UK News
Insights from the UK and beyond
from Blogs Dashboard:
A devalued pound can’t save the British economy
There it goes again. Sterling has been dropping sharply this year against the U.S. dollar and especially the euro, as Britain turns to a tried and trusted remedy for its economic problems: devaluation. Even with its slight uptick on Wednesday, sterling is down more than 6 percent against the euro since the beginning of 2013 and has slid 10 percent over the past six months.
This is not something the British government is boasting about, especially at a time when there’s concern over -- and sometimes a high-level condemnation of -- countries such as Japan that allegedly seek to manipulate their currencies. But it’s also not something the British government or the Bank of England is trying to hide – or stop.
The big question is: Does devaluation still work? It’s an old tool aimed at restoring competitiveness that has been used countless times by Britain in the past. In the 1960s and 1970s, the Labour government devalued sterling sharply against the dollar (and gold). And over the past 60 years the pound has lost more than 80 percent of its value against the German currency – first the mark and now the euro. In that time, the two countries’ economic fortunes have fluctuated, with Germany showing very robust growth in the postwar years and Britain performing relatively better from the early 1990s, when it crashed out of Europe’s system (at the time) of semi-fixed exchange rates, just as Germany was struggling to digest the economic impact of reunification.
Devaluation hasn’t always helped: In 1976, Britain famously had to go to the International Monetary Fund to ask for a loan to end a damaging run on sterling. It can also be a risky strategy if inflation gets out of control, which is why Germany, for one, is so skeptical about devaluation as a policy tool. But there’s a new concern surfacing: Can it even work? In the era after the financial crisis of 2007-08, there is mounting evidence that devaluation may not be able to help kick-start a stalled economy as readily as it may once have done.
from The Great Debate UK:
Waiting for the other shoe to drop
-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. -
The unemployed and the terminal insomniacs who have nothing better to do than read my blogs will know that I have long been gloomy about most of the Western economies. How can you fail to be pessimistic when the world economy is still dominated by the U.S. - a basket case, becoming weaker every day, with a political class too blind or too scared to admit in public the obvious fact that the country cannot carry on living beyond its means?
from The Great Debate UK:
Bank of England Inflation report offers markets a reality check
-Mark Bolsom is Head of the UK Trading Desk at Travelex Global Business Payments. The opinions expressed are his own.-
Sterling tumbled to a one week low against the dollar in trading this morning, after the Bank of England delivered its latest quarterly inflation and growth forecasts today.
from The Great Debate UK:
Sluggish U.S. economy may threaten UK business development
- Paddy Earnshaw is the Director of Customer Relations at Travelex Global Business Payments. The opinions expressed are his own.-
British importers and exporters’ confidence in the economy leapt in July, as positive economic data fuelled hopes for a return to strong economic growth. According to the Travelex Confidence Index (TCI), which jumped 12 points in July to 116, from 104 in June, strong gains were driven by quarter 2's GDP figure, as it showed the UK grew at its fastest pace in four years.
Tories could be making sterling a rod for their own back
Talking down the pound could have some pretty bad consequences.
Ever since the debacle of sterling being forced out of the European exchange rate in September 1992, British officials and politicians have maintained a stiff upper lip when talking about the pound.
The Conservative government spent billions of pounds and jacked up interest rates to defend the currency back then, but to no avail. The party’s reputation for economic competence was lost, paving the way for Labour’s big win in 1997.
Is powerful Mandy talking up the euro?
When Prime Minister Gordon Brown reshuffled his cabinet last week, fending off a challenge to his authority, a significant outcome was the creation of one of the most powerful ministerial jobs Britain has seen in years.
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Peter Mandelson, a former European commissioner who has twice served in British governments in the past and twice been forced to resign, was reconfirmed as secretary of state for business, but also given greatly expanded authorities that make him a powerful if unofficial number two to Brown.
Of course it’s genuine — I made it myself
Everyone, surely, would love to have a licence to print money. Well, one man has taken the concept to a whole new level. It might sound bonkers, but Sheridan “Shed” Simove has created his own currency.
“It makes the world go round. Oh, and it’s the root of all evil. Although strictly, the love of it is actually the root of all evil,” he writes in his new book, “Ideas Man: The Amazing Real-life Adventures of a Modern-day Creative Genius“. “Yes, I’m talking about the basis of our capitalist society, the units of exchange we use to obtain material goods — MONEY.”
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The Wall
