Wow!

I just read the pound went under a value of 1.10 euro for the first time in history. 1,0984 euro to be exact. That must be shocking for the UK I can believe! I knew the Pound went down massively, but this is huge! I hope it goes up again soon! I remember the time I was calculating everything by 1.45-1.50, and how long is that ago? Max. a year! And that is a dropdown of approx. 27% in a year! Hopefully it will rise again as soon as it went down; or hopefully quicker!

I remember how shocked I was when I first heard that Canadian money was now worth more than American money! The world is turning upside down!


Interestingly, though, Canadian coins are used interchangeably with American coins, and are given the same value in the store, regardless of the exchange rate.

Lol. I think people are getting a tad over excited here

The pound may be approaching parity with the Euro, but that's forgetting the dreadful state the Euro was in when it was first introduced- and for a long while after. It's also easy to forget that the pound has had abnormally highs against the dollar, and in lesser degrees against the Euro, for a very, very long time. I've never seen that kind of longevity of strength before with sterling- not in my lifetime. The fact that the pound has dropped to 1.54 approx against the dollar recently is not in anyway record, or anything to write home about. It was down to about about 1.34 in the early nineties- I remember it well because I went out to the US on a holiday at that time. It was also at a similar stage, and also a lot lower, throughout some of the seventies and eighties. What people forget is the striking fact that the pound has been so unusually strong for such a very long time- it's unprecedented. But it wasn't sustainable, therefore it had to fall sooner or later. People are just shocked at the speed at which it's fallen recently. It's probably going to fall even further before it starts to find any kind of recovery. I also very much doubt you will see what's happened over the last few years happen again in the next few years- the pound became over valued as a currency way too much in the last two years or so

The reason why the pound is dropping so drastically is partly because a lot of investors are, very quickly, pulling out their capital from the UK right now as a reaction- they predict (probably rightly) that the UK is about to go into what they think is going to be a fairly nasty recession, slightly behind the US in timescale. Therefore they want their money invested elsewhere for the time being. The US will probably recover before the UK does, because it's already ahead of the UK over going into a recession- and also because, despite everything the way it seems, the dollar is still the least volatile currency to invest in right now if you want safety. There's also a loss of confidence in the UK financially at the moment- hence why people are moving their money elsewhere. It's the same thing the US had a while back. It also has a lot to do with the fact that UK interest rates are deliberately being dropped to counter the perceived 'coming' recessionary effects. The UK is hunkering down for the moment. Investment is now going elsewhere. However, a period of 'cheap pound' can also really push up British exports, and tourism- as long as they don't keep it that way for too long because it screws up outside investment and undersells your currency (product/ value as a nation). Something I tried, in vain, to explain to Cotoole about the constant 'low' dollar over a year ago, when this all first started

It's all cyclical in the long term. We've all been here before on several occasions- though I think this time it could perhaps, potentially, be pretty nasty for a while. We don't really know yet.

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.

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.

mr dragon wrote: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.

It was on the news yesterday that more trips then ever have been booked to London (by plane, boat and train) this year to do X-mas shopping in London. That is what I thought. There a loads of cheap deals at the moment to go for one or two days. Also, there are a lot of cheap deals to celebrate New Years Eve in London, so there are definitely some advantages, and money will come in in a different way now if the shops/hotels are smart in London. I think it is the tourist sector they should concentrate on now, also with the view on the Olympics in 2012. I think that is where the money is at for the UK. At least, that is what I should do.

And just as an idea: why don't you try to do that as well? Maybe you can make some fantastic shots for the Olympics or some advertisement companies in regard to the Olympics or the tourist sector? Ask around. Make some pictures, and show them around to important companies and people. I bet they like your work. I can’t believe they won’t.

That's good advice P, and not something that hasn't crossed my mind. Though most of my work will come through agencies, therefore it's not necessarily my choice what I shoot. It depends on the commissions they get in and who they then choose to contract out the imagery to. You don't go directly to, say, the Olympic organisers to get this work, it goes out to ad or design agencies who then commission who shoots it depending on their contacts within the agency and also whether they feel the style of the photographer is appropriate for the type of campaign they are running.

Re the potential 'tourist and foreign shopper boost' by having a low pound. Basically it's a nice option to have right now but sadly I doubt it's going to have a major impact on the British economy because it's only a small proportion of our overall economy. And, more importantly, the fact they are slashing prices to the level they are right now means none of these companies are making any real profit. The people who actually benefit from this are the people who come from the outside the country to get a bargain. If businesses are forced to keep slashing prices downwards in order to compete and just make some kind of sales to shift stock, it ultimately gets to a point where they are actually loosing revenue because their prices don't match their costs anymore. Which ultimately means their businesses then have to downsize dramatically, they also create less orders from their suppliers- which then effects their businesses as well, a lot more people then get laid off, or in some cases the companies go bust- as you've just seen with Woolies. It's a downward spiral within the system, partly because the effect is to make more people redundant which then reduces their spending power- which is a disaster for an economy which is largely based around consumer spending. It it carries on it then leads to economic deflation as I mentioned in my previous post. The Americans tried in recent years to keep their currency low for a long while in order to boost exports, yet in the end it didn't really help them that much overall. This was exactly the argument I put to Cotoole a year and a half ago when this all first started, and you can now see that I was right- the US economy is one of the worst placed countries at present, going into this depression, when it comes to the current strength of it's major exporting manufacturing industry. Being 'cheap' currency wise doesn't necessarily make it better for your economy- that all depends on what type of economy you have amongst many other more complicated factors.

