Sterling hit a five-year low against the dollar this morning after Mervyn King, the Bank of England’s governor, admitted that Britain was headed for a recession. The pound is currently resting at just over $1.60, well off its $2.11 12 month high. The slide in sterling will likely make IT products more expensive in the UK, as kit …
Why can't people like this keep their gobs shut.
Loss of confidence is the reason the markets are in such turmoil, and that confidence isn't going to be bolstered by people who should know better saying things like this!
Why didn't Mervyn King...
... take a lesson from the way Sterling crashed when Darling Alastair opened his big mouth and *not* trigger another plunge for our currency?
You're probably right, it's just "talking the market down" that's the root cause of all this. Not the £1.5 trillion of personal debt. Not the flood of cheap money after 2001. Not the unsustainable housing boom, nor the obligatory housing crash that was bound to follow. Not the reckless lending. Not the record levels of national debt. Not NuLabour's "economic miracle" based on the back of a bloated public sector. Definitely not Gordon Brown's very existence.
Nope, it's probably just Merv's fault for uttering the 'r' word.
Back in the real world, the good governor has been one of the few sane voices in this whole worldwide debacle. He should be Chancellor.
So, the sudden dip in the currency rate isn't anything to do with his comment, despite coming immediately afterwards? I agree that the underlying problems are all that you have stated, however, sitting around and making comments that have immediate obvious negative effect certainly do nothing to help the situation.
Run away from the US$
"King is now calling on bankers to be patient after the “excitement” of the past few weeks."
I like that. He's claim and accepts the inevitable adjustment. If you look at what the US is doing in contrast, they are running the printing presses at maximum and printing dollars.... whirrr whirr whirr.
So to sum up, the US fed will pay interest on banks reserves deposited with them (i.e. fed will pay the banks interest on taxpayer bailout money too) whirr whirr whirr.
The Fed will pump money in as the government bails out the banks (i.e. as the gov takes out money the fed can print some more with limited risk of dollar collapse). whirr whirr whirr.
The fed will buy business paper, bonds etc. i.e. the link between making money and making things is eliminated, the fed will run the printing presses for businesses benefit too. whirr whirr whirr.
The Us Gov will take on further bailouts, (which are simply a way by which the FED can increase the money supply and pump it into the banks without a sharp drop in the dollar, ....)
Fannie Mae and Freddie Mac's worthless paper will form part of the value of the US Gov, since US.gov has invested in those businesses where nobody else would, and hence it forms part of the value on the $. So we'll hide the problems there as long as possible so as not to impact the $.
IMHO, if I were you, I would run, not walk, from the US$, and when you sell to US business I'd insist on getting paid in some other currency. I would choose Euro personally, but from Bank of Englands comments, maybe GBP would also be ok. That way when they pay you in these monopoly dollars you don't end up getting stiffed being paid on bits of paper that were worth a lot less than when the sale was agreed.
Worst President ever EVA!
re: keep your mouth shut or not
Keep your mouth shut - don't tell anyone about the dangers and slim chance will be avoid purely on will power (and be a thought incompetent for failing to predict it)
speak up and do your job - even if it is several years too late and just as we are falling through the ice
I knew I should have paid off the balance of that american trip sooner.
@Dave Ross again
That the British markets and currency are both down today is undoubtedly from Mervyn King's comments (and his holiness Gordon now, it would seem). Whether the news that we're in a bit of a pickle comes from the governor or whether the markets find out for themselves (and markets are very good at that) as events unfold the overall effect is much the same.
It's the five stages of grief: denial, anger, bargaining, depression, acceptance. I reckon we're somewhere between stages three and four (God knows there's been enough denial). Perhaps Merv is just helping us along the process, and surely sooner is better than later?
In short: don't shoot the messenger.
At least the US has the gold reserves to print the money,
We gave most of ours away in 1998 by, hmm, let me think? oh yes, it was Gordon Clown who sold it at $297 an ounce.
