quote:

Op donderdag 13 november 2008 23:57 schreef Yi-Long het volgende:
Lekker games en boeken etc kopen op deze manier bij play.com

quote:

British Pound Crashes to New
Lows as Economic Crisis Deepens
by Nadeem Walayat, TheMarketOracle.co.uk | November 13, 2008
Print

The foreign exchange markets are witnessing heavy and sustained selling of sterling which continues following the Bank of England's inflation report and statement on the economy. The British Pound has fallen below £/$1.50 to currently stand at 149.12, and to a new low against the Euro of 119. The fast developing sterling crisis illustrates the systemic failure of the Bank of England and Labour Government to manage both the economy and the credit crisis and marks another marker following last weeks panic interest rate cut of 1.5%, as the government took control of monetary policy back from the Bank of England and effectively ordered the Bank to cut interest rates by 1.5% despite inflation hitting 5.2%.

Mervyn King through a number of TV interviews during the day set out to to reassure the financial markets as to why the Bank of England cut interest rates by a near unprecedented 1.5% last week instead of during the previous 6 months and why the Banks outlook has changed so much since the August report by stating.

“We've reacted because the world has changed. The way we go about setting interest rates hasn't changed. I think it's worked well and I think it will continue to work well,”

Unfortunately the more Mr King spoke the more investors dumped sterling as it became increasingly apparent that those at the helm of the UK economy are barely able to comprehend what is going on in the present let alone to attempt to competently manage and accurately forecast as to what is to transpire and what needs to be done.

The governments response to the credit crisis and economic meltdown has been :

1. The £500 billion bank bailout package comprising £50 billion equity stakes, £250 billion loan guarantees and a further £200 billion in short-term liquidity injections.

2. Panic interest rate cuts that have seen rates cut by 2% in less than a month, falling from 5% to 3%.

These are panic measures to a) prevent an deflationary economic depression and b) boost the economy in advance of the June 2010 general election deadline.

Having first written about the perfect economic storm that Britain is now facing over 7 months ago, that perfect storm is now coming to pass as the currency crashes in the wake of unrestrained government borrowing, that sows the seeds for many years of stagflation following the impact of the asset price deflation.

The Impact of the Crash in Sterling

* Britain's living abroad reliant on UK earnings i.e. wages, interest or benefits paid in sterling are witnessing a fall in disposal income as the devaluation hits them directly in their pockets as the cost of living in sterling terms soars.
* UK PLC loss of asset values - In addition to the headline falls of 16% for house prices and 40% for the stock market, investors should also bare in mind the 22% drop in terms of euro and 29% in dollars which translates into a housing market crash to date of 38% to 55% which has ALREADY occurred, and a stock market crash of 62% to 69%. This is highly deflationary and hence the Bank of England is now, belatedly worrying about deflation through its panic interest rate cuts.
* The fall in sterling is highly inflationary and will result in forward inflation after the current deflationary bust. I.e. the UK economy is presently falling off the edge of a cliff, however once GDP stops plunging (by late next year), then inflation will start to make a return as the price of imported materials, goods and services soars.
* Mervyn King points to the fall in sterling as a boost for exports, What exports ? and who will we sell to during a recession? The manufacturing sector is has shrunk to less than 17% of the UK economy and of that exports are less than 5%, whilst a 25% crash in sterling 'should' boost exports, however the benefit of which will be far less than the Bank of England suggests.
* Tourist Industry - Theoretically sterling's fall should boost Britain's domestic tourism industry as foreigners flood into Britain to benefit from the sharply lower exchange rate. However with much of the developed world also going into recession it remains to be seen whether debt ridden consumers will be able to luxury afford trips to the UK, especially as Germany, Europe's biggest economy has just declared itself to be officially in recession following today's release of worse than expected economic data that shows 3rd quarter GDP contracted by 0.5% (consensus 0.1%) which follows second quarter contraction of 0.4%, and where Germany goes the rest of Europe will soon follow.
* Boosts Competitiveness - The key impact is that a fall in sterling should lift the price of imports and therefore boost the ability of British companies to compete in the short-term, however again there exists the problem of the lack of UK manufacturing, as well as the risk of foreign suppliers discounting and dumping stock onto the UK market as their own economies buckle under the weight of the economic crisis. This was illustrated this week following China's $600 billion economic stimulus package which effectively aims to subsidise Chinese exports.

For more guidance on how to survive the credit crisis and protect your money see the excellant free toolkit

Interest Rates, Inflation and Deflation

The Bank is now forecasting inflation will fall sharply during 2009 to below 1% CPI with the RPI measure going negative and pushing the economy into deflation during the year. However as we have witnessed with the perpetual 2% inflation forecasts in 2 years time, the Bank of England forecasts are consistently wrong. Similarly the Bank of England is now forecasting that the UK economy will contract sharply in 2009 by 2%, this is against the forecast made barely 3 months ago that stated that UK 2009 GDP growth would target 1%. It remains to be seen the degree to which these forecasts will also be revised further in 3 months time and during 2009 as has been the repeated tendency throughout 2008.


