Pound lower than the euro

[widge]

[quote]Who is going to bail the UK out of trouble if sterling comes under real pressure.

[/quote

The Bank of England may be forced to raise interest rates to defend Sterling. This of course would spark a whole new set of problems for us but unless inflation comes down from 3.8% (& any vat increases won't help) then interest rates are set to rise in the autumn.

[Gary/Gaynor]

Cereza please read the following :-
Britain has run debt to income ratios way in excess of current levels at several points in its history. Around the times of the Napoleonic War, and both the First and Second World Wars the debt to income level exceeded 200% - levels that today would be regarded as crippling and would lead the markets to expect imminent default. Click chart to the left. Yet there has never been a formal default, and much was made about the UK paying off the last of 50 instalments of World War 2 debt to the US and Canada in 2006.

But it cannot be said to be true that the UK's credit record is unblemished. In their brilliant book, This Time Is Different (we've plugged it before), Reinhart and Rogoff do not have Britain in their very short list of six nations that have never defaulted (New Zealand, Australia, Thailand, Denmark, Canada and the USA). There are (at least?) two instances of the UK defaulting. In 1932, in the grip of the Great Depression, Britain (and France) defaulted on First World War debt to the United States - the so-called inter-allied debt. Britain had linked its ending of paying of these debts to the premature end of German reparation payments earlier in the year - academics therefore have termed this an "excusable default" where Germany was the real defaulter. The Americans didn't seem to be especially cross about it in any case, although it was done without consent.

They normally default by inflation have you noticed how that is now rising especially in the UK but not so in Europe and the USA (deflation).

There is very little chance Mr King will raise interest rates unless he is forced to by the markets they want a low pound and inflation and that is what they are getting. The UK along with many others are going bankrupt its just a matter of time maybe in a few years or a lot longer but it will happen.

The great depression started around 2005 and has been hidden by goverments borrowing too much and printing money but that has now come to an end the word stimulus has been replaced by austerity its going to be a bad few decades.

I still think there will be riots in the streets

Have a nice weekend (its a bank holiday out here monday and we are off to CVO friday) The sun has got its hat on hip hip hooray the sun has got its hat on and Im going out to play

Gary

[widge]

The great depression started around 2005 and has been hidden by goverments borrowing too much and printing money but that has now come to an end the word stimulus has been replaced by austerity its going to be a bad few decades

Do you mean Gordon lied to us? Do you mean Gordon spent too much? Do you mean Gordon sold our gold at rock bottom prices to help pay for it? Do you mean that the Conservatives are going to have to rescue the UK from another bankrupt Labour government?

I fail to see why you think there will be rioting in the streets................we all know about Gordon & the consequences of his tax & spend regime, we've been here before with Jim Callaghan!

[cereza]

Really interesting article Gary but there are counter arguments to the 1932 "default" as even the authors concede. We sill retain our triple A status although the rates we are paying for gilts are higher than they should be for such a rating.
We are in a dire position of that there is no doubt but we do have the methods to get out of it AS LONG as they are implemented and thats what the markets are looking from from Boy George. If he adopts the right policy markets will go along with him. Thats why it was absolutely vital to kick out the Labour dreamers once again.
The authors of that article are also right in their assessment that countries do default by allowing inflation to reduce the debt and that is what we are doing right now. Widge - don't be concerned by the BOE having to write letters over inflation - inflation is exactly what is needed to reduce the debt quicker in real terms. The tool of increasing interest rates to defend the currency will not be introduced for a long time because that would choke off any growth which is also vital to get out of the Labour induced hole. The government will hold interest rates for as long as possible while not worrying about inflation - remember the letter writing by the BOE was another one of Browns ideas

One result of this inflationary period could also see another mini boom in property prices at least in the South initially

[widge]

Widge - don't be concerned by the BOE having to write letters over inflation - inflation is exactly what is needed to reduce the debt quicker in real terms.

Very unusual strategy ! High inflation = high interest rates = reduce debt quicker in real terms ???

Please explain why every nation in the world is seeking low inflation, low interest rates & reduced public expenditure to reduce debt?

[cereza]

No widge - they want low interest rates to encourage growth which can subsequently provide more tax which will help to pay off debt. Reducing public expenditure will obviously help. They also want some inflation because that way the debt reduces by itself but politicians will never say that publicly. The UK and US have been printing money or QE as they name it and now the ECB are going to do the same and this will actually promote inflation because of the increased money supply in the economies and they all well know this. They speak with forked tongues

[widge]

They also want some inflation because that way the debt reduces by itself but politicians will never say that publicly.

They probably don't say it because, whilst technically correct,it's an unusual point to make without also admitting that inflation also reduces the value of future borrowings making the issue of bonds and gilts less attractive to those from whom we borrow.

[cereza]

Exactly widge and also it would also be bad publicity to savers because the combination of low interest rates and higher inflation means reducing values of their savings on deposit. Thats why shrewd money is buying tangible assets that will easily be sold on (Chris Evans buying a Ferrari for 12 Million was not just a whim!) and property in the right location will also come more into this category in my opinion.

[PTBUXTON]

God why all the Bloody doom and gloom the £ trading at 1.15 to the Euro and as yet nowhere near parity.

[widge]

[quoteGod why all the Bloody doom and gloom the £ trading at 1.15 to the Euro and as yet nowhere near parity.


][/quote]
Cos some of us "old farts" rememember when it was 1.51!!!

[cereza]

God why all the Bloody doom and gloom the £ trading at 1.15 to the Euro and as yet nowhere near parity.

Think you've got the wrong end of the stick PT - theres no doom and gloom here - expect sterling to go to 1-20 next

[widge]

Thats why shrewd money is buying tangible assets that will easily be sold on

Like gold !!!!

[widge]

Thats why shrewd money is buying tangible assets that will easily be sold on

Like gold !!!!

Except Gordon Brown - who sold most of ours at bargain basement price just as it was about to go through the roof !!!!

[PTBUXTON]

God why all the Bloody doom and gloom the £ trading at 1.15 to the Euro and as yet nowhere near parity.

Think you've got the wrong end of the stick PT - theres no doom and gloom here - expect sterling to go to 1-20 next

I do hope you are right, and it make a change to hear that somebody is a little more positive than the rest.

[HampshireRich]

God why all the Bloody doom and gloom the £ trading at 1.15 to the Euro and as yet nowhere near parity.

Think you've got the wrong end of the stick PT - theres no doom and gloom here - expect sterling to go to 1-20 next

I do hope you are right, and it make a change to hear that somebody is a little more positive than the rest.

There only seems to be cereza and me with any confidence in sterling - gained a little today (something to do with a Spanish Bank) - but almost anything sets off movement these days