Persephone wrote:I have to read it more carefully what you wrote, but I was just shocked the pound is so low at the moment. I was thinking yesterday, it might be a good thing though. I think a lot of Europeans will start visiting London now for X-mas (I know a lot of commercials are here on television about cheap X-mas shopping in the UK, and so on). So I hope different money will come in now, for instance by tourists because the pound is very low for us right now. And you know how different that was one year ago for me. We all thought London was really expensive. The good thing is, in this time you don’t know for sure where you are heading. It might change very quickly for the better again. And I genuinely hope it will do soon. Because I hear a lot of news these days about people made redundant in the UK and US, people who loose their jobs etc. It is a scary time. I hope the UK economics will catch up really fast, and hopefully the Euro will stay at the same value as well.
Having a low pound has advantages P. As you say, for the last ten years or so the UK has been very expensive for a lot of people coming here, or for outside countries buying our products or services. To have the reverse of that situation for a short time (given the current situation) in many ways may not a bad thing- it can help boost the economy in other areas. It's also not a great calamity to see this happening right now as some people are making out overall, and in the media. Some of us have memories that extend backwards historically before 1995 and know that the pound has reached much further lows than this point as a currency- and also know it wasn't always serious problem at the time within the overall big picture- also going forward from that from that. My worry about this current situation is more long term. I don't have a problem with a low pound right now, but I do have a problem with a continuous 'low pound' over a long period- ie longer than the next two years or so. The UK may have been more expensive than a lot of countries in terms of monetary value for the last ten years or so, but it also had massive outside investment into the country because of that value given by the currency, and also had massive job growth not only internally but also coming from the outside because of the strength of the pound. A strong currency can deter exports, but it also turns your currency (and economy) into something people (with a lot of money) want to invest in from the pov as outside investors- which then helps build that economy. Remember money is also a 'product' that people buy and invest in- from stocks and shares to investing in building projects etc. On top of that a high currency also encourages people from outside to come and work in that country, thus also creating a larger job market which stimulates the economy, partly because they get value on their exchange rate when they go back home after having worked in that country. Which is why we've had such an influx of workforces from ex soviet bloc countries in the last few years- which has also boosted the British economy.
Britain does export, but often in specialised services (we aren't a major mass market manufacturing country anymore). Many of those services come at a premium because they are specialised and people don't mind paying a premium for them for that reason. To cheapen what we export as a nation, in terms of product, may well not help us in the long term because we aren't selling within the 'cheaper' areas of the mass market globally- that's what a lot of Asian countries do at present because they can. It's much cheaper to manufacture and export a mass market product, such as a mainstream consumer electronic product from Asia, than it is from the UK. Therefore, I'm not sure if a prolonged low value currency situation with sterling is actually going to help us in the long term- which was also the issue I was trying to point out to Cotoole with the US dollar last year. Other countries offer cheaper services for many of those areas of the market more competitively. Because your product (from a major western economy) is probably going to be more expensive- you need to develop and market it for the areas that are prepared to pay for it.
However. At least for a short term period in the UK, given what's going on right now, it is ok to have this situation- I think.
The other really big issue is deflation. Very very low interest rates, a low value as a currency, and a recession with many people getting laid off- resulting in businesses constantly lowering their prices to compete just to make sales, further and further, all adds to deflation. Which means a country then has to print more money to inflate their economy back again- which unfortunately also has the added effect of devalueing their currency even further- which means less people wanting to invest in it. We don't want to get into that kind of spiral either. I still think the UK is going to be ok right now (we're just going to have a period of shittiness). Despite everything going at present we still have a very robust financial system and one of the most adaptable and flexible work forces in the world. However, it aint smart to make predictions, and I am particularly concerned about the level of debt our Government has accrued from when they were much more confident about our economy. We're not well placed, as some other countries are right now, to inject cash back into the system in terms of assets. I know it's worse in the US right now, but the UK isn't sitting that pretty either- and you can see the result of that by the way investors are pulling their cash out of the UK right now. Which is one of the reasons why we now suddenly have such a dramatic decreasing currency within international exchange rates. It's due to a sudden loss of confidence in the British economy.
Don't mess with the Bunny.
by Persephone on Wed Dec 17, 2008 6:13 am .gif "Shock")
Hopefully it will rise again as soon as it went down; or hopefully quicker!
.gif "Big Grin")
). It was a train trip (back and forth for 99 euro); I am not sure if there was anything included, or for how long it was, but I am just noticing all the cheap deals and adverts to London, due to the low Pound.
