The collapsing Pound - some perspective

The BBC are screaming about the collapsing Pound. Here's some perspective:

The Pound closed against the dollar on the 28th February this year at 1.3863.

It now stands at 1.3792

That's a fall of just over half of one percent - 0.512% in fact.

I don't remember the BBC calling this a disaster in February, why now?

Brexit - Why?

I went to sleep last night thinking that Project Fear had worked, hell earlier in the day even I had started to have doubts about which way to vote.

At 10pm last night I heard the poll forecasts of 52:48 for Remain and that the pound was hitting $1.50. This just seemed odd, the mood of the country didn't seem to be towards Remain, but maybe Project Fear had worked, after all even I had nearly cracked. However it felt wrong, so I tweeted...

I slept and awoke at 4ish thinking that being a gracious loser was important and that at least Sterling was up so holidays would be a little cheaper. Then I heard the news... Leave had won!

Of course the BBC are all doom and gloom and 'told you so' re the financial markets. Sterling down 9% they are saying, will yes against a figure that was illusory, a figure whose value was decided on wrong information. I was buying dollars not that long ago at just under 1.40, so the drop is about 5%, painful but not unprecedented.

But why did the Brexit campaign win? The blame can be laid in four main places:
1. The EU itself - By taking away democratic control from the people, the people felt powerless. This referendum gave the people some power and they exercised it. Also when David Cameron asked for a few scraps from the table to allow him to present his EU renegotiation as a success, they couldn't even allow that. So David Cameron had to pretend that he'd got a good deal but it was obvious that he hadn't.

2. Tony Blair and the Labour Party - Tony Blair was an EU supporter and an ally of the EU fanatic Peter Mandelson. But Tony Blair's culpability in this regard actually lies elsewhere. By opening the UK up to unprecedented immigration from both within and outside of the EU, Tony Blair and the Labour Party hoped to 'rub the right's noses in diversity'. Immigration into the UK increased to unprecedented levels and the people that were affected the most were those working class people, historically Labour voters, who saw their wages drop, their jobs disappear, their schools get more crowded, their roads fill up, their hospitals at breaking point and their ability to buy or rent a house recede as demand for housing and other public services outstripped supply.

3. The British media - The BBC dominate the British mediasphere and they have been very pro EU, pro unlimited immigration and frankly insulting of anyone who dared to hold a contrary view. A large proportion of the British people were tired of being called 'racist' when they pointed out that their hospitals, schools, roads etc were being adversely affected  by immigration. If the BBC had allowed their voices to be heard, if the government had listened to their legitimate concerns, then maybe the people wouldn't have become so angry. But the media and the establishment always know better, know what's good for the people and left the people voiceless, until...

4. David Cameron - I really believe that David Cameron didn't believe that he win the 2015 general election with a majority Conservative government. So a promise of an EU referendum was safe, he could say that the price of having another Conservative lead coalition with the Lib Dems was that there could be no EU referendum and he would probably have got away with that. Unfortunately for David Cameron the mood in the country was such that Labour voters fled the Labour Party for UKIP in sufficient numbers for the Conservatives to win a majority government. Now what was David Cameron to do? He went to the EU (actually see 1. for what happened)

5. Angela Merkel - Her decision to open the floodgates to Middle East and North African immigration and the resulting images of, mainly, young ,men walking into Europe helped to decide the views of many who don't benefit from cheap cleaners, gardeners and builders but who can no longer get work in thise jobs because they've been undercut by immigrants.


What do you think? Am I right? Have I missed something?

Targeting a currency over the Christmas/New Year period

The City and indeed most financial markets are winding down now and will be all but closed from 24th December to 4th January. I wonder if this is when a campaign targeting a currency could be more easily launched. If so which currency? My money would be on the UK's Pound Sterling. Let's hope that I am wrong.

The ever increasing price of gold...

As gold nears the $1,350 per oz level, I was interested to read this 'As confidence in the dollar drops, private investors are putting their faith in gold.' in de Spiegel. Read the whole article and then feel free to panic.

Economic apocalypse?

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 after the US Fed declared that the US economy may not recover for five or six years. Far from winding down emergency stimulus, the bank may need a fresh blast of bond purchases or quantitative easing.

Capital Economics predict that UK house prices will crash more than 20pc over the next two years as a result of Government spending cuts, tax rises and a surge in unemployment.

Meanwhile Gold drops in price but somebody bought 241,000 tonnes of cocoa beans yesterday moving the price for that essential commodity to its highest price for over 30 years. Maybe I should have invested in chocolate rather than gold?

