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The pound has plummeted because Mervyn King is saying that the UK is entering a recession.
It seems it took all the currency traders by surprise. This strikes me as odd; hadn't they already worked it out for themselves?
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1I am a bit surprised at the pound falling too. The US and EU are also lowering interest rates and entering a recession. It suggests that UK is considered to be at higher risk than either of our biggest trading partners. Something I find quite worrying.
Posted on 22 October 2008 |
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0The real problem lies in the UK's close association with the housing market and the high number of owner occupiers. As house prices crash this will have a disproportionate impact on the UK economy than in the EU and US. With a massive decrease in approved mortgages spending will drop dramatically and with falling interest rates and a recession ahead this country is definitely less attractive to foreign investors.
Posted on 22 October 2008 | Love 0 loves
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159I agree with the above - the response to the falling pound is to buy gold imho
Posted on 24 October 2008 | Love 0 loves
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0Being involved with a business importing large amounts from the USA, my fellow directors and I find it SO frustrating to hear our 'leaders' talking down the UK economy. As previous answers have said, that only fuels the fire. We watch our profits disappear with the $/£ exchange rate - something wholly outside our control. We do what we can to protect the business, which is little now that the banks are living up to their old reputation (only be willing to lend to people who don't need to borrow).
Our business supplies aerospace, defence and motorsport, significant employers and contributors to the UK's GDP. If we suffer, they suffer, we all suffer. SME's need help, not pessimism.
Posted on 28 October 2008 | Love 0 loves
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159Re JoyceMBeck
I'm sorry, but it is a complete cop out to accuse realists of pessimism talking the pound and markets down.
If for example I were so powerful that my words had any effect then I would have stopped the bank bail out from happening, raised interest rates to 18% like Iceland now the IMF is in charge and directed Northern wreck as a nationalised bank to pick up worthwhile pieces of the resultant train wreck of and caused by greedy people and banks borrowing and lending more than was prudent. Let the bad go to the wall and then we can start again. Wake up and smell the coffee - the economy HAS been wrecked and not by people who practice prudent financial management, yet who gets to sort it out?, the very government who allowed it all to happen in the first place - the Lunatics are running the asylum!
Optimism is not going to solve this - too many people have been wised up to what has been going on by optomists to be fooled again too quickly.
Posted on 29 October 2008 | Love 0 loves
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7uk economy has been funded on personal debt/housing boom/re-mortgages.
current gov want us too spend our way out of this credit crunch---with what?get into more debt?
im with above post--interest rate rise/although very painful will shorten reccesion/kill inflation.
what we will have now is 10 years of gloom
Posted on 05 December 2008 |
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1Most of above comments are correct, but not much has been mentioned about huge and ballooning government liabilities, both on and off balance sheet. Government shows no inclination to reduce public sector headcount and an incoming government would find it difficult to make significant inroads in the short term. Tax rises can only yield so much and the financial services sector, for so long a provider of real or illusory wealth is in desperate trouble. Moreover, with interest rates heading south, savers are not going to be inclined to bail out the government deficit.
You don't have to be Einstein, therefore, to see that the government will try to print its way out of trouble, in effect devaluing the currency by stealth. The money markets know this. QED.
If you really want some depressing reading, don't bother with the bland coverage from the BBC - try Jeff Randall on the Telegraph website.
Posted on 05 December 2008 | Love 0 loves
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