The big issue is getting the credit markets and the banking sector to function properly again, without that you wont see a real economic recovery.

And another new dept record: 1 Pound is now 1,023 Euro worth...

http://www.nu.nl/economie/1891329/brits ... -euro.html

That's a loss of 32% now

Lol. You shouldn't complain P- it's good for you!

I suspect the pound will reach actual parity with the Euro pretty soon. After that it's probably going to be a dodgy year for Sterling in 2009. It'll take a while for the currency to dig itself out of the hole it's suddenly found itself in.

I would think a weakened currency helps fight deflation...I think I have that right.

It's been 12 years since I took Econ 101...

mr dragon wrote:Lol. You shouldn't complain P- it's good for you!

I am not complaining; I am shocked, surprised and sorry for the British people. I know it isn't the end of the world, but it is not that you need this on top of everything in the UK. I saw a huge advert again this morning for cheap trips to London (although we did it cheaper before ). 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.

eddie2003 wrote:I would think a weakened currency helps fight deflation...I think I have that right.

It's been 12 years since I took Econ 101...

I'm not so sure if that's always considered true anymore Ed- though I'm only going by stuff that I've read recently. My knowledge of economics is very basic and simple. I see the argument though, because it helps boost exports which helps the businesses in a downturn. What I do know is that the continual slashing of prices by businesses to compete with each other creates deflation, which if it keeps spiraling downwards is considered, ironically, to be worse for an economy like ours than over inflation. That's what I am pointing out to P- shopping in Britain is also cheap right now because businesses are slashing their prices just to make any kind of sales. I'm not sure if it will get that bad in the UK though. I have a feeling the Bank of England will print more money to try and prevent it spiraling out of control to attempt to 'inflate' the economy (which also has other negative consequences). I'm more concerned about that whole situation than having a low pound for the moment. We've had periods of low value sterling as a currency in the past- it's not a new thing. I think people are more shocked at the speed and level it's fallen to, after being so high for a very long time.

I saw an economist on FBC or CNBC argue that in 18 months, the world economy is going to go through what he described as an "Inflation hurricane" due to all the money being thrown out there. He said if we get by with 8% inflation, we'll be lucky.

Yeah, that's also the argument I've heard. Without getting out of my depth too much here, the way I understand it is this. The central banks print more money to try and counter act deflation. If it gets out of control the market becomes flooded with extra cash, that then lowers the 'value' of a currency even further than it is already- which further reduces anyone wanting to invest in the currency at all (note it already being bad because the currency is already at a low value). Result- bigger fuck up for the economy that's much harder to extract yourself from- with the added bonus of out of control inflation because wages then have to go up in line with it, which then means they have to print more money to keep up, and it spirals even more out of control etc etc.

Guess we'll have to see how smart they are at dealing with this over the next year, aye. I think both Britain and the US are potentially in a lot of shit right now. But I don't think it's as bad as it could get yet. A lot of this rests on how the ideas of the incoming Obama Administration, and the other world leaders already in the game, react over the next year from Jan 2009.

Yes you are right money market rates and stocks go up as well as down, except people think they keep going up and up. Look at endownments, if yours matured in the late 80s and early to mid 90s, you were rolling in it. Earlier in this century, you would have just got back what you would have put in or even less. As for the pound vs the euro, well I can see Scotland adopting it before the rest of the UK would. Perhaps Scotland would be the trial run to see what would happen I guess.

As for the administrations in the UK and US, I believe you are looking at least 4 years maybe more to turn this thing around, and there is going to be a lot of consolidation in the meantime. I never understand the need to pump money into a loss making business, without any plan of restructure. These acts seem to be classic acts of Keynesianism, with a reaction to what happened in the 1930s, but you have to encourage world trade and you cannot do that if you are using subsidies and tariffs.

Well what matters more than the rather silly myth about the importance of FDI is that British people's mini breaks to european cities has been made harder by the decline in Sterling's fortunes. British people love their holidays more than any notions of soverignty so don't be surprised if support for joining the euro increases from now on.

OMG!! Look who's emerged! How you doing Eton?

I don't think British public opinion regarding joining the Euro is going to change because it might might make their hops across to the continent slightly more expensive for a while. That's a little silly to suggest. What may start to change it is if there's a very long period of weak sterling- and I'm talking more than several years here. You might find people then swinging towards the Euro if it stays a strong investment currency over time on the world markets- and if the pound keeps dragging for a very prolonged period. I don't think that circumstance is going to happen (though you should never say never). However I've seen sterling take a nosedive on world markets more than once in my lifetime- and it's always recovered. To be honest I'm 'sort of' in two minds about the Euro/Sterling debate. On the one hand you could potentially see the Euro carry on it's recent found position against the dollar- as a strong alternate choice of investment currency on world markets, yet on the other hand the Euro is not advantageous to certain European countries right now (who now have a property price crash- alongside an economic problem) that are currently converted to EMU: Spain and Ireland would be very notable examples. Because of the situation going on in the UK housing market at the present the UK's actually better off out of the Euro right now because of the direct control of interest rates issue.