No overall majority looks like being favourite and the foreign exchange markets have taken fright

I see the Pound is drifting down as hopes of a majority Conservative government recedes and the chances of Gordon Brown limping along as Prime Minister increase.

Pound collapses against the dollar but not a word on the BBC news pages

The Pound has fallen a full 5c against the dollar over the last few days but not a word on the BBC, whose main priority is keeping the Conservatives out of power.

In two hours the polls close and it will start to be safe for the BBC to report bad economic news again!

That's not the whole story is it?

The BBC report that 'European stock and debt markets continue to be hit by worries over Greece's heavily indebted economy, as the euro also falls.' Trouble in Euro-land, thank heavens we are not members of it, would seem to be the subtext. Let's leave aside that the BBC's current blue eyed party would have taken the UK into the Euro years ago and that the BBC in-house policy has always been pro the Euro for the UK, what is actually going on in the markets? The BBC line would seem to be that the Euro is falling, let's have a look... At 1pm, the BBC show Sterling down 0.66% against the Euro so which currency is suffering more, the Euro or Sterling?

Here comes the Sterling crash

The Telegraph report that:

"UniCredit has alerted investors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece.

...

"I am becoming convinced that Great Britain is the next country that is going to be pummelled by investors," said Kornelius Purps, Unicredit 's fixed income director and a leading analyst in Germany.

Mr Purps said the UK had been cushioned at first by low debt levels but the pace of deterioration has been so extreme that the country can no longer count on market tolerance.

"Britain's AAA-rating is highly at risk. The budget deficit is huge at 13pc of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that," he told The Daily Telegraph.

"Sterling is going to fall further over coming months. I am not expecting a crash of the gilts market but we may see a further rise in spreads of 30 to 50 basis points."

Yields on 10-year gilts have already crept up to 4.14pc, compared to 3.94pc for Italian bonds, 3.48pc for French bonds, and 3.19pc for German Bunds, though part of this reflects worries about higher inflation in Britain.

Ian Stannard, currency strategist at BNP Paribas, said markets are fretting over how the UK will cover its deficit following the pause in quantitative easing by the Bank of England. The Bank has absorbed £200bn of debt, more than total Treasury issuance over the last year.

"The UK may have difficulty in attracting extra investors to fill the gap. We think they will have to do more QE as recovery falters," he said.

BNP Paribas expects sterling to drop to $1.31 against the dollar this year and reach parity against the euro despite troubles in Club Med. "We're very bearish on the UK," he said. "

The BBC have decoded not to report this story; I wonder why? Is it because it does not fit the agreed 'narrative'?

And the bad economic news just slips out

Here's the BBC headline"UK trade deficit widens to worst in 17 months" and the start of the article (my emphasis):

"The UK's goods trade deficit with the rest of the world unexpectedly widened to its biggest since August 2008 in January.

And exports saw their sharpest drop in more than three years, according to the Office for National Statistics (ONS).

The UK's trade gap in physical goods widened to £7.99bn ($12bn), well above the £7bn forecast by economists.

The news was disappointing, especially since the weak pound might have been expected to boost sales abroad.

The UK's currency has fallen by some 24% against a basket of world currencies since early 2007 - before the global economic crisis.

...

Meanwhile, December's trade figure was revised down to £7bn from its original £7.3bn.

The goods trade gap with non-European Union countries was also wider than forecast.

That stood at £4.8bn, from £3.4bn in December, after Meanwhile, December's trade figure was revised down to £7bn from its original £7.3bn.

The goods trade gap with non-European Union countries was also wider than forecast.

That stood at £4.8bn, from £3.4bn in December, after exports to countries outside the EU dropped by 12.5% on the month and imports rose by 1.6%."

Appalling economic news and I remember this sort of news being greeted with cataclysmic headlines and being used to destroy Conservative ministers in the 1980s. But as this is a BBC approved Labour government the story is not even one of the top stories - those being the new dog licence proposals, the Facebook killer and the news that the England football team might have been bugged. In fact this story showing how deeply in the mire the UK economy is has now dropped below a Jon Venables story.

The BBC's news management is so biased that it almost washes over me. When will the Conservatives start to point it out, or do they want a Labour government to be re-elected?


UPDATE 16:30: The article has now completely disappeared from the News front page and UK news front page. It is still the Business page lead story but why hide the appalling figures from those people who don't browse to the business pages?

