultivate an environment where businesses can thrive and retain the option to exit by selling to overseas investors if they wish. Not sure if or why it should be discouraged; unless there are national security issues or something I don't see why anyone but the shareholders get to decide who they sell their shares to.

EDIT - I didn't ignore the unquoted points you made - I agree with them

I well home grown businesses as the profits and dividend are more likely to stay onshore.
Of course I respect the right for shareholders to sell their businesses to who ever they like.

It would be interesting to know whether the rate of foreign acquisition of UK assets iis being matched by new asset creation.

mwpt

buglawton wrote: »

Should this topic be called "£ returns to sensible 2013 value against the Euro, after soaring to giddy overoptimistic heights, nothing whatsoever to do with Brexit"

Potentially.

Personally I liked the fact that the currency I earned in was getting stronger again, almost reaching the giddy heights of 2007 before our banking system had to be bailed out. My holidays were cheaper and my dream of retiring, potentially to somewhere sunny in Europe was getting easier.

But I understand that there are an incredible amount of altruistic brexit voters around who are very concerned about our exporters and are happy to sacrifice their own purchasing power for big business.

Thrugelmir

mwpt wrote: »

But I understand that there are an incredible amount of altruistic brexit voters around who are very concerned about our exporters and are happy to sacrifice their own purchasing power for big business.

Big business can relocate back to the UK.

mwpt

Thrugelmir wrote: »

Big business can relocate back to the UK.

If we continue to devalue the currency further, we could probably compete with Malaysia, China, India and so forth for the mass manufacturing business too. I don't know why everyone doesn't do it.