Will the EX Rate ever go back up?

Roberto,

That's what I thought.

But the Dollar has made a strong rise against the Euro, so ... well, I don't know!?!

Hopefully one day it will revert back, then again maybe it won't and the UK will either have to devalue the Pound or join the Euro, or both!

The likes of Eddie George and Gordon Brown should keep their gobs shut, spouting off about a recession . Couple that with the results today and what do you get? 1.228!!! Dropped 5 cents in the space of a week and are back to where we were in the "dark times" earlier in the year.

Mark

Had to send some money yesterday and only got 1.22 . Just as well I didn't wait until today, it has gone down to 1.19 . Can't be long now until it is £1/ €1 !!!!!!!

Mark

I know Mark, bad news

Good news, just booked some cheap flights, at least that's some consolation

Mark, you had to look! lol

I think your Mrs might be right, every time you look at the EX rate, it's gone down!

However this time it's not just GB to blame, when the BOE slashed the Interest Rate the stock markets at first thought 'cool' and then thought 'hang on a mo, what's going on here'.

In a similar vein so did the Money Markets, then the ECB a few days later only dropped the Interest rate by 0.5% thus causing the Pound to weaken further and 'artificially' keeping the Euro strong.

Why 'Artificially', well simply because had the ECB followed suit with the BOE, then we would have seen the exchange rate go the other way! However the ECB will I believe give another 0.5% cut within the next few weeks, as they know they must, but don't want to weaken the Euro by doing what the BOE did. Sneaky.

That's my opinion for what it's worth.

Sadly things here are even worse than they appear. Since all currencies are devalueing at the same time its difficult to get a clear picture of what is actually going on. In currency terms there is a "race to the bottom" to devalue and try and gain some competative advantage re exports. Unfortunately for a country like the UK that does not export much, all it will do is increase the costs of the huge amount we do import. So we can look forward to paying much more for everything in the future as the pound increasingly becomes worthless.

Gordon Brown is trying to stabilise the economy, but his chosen method is strangely more of the same medicine that got us into this fix in teh first place - ie more spending and borrowing at the individual level and at government. His priority wether he admits it or not is to try and stabilise the houseing market, firstly to save the banks and escondly in the mistaken belief that as people's houses stop falling, they will again borrow money against their houses and spend it like there is no tomorrow.

Unfortunately with this method you get a situation which is called pushing on a string. Ie like in Japan in the 80's you can lower rates all you like, infact to 0%  as they did and people still will not borrow and spend, because they have done that before and got into trouble.

When this happens the government has run out of interest rate bullets and then as the poor old consumer is tapped out and on his last legs, the goverment has to take over and do the spending for them. However the government does not have any money to do the spending with, its not like the gov has a big pot of money for hard time, infact all it has is a huge pot full of debt iou's. So the government is forced to borrow more, and print money to make up the difference. It then goes on a spending spree, usually vast projects to build roads and hospitals etc further plunging the country into debt and burdening our children with a dreadful legacy.

This is the modern equivalent of employing people to dig ditches and then fill them in again, which was tried in desperate situations in the not so dim and distant past. The theory being that it was better to have people doing something to avoid civil unrest.

As the money is printed to pay for all these ditches, the beer gets watered down as more and more pounds get into circulation. The result is what we are seeing now, the cost of everthing going up. If you think about it, if printing money was the solution, then Zimbabwe would be the richest country on earth, its not of course, its one of the poorest.

GB was warned by many, includeing the IMF that his borrow spend culture would end in poverty for the UK and the wastebucket for the pound. Instead he though he was better than that, and the UK could continue to prosper, building houses and selling financial services and providing free benefits to the poorr of the world. Sadly for us the results are all too aparent now.

As I said at the start sadly the pound may be falling against the euro, but in reality the euro is falling as well. This is the problem of measuring one currency against another. Its a bit like measuring your progress against a friend, it does not tell you how well you are doing, only how well compared to your friend! Your friend maybe a dunce!

To conclude the upshot of all this is going to be massive inflation down the road, after the temporary deflationary effects of the credit crunch have been worked thru.

The GBP will imho continue to fall against the euro while GB continues to borrow and spend. I have been hedging the pound against the euro using currency futures. Its not difficult to do and has preserved the value of my UK savings. This is important for me as I earn in pounds, but living in Spain spend in euros.

One euro buys 85.5p as of this evening, but its depreciating so fast could now be 86p. They say a currency reflects the world's opinion of its premier. Oh dear!

The BOE is making noises about intervention if this gets out of hand, I wonder what is out of hand to them.

BTW Techo

"However this time it's not just GB to blame, when the BOE slashed the Interest Rate the stock markets at first thought 'cool' and then thought 'hang on a mo, what's going on here'."

GB gets to appoint the members of the rate setting group, so he has should we say undue influence. The BOE is supposed to make rate setting independent, but we know GB only appoints dovish members.

I think there will be a rush to hard assets soon, as the dust settles on the credit crunch and people work out that money is no longer acting as a store of value.