400 tons of the stuff at rock bottom price which should have been kept for a rainy day like now.
So no surprise were up shit creek with no paddle, price of gold now Gordon? or shall I measure up for the dunces hat now...
"kit and component prices are generally set in dollars"
We should have tried a bit harder to keep JVC and Freescale semiconductor open in East Kilbride and made all that junk ourselves instead of importing it.
Mines the one with the P45 slip in the pocket and the footprints all over it.
damn you Carrol Vorderman! :D
I moved to this country in 2004 and have been unemployeed for a total of 5 working days, that was when I first moved here.
During that time I have seen house prices double and triple in certian areas based on the idea that people were getting between 4-10 times thier annual salary.
If you wanted something and did not have the money then get a credit card and put it on that. Then when the interest free period ran out change to a different card.
It is these policies that have caused this issue. It is not just the gov't or banks to blame but everyone for wanting it all now without having to wait a little while so you can afford it.
Buy a house and you can make a load of money by doing a little work and selling for an inflated price. Thing is there is a limited amount of credit and it will dry up but noone beleive me when I stated that.
I stated 3 years ago that the housing market would crash and had people at my last job laugh at me. They kept saying that the immigrants will need houses and that is why the market is growing so quickly. Wrong the market was growing so quickly because they were giving mortgages to people who should not have gotten them.
And he is just stating that we look like we may be heading for a recession, a depression is a lot more like it. Only difference between this and the 90s' is that this is global and not down to one or two countries.
On the upside...
The Pound is still stronger than the Icelandic Krona.
of the stock market are FEAR and GREED
and nothing else, please remember this
Gold? It's shiny!
"At least the US has the gold reserves to print the money,"
Not exactly, you have less gold+ foreign currency reserves than Algeria/Turkey etc:
But that's a good thing (that you don't stockpile gold), it's just a shiny metal with limited real use. It's value is from scarcity but it's not scare if it was not stockpiled. So if you don't back your currency with gold there is no point in keeping it scarce.... pretty to look at, but otherwise kindof pointless.
'At least the US has the gold reserves to print the money'
Check again, it really doesn't have over 10 trillion in gold to pay of its national debt
Chickens coming home
People were throwing cash around like it was water. Buy now pay later . When laster came we just borrowed again. Then some woke up. People started defaulting, then they said wait, how much money is actually out there .
USA is not exactly the beacon of economic stability and growth just now --- why would anyone want dollars?
They don't even know how to play the game
Fine, the UK does need to take a battering, primarily because the value of it has been so reduced under Labour dictatorship, that we need to look at the reality of the real value of this island.
But, it does take a complete gibbon in a position of responsibility to really screw it up with words of foreboding doom. Here's an idea if you want it to be boring, then don't open your gob to the world's press :)
This is the effect of credit economies, this is the effect of land prices being inflated too high, this is the effect of an uncontrolled immigration policy, it is just plain and simple maths. I am not sure the Tories can even sort out this mess, they seem to think that people actually agree with Labour policy.
It is very simple to sort out this mess, but it requires some bravery by the leaders, it requires a freer society, it requires less government involvement at all levels, it requires less taxation, and it requires laws that work for the people not against them.
We are not after safety, we are after fairness, that is the crux to all of this. Order via fairness not fear.
The dollar is in the process of being watered down to the tune of 700 billion thanks to the US Gov and Fed.... wont be long before it starts falling again.
What annoys me is that it is meant to be a free efficient market but in times of trouble governments step in and bail out the people who caused the problem and ends up dumping the problem on the taxpayer (you dont actually think that the government actually has this money really? They create it out of nothing and it is paid for out of future debt).
Either they markets should be left to run efficiently without interference and let the greedy bastards fall when the markets fall or else nationalize the lot and we can all walk around in fur hats and queue for bread with our food coupons (because the government is incapable of running a nationalized economy without FUBARing it.