Two dollar pound

IdleRich

IdleRich
"It means it's time to go apeshit mental ordering records from america."
Well, I must admit that amongst the first places I read about it was this one

http://www.vinylvulture.co.uk/forum/showthread.php?p=161390#post161390

But I was wondering if it was significant in terms other than records. I know that there is a maxim that currency traders say along the lines of "no-one ever got poor buying dollars at two a pound" but people on here have speculated about a US currency collapse. That's why I'm asking if the pound goes and stays beyond two and proves that maxim wrong will it be significant?
 

3underscore

Well-known member
It means about a cent on yesterday - it is just a psychological barrier it has been hovering at for months.

So, all in all, it means cheap copy in newspapers that has been ready for the past six months for which time it has been inevitable anyway.
 

IdleRich

IdleRich
It means about a cent on yesterday - it is just a psychological barrier it has been hovering at for months
Yes but I would guess it's a psychological barrier at which a lot of people will sell pounds so I would have thought that if it can break through that it would indicate a significant change in the relative values of the two currencies.
 

It means a lot of things (obviously, this forum has a lot of Sterling-regime oriented posters, but when the Dollar hits 1.50 to the Euro is when we need to start worrying ... BTW, please tell me, why have so many Brits got such a ridiculously inane hang-up about the Euro?).

The Dollar decline has been consistent and systematic since 2003 - it has declined against the Euro from 0.80 to 1.35 over that period, as it continues to struggle to fund its spiralling trade imbalance and national debt through the historically reliable petro-dollar re-cycling practice of creditor nations (mainly Japan, China, Saudi Arabia) supplying it with the requisite capital inflows to sustain that ever-expanding bubble cycle. But those countries, increasingly, are not doing this according to the old US-dictated rules any more (choosing instead to diversify both their foreign currency reserves and foreign investments - just consider what China is now doing in Africa) - even after the U.S. seductive hike in its interest rates from near-zero to 5-plus per cent since 2003 for this very purpose, the monetary policy that has now plunged the U.S. into deep, construction-led recession. Will it defend the dollar or defend the underlying economy? (Britain, now a purely monetary economy, when itself repeatedly faced with such a scenario over the last century, has always chosen the former).

On the positive side, the decline will hasten (as it did in the early-1970s vis-a-vis Vietnam) an embarrassing, bankruptcy-avoiding retreat from Iraq and Afghanistan.
 

IdleRich

IdleRich
"BTW, please tell me, why have so many Brits got such a ridiculously inane hang-up about the Euro?"
My guess would be mainly due to tradition - perhaps mixed in with a fear of losing control of setting interest rates, cautionary tales from Italy etc Basically people have an instinctive desire to keep the pound so they don't need to hear too much about possible economic disadvantages to be convinced.

"On the positive side, the decline will hasten (as it did in the early-1970s vis-a-vis Vietnam) an embarrassing, bankruptcy-avoiding retreat from Iraq and Afghanistan."
We'll see.
 
My guess would be mainly due to tradition

You mean economic conservatism and insular nationalism?

- perhaps mixed in with a fear of losing control of setting interest rates

But "most Brits" have absolutely no control over the setting of interest rates. Depoliticised by successive UK governments, they're now set by a private, un-elected executive cabal in pursuance of their elite self-interest.

Hundredmillionlifetimes said:
On the positive side, the decline [of the Dollar] will hasten (as it did in the early-1970s vis-a-vis Vietnam) an embarrassing, bankruptcy-avoiding retreat from Iraq and Afghanistan

.
We'll see.

We will indeed.
 

Grievous Angel

Beast of Burden
Going into the Euro would demonstrably have been bad for the British economy.

The pound has gone up against the dollar in anticipation of interest rates going up, which will happen because inflation has just jumped, because over-heating house prices have driven a consumer spending boom because of a misplaced sense of wealth. Higher interest rates means more traders buy pounds means the pound strengthens in value against the dollar.

It'll be down to 1.85 in three months.
 

hucks

Your Message Here
It means a lot of things (obviously, this forum has a lot of Sterling-regime oriented posters, but when the Dollar hits 1.50 to the Euro is when we need to start worrying ... BTW, please tell me, why have so many Brits got such a ridiculously inane hang-up about the Euro?).

The UK may well have gone in in Blair's first term if he'd have been able to sell it to his chancellor. When you read the Blair political obits over the next month or so, this will be one of his "big regrets". But Brown said it wasn't economically sensible, and since then he has been proved right. There is pretty much no economic reason for us to join the euro.

Much of the rest of Europe weren't/ aren't too keen on it either - it led to significant inflation in the Netherlands, for instance, as they went in too high. And some parties in Italy were talking about ducking out last year, too. It's a reality in most of the rest of the EU, though, so there's no point in their being hung up.
 

Mr. Tea

Let's Talk About Ceps
BTW, please tell me, why have so many Brits got such a ridiculously inane hang-up about the Euro?).