The difficulty with playing the foreign exchange markets

How can I be expected to know which currency to put my money in when the UK, the US and the Euro Zone are all screwed. My views of the broken UK economy are well known and Greece's economic collapse and the near collapse of Ireland, Portugal and Spain (the so called PIGS economies) makes the Euro Zone weak and of course with news that

"A leading credit rating service warned the United States' stellar ratings could take a hit because of the U.S. budget deficit and slow pace of economic recovery.

Moody's Investors Service issued its determination Wednesday, two days after the Obama administration said the deficit in fiscal 2010 would be about $1.6 trillion and about $1.3 trillion in 2011. The 2011 estimates work off the assumption of a relatively strong bounce for the U.S. economy. "

Maybe Japanese Yen or the Swiss Franc?

Here's to 2010

The blogosphere seems almost full of predictions for 2010, including Iain Dale's ten predictions for what will happen and Letter From a Tory's 10 things that won't happen. So who am I to miss out?

Five political predictions for 2010:
1. Gordon Brown will continue to try and create spurious and contrived dividing lines with the Conservatives, the BBC will assist by pushing the dividing lines
2. The election will be held on May 6 (along with the local elections) because Labour cannot afford to run two campaigns and this way they will maximise their vote in the council elections
3. The pre-election leader's debates will produce a surprise win (in the view of opinion polls) for Gordon Brown
4. The pre-election leader's debates will produce an increase in support for the Lib Dems
5. Labour win the general election, postal votes being a key factor, and the protests about vote-rigging are dismissed as "losers' sour grapes"

Five economic predictions for 2010:
1. With a Labour victory at the general election (see above) the UK's credit rating will drop from AAA and the resultant rise in interest rates will produce the second half of the 'W shaped' recession
2. The re-election of a Labour government will mean that the exodus of bankers and other financial institutions to more financially friendly locations
3. The ever larger hole in the Treasury's tax receipts will mean that the higher rate of income tax rises to 60% and VAT to 20%
4. The Pound will reach parity with the Euro and the price for IMF and EU assistance for the "sick man of Europe" will be joining the Euro. Being at parity will make this an easier sell for Gordon Brown and Peter Mandelson
5. Having dropped to around USD 1,100 at the end of 2009; gold will rise ever higher, reaching USD 1500 by the end of the 2010

Five BBC related predictions for 2010:
1. The BBC will become ever more blatantly biased in favour of the Labour party, the Conservatives won't realise how serious a problem this is
2. The tone of the BBC's leader's debate will be clearly pro-Labour, the Conservatives won't realise how serious a problem this is
3. The BBC will minimise their coverage of the postal voting scandal (see above), the Conservatives will finally realise how serious this BBC bias is but it will be too late
4. The BBC will continue to push for the withdrawal of British armed forces from Afghanistan
5. The BBC will continue to vilify Israel at every opportunity and revel in the coming further military attacks on Israel


More to follow...

Selling the family silver

The BBC report that:

"Gordon Brown is to announce the sale of £16bn-worth of assets by the government in a bid to shore up public finances.

The prime minister will give details of initial sales that could raise £3bn - including the Tote, the Dartford crossing and the student loan book. "

Oddly the BBC are also still reporting that:

"Prime Minister Gordon Brown has painted an optimistic prediction for the economy, saying it was "simply not true" that tough times are ahead."

How far removed from reality are Gordon Brown and his cheerleaders at the BBC?

I don't see how this can be anything but dreadful news for the UK economy in general and specifically the value of Sterling. How soon before Sterling reaches parity with the Euro? Is it possible that this has been Gordon Brown and others' plan for some time, to destroy the UK economy so as to get the UK into the Euro?

By the way are all the protestations by Labour politicians that in order to enter the Euro there must be a referendum taken seriously by anyone? After all they are being made by the many of the same people who promised us a referendum on the European Constitution - "Ever get the feeling you've been conned?"*




*Yes a gratuitous John Lydon Sex Pistols reference.

Bye bye US Dollar

The news that China sold its first batch of sovereign bonds in Chinese yuan to foreigners last month points to the continuing demise of the US dollar. We are now in a transition period as the current global reserve currency the US dollar is gradually rivalled and then surpassed by the Chinese yuan.

So what will the effects of this change be? A worsening of the US dollar exchange rate and a hardening of the Chinese yuan. I also foresee the Euro, Yen and Sterling diminish against the Yuan, but probably increase against the dollar. The big winner will be GOLD.

"Best placed" economy?

Alex Masterley informs us that:

"The International Monetary Fund has just listed the UK as the country "most susceptible" to having its economic recovery derailed by a lack of credit in its global financial stability report.