Er, possibly something to do with the generally bouyant and stable nature of the British economy over the past 10 years, versus uncertainty and high unemployment in the main Euro zone economies (France and Germany)?
 

IdleRich

IdleRich
"You mean economic conservatism and insular nationalism?"
Pretty much.

"But "most Brits" have absolutely no control over the setting of interest rates. Depoliticised by successive UK governments, they're now set by a private, un-elected executive cabal in pursuance of their elite self-interest."
Well yes but their self-interest is likely to be better served by a successful UK economy. Either way, interest rates set more specifically (by country) rather than Europe-wide are a more precise tool.
My point is, that when people are predisposed (be it by insular nationalism or whatever) to one point of view, whatever economic arguments there are for that view already have an unfair advantage.
 

3underscore

Well-known member
But "most Brits" have absolutely no control over the setting of interest rates. Depoliticised by successive UK governments, they're now set by a private, un-elected executive cabal in pursuance of their elite self-interest.

Please tell me more of this elite self-interest driven executive cabal. It sounds like a very fun interpretation of the BoE MPC (and actually wrong on many levels) that I would really like to hear about.
 
2stepfan said:
Going into the Euro would demonstrably have been bad for the British economy.

Says who? Bad for whom, exactly? [Are you just making this up as you please?]

2stepfan said:
The pound has gone up against the dollar in anticipation of interest rates going up, which will happen because inflation has just jumped, because over-heating house prices have driven a consumer spending boom because of a misplaced sense of wealth. Higher interest rates means more traders buy pounds means the pound strengthens in value against the dollar.

This is all very well at an undergrad, mainstream classical economic normative dogma level, but it just doesn't cut it in understanding current political economy. It is pure tautology.

First, inflation - which most certainly is not the reason for the interest hike, just the long-standing pretext -- has not just "jumped", it is engineered to appear that way. And of course, even inflation figures are systematically re-rigged when convenient: consider the way Gordon Brown did so in December 2003 when he switched from the old RPI inflation index, which was looking dangerously high, to the CPI. [Just as with the re-classification of unemployment figures: the 2.6 million on "disability benefit" being excluded from unemployment measures].

For around a hundred years, since the U.S. took over from Britain the Empire role, Britain has consistently maintained as a fundamental matter of policy (and with U.S. agreement), actually without exception, an interest premium over U.S. rates [the origin of Britain's move from a manufacturing-based economy to a finance-based one, a policy aggressively pursued by every UK government since, accelerated during the Thatcher years], which allowed for the emergence of The City and guaranteed a share of monetary re-cycling from the rest of the world that might otherwise go to the U.S.

U.S. interest rates have been increasing steadily since 2003, when they were a historically low 1 percent, and are now over 5 per cent, with more increases imminent [despite the collapse of the property market] to fund its trade deficits [zooming up to 1 trillion], budgetary deficits [ditto], and national debt [8 trillion]. All of these increases are always pre-matched by Britain to maintain its preferential premium. There's nothing mysterious about any of this, you just have to examine the actual policies and practices, along with the historical record, to ascertain all of this, though you first have to guillotine all of that inherited classical economic dogma, the normative fantasies daily broadcast by media and powerful interest groups.

Britain has had a "mis-placed sense of wealth for decades", nothing new being reported here: it totally depends on the virtual financial economy, including recurring "over-heated house prices". In fact, hiking rates will further guarantee an even bigger property crash.

2stepfan said:
It'll be down to 1.85 in three months

Again, are you just making this up as you go along? On what basis will it be "down" in three months? Based on all the forecasts I've seen, and - more fundamentally - global exchange-rate trends vis-a-vis the dollar and unchanged U.S. domestic and foreign policies, the pound sterling will be ABOVE 2 bucks in three months. I can guarantee this :D [Just as the Euro, the Yen, the Swiss Franc and many other currencies will be above their current rates against the dollar].

The U.S. is heading for meltdown, as we've known since 2003 ...

3underscore said:
Please tell me more of this elite self-interest driven executive cabal. It sounds like a very fun interpretation of the BoE MPC (and actually wrong on many levels) that I would really like to hear about.

Aren't you even capable of doing your own research?

It's got nothing to do with "fun", whatever that irrational, conformist nonsense is; it is how that institution operates.
 

dominic

Beast of Burden
as for why u.k. didn't adopt the euro, i think out of loyalty to united states, i.e., to ensure that oil and other commodities would be traded in london in pounds and dollars, not the nascent euro

and as for whether the u.s. economy is headed for meltdown, by any normative theory it should have collapsed long ago

however, if normative theory does not apply, if u.s. trade deficit is actually akin to an imperial tax on the rest of the world, then maybe things can just keep on keeping on until the rest of the world's powers make a concerted effort to buck u.s. position -- but the price for this would be total chaos and deep global depression, if not world war

key to u.s. position is to make sure that oil continues to be denominated in dollars -- this way other countries will always need dollars to buy oil -- otherwise, dollars would be useless and headed for collapse (on a normative theory)
 
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