The Fund says there aren't enough domestic resources to finance government borrowing and private sector credit, and that funding gap would represent about 15 per cent of national income in the UK during 2009 and 2010, compared with 2.4 per cent in the US and 3 per cent in the eurozone. This year the Bank of England has filled the gap with its £175bn programme of quantitative easing, creating money out of thin air to buy assets, predominantly government bonds.

"In terms of regional vulnerability, the United Kingdom appears most susceptible to credit constraints under our stylised scenario, given its significant reliance on the banking channel and the projected sharp decline in domestic bank balance sheets, as well as substantial public financing needs," says the IMF.

The choice for is either or all of

* more quantitative easing, in which case expect the value of sterling to drop further, making imports and the cost of living more expensive for all,
* drastically less spending by government and the private sector, but mostly current spending by government because that is where the biggest shortfall and hence most of the funding gap arises, which will hit the public sector worst immediately but damage the prospects of UK business through lack of investment and will keep unemployment high; or
* much higher interest rates to attract foreign lenders to put their money into sterling, in which case businesses and homeowners get it in the neck and few new jobs will be created.

Either way you are probably screwed. Sounds like the scrag end of the last Labour government."

I couldn't have put it better mysepf Alex, so I didn't!

A "weak currency"

Last December I blogged: "

"A weak currency is the sign of a weak economy,which is the sign of a weak government"
Gordon Brown, 1995

Would Gordon Brown care to comment on his reported remarks bearing in mind the standing of Sterling or will he persist in his claims that the UK economy is much better placed compared to other countries? Maybe the BBC could question Gordon Brown or Alistair Darling on this matter and not let them get away with the line that they do not conduct a day-to-day commentary on the exchange rate.

I was reminded of this as the Pound falls to a five month low against the Euro and has dropped against the dollar as well. The reason, warnings that UK public debt levels may not be sustainable. Any comments from "Prudence"?

Bookended by surprises, is the endgame in sight?

I have the terrible feeling that the Labour government of 1997-2010 will be bookended by two "surprise" economic decisions. The first days of this Labour government were marked by the surprise freeing from political control (yes I know it wasn't really freed) of the Bank of England. Will the dying days of this same Labour government be marked by the surprise joining of the Euro?

BNP Paribas are reported to have predicted that the Pound Sterling's recent collapse on the foreign exchange markets, as traders realise quite how badly screwed the UK economy is, will continue and that Sterling will reach parity with the Euro within about six months.

Around six months to currency parity which would make the job of selling a 1:1 conversion of Sterling to Euros, to a mostly economically illiterate population, that much easier.

Entry into the Euro, the Lisbon Treaty ratified by all member governments (with or without their population's approval) and then who cares if the Conservatives win the General Election, for they will only have the power of a local authority not a national government.

Maybe those people who chant "Gordon is a Moron" misjudge the man, maybe the game is all but won...

Pound down and the BBC can't report it

Sterling has been dropping ever since Mervyn King's appearance before the Select Committee this morning, how convenient that the BBC charting of exchange rates seems to have stopped working. After all the BBC can't allow the proles to be upset whilst their lord and master is making his great courageous speech this afternoon.

UK is downgraded (update)

I note that Standard & Poor's say that in the past, revised outlooks lead to downgrades in around 37% of cases. A 37% chance of the UK's credit rating being downgraded - should you sell Sterling, I have...

UK is downgraded

Standard and Poors have just revised their outlook rating of the UK. The UK is now had its outlook revised from stable to negative:

"-- The 'AAA' long-term and 'A-1+' short-term sovereign credit ratings were
affirmed.
-- The outlook revision is based on our view that, even factoring in further
fiscal tightening, the U.K.'s net general government debt burden may approach
100% of GDP and remain near that level in the medium term.

The only aspect that I take issue with is the 100% of GDP figure; if you include all of the off balance sheet elements it is much much higher than that.

The UK's "rating" has not been lowered but Standard and Poors point out that:

""The rating could be lowered if we conclude that, following the election, the next government's fiscal consolidation plans are unlikely to put the U.K. debt burden on a secure downward trajectory over the medium term," Mr. Beers
said. "Conversely, the outlook could be revised back to stable if comprehensive measures are implemented to place the public finances on a sustainable footing, or if fiscal outturns are more benign than we currently anticipate.""

Sterling looks remarkably stable after the expected initial shock, but will that last once the dealers have had a chance to really think about the real level of debt?


And here is Gordon's explanation of UK Debt levels from last year, looks well doesn't he?


Thanks to Guido Fawkes for reminding me of that video.



An odd blogging experience this one, I spotted the S&P outllok change whilst working and blogged it before seeing that I was not by any means the first... Oh well.