My existing forecast for UK interest rates to fall from 5% to 3.25% has now been fulfilled ahead of schedule following the Bank of England's panic interest rate cuts. Clearly with deflation on the horizon and an economic bust worse than the 1990's recession it does not take a genius to work out that UK interest rates are heading still lower, we will probably see interest rates of 2% or even lower by mid 2009, especially if negative RPI transpires as the next section elaborates upon.

Deflation - Negative RPI and Government Debt

The Bank is forecasting negative RPI next year, the importance of this is the fact that many pay deals and state benefits are linked to the RPI measure therefore a negative RPI implies that benefit payments will be cut next year, it will be interesting to see the public response, as it implies the UK is in store for civil unrest and worker militancy, especially amongst the public sector. Therefore in advance of 2010 Election the Labour government will increasingly cave in to public sector worker demands and push borrow far more than the current estimates and forecasts.

Deflation has not been seen since the 1930's Great Depression. The effect of deflation are worse than inflation as a deflationary spiral brings investment to a halt and the value of debts increases in real terms as wages contract, leaving borrowers worse off than people have experienced during the recessions of the post war period.

Long before the current crisis broke, way back in April 2008, I was forecasting that the UK would soon bust through the 40% GDP golden rule and lift borrowing to over 60% by the end of 2009 which would send sterling crashing. Following the £500 bank bailout I raised official UK debt surging to over 100% of GDP with similarly severe impact on sterling that had by then started to become apparent as sterling crashed through £/$1.80 down to £/$1.70. However it does look increasingly likely that Gordon Brown has now adopted the policy of bankrupting Britain in an attempt to win the next Election, which sets the scene for many years of economic stagflation to follow deflation.

Currency Trends



Sterling has been heavily oversold for over 2 weeks, however despite this sterling continues to home in on the longer-term target of £/$1.37 which represents critical multi-decade support, below which would be parity to the US Dollar.



Chart courtesy of stockcharts.com

Sterling's Break below 122.50 against the Euro to a new Euro all time low signals that the currency has entered a new downtrend that looks set to continue well into 2009.

Soaring Unemployment Heading for 2million for Christmas

The latest UK unemployment data released today showed unemployment soared by 140,000 in the 3 months to August, up 33,000 on the month and the number officially claiming unemployment benefit rose by 25,600 in October to 970,000. This was followed by the Bank of England's report on inflation and the economy that stated that UK is heading for 2% GDP contraction for 2009 which is significant change to the existing forecasts of growth for 2009. With a three month lag in published data, the actual unemployment rate looks set to pass above 2 million by Christmas to be released in March 2009.

My UK unemployment forecast as the below graphs illustrate is for unemployment to rise to just above 2.5 million by April 2010, however a 2% GDP contraction forecast by the Bank of England for 2009 now implies that the UK is heading for a severe recession which implies UK unemployment could pass above 3,000,000 during the recession, this despite the fact that he unemployment statistics are heavily manipulated to under report true unemployment which would be some 6 million higher if all those of working age were included in the data. The real number of unemployed in the UK now stands at 7.9 million, up 15,000 in the three months to August.



UK House Price Crash Continues

The most recent house price data released by the Halifax shows that UK house prices have fallen by more than 16% from the peak of August 2007 and October 2008. The crash in both US and UK housing markets over the last 12 months was increasingly followed in September by the bankrupt banks collapsing one by one like a chain of dominos with governments rushing to their rescue during September and early October to the tune of unheard of amounts of tax payers money that now runs to collectively over $3 trillion. This triggered the near panic co-ordinated interest rate cuts in October of 0.5%.

The whole trend for the house price crash has been forecast well in advance of events, right from the very peak to the initial down-trend path amidst prevailing mainstream denial that house prices were actually falling as recent as of March of this year, and right up to the most recent data that fulfills the original forecast of a 15% fall in average UK house prices as projected in August 2007.



The current house price forecast is now complete, therefore I now intend on working exclusively towards completing in-depth analysis geared towards generating the next accurate forecast for UK house prices to cover the next 2 to 3 years, which despite the now pervading bearishness may still have a surprise or two in store.

quote:

Op vrijdag 14 november 2008 09:53 schreef SeLang het volgende:
Ja de authoriteiten zijn totaal in paniek want ze hebben geen controle meer over de situatie. Nu wordt de £ geofferd.
Het is ongelofelijk dat zelfs maar een paar weken geleden de BOE in elk geval in woorden nog redelijk streng waren op inflatie maar nu is de paniek totaal en wordt de £ overboord gegooid.

Het is toch interessant om te zien dat een aantal andere landen in de wereld hun rente juist hebben verhoogd om de munt te steunen. Ik ben benieuwd of de UK in de situatie terecht komt dat ze een snelle U-turn moeten maken wat betreft rente omdat de £ totaal door het putje gaat.

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Op vrijdag 14 november 2008 12:45 schreef dylann het volgende:
is de pond alleen aan het dalen tov de dollar of ook tov van de euro?

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Op vrijdag 14 november 2008 10:52 schreef sitting_elfling het volgende:
Hoe zit het eigenlijk met het britse bankenstelsel? Is dat écht zo anders dan de rest van de wereld?

quote:

Op zaterdag 15 november 2008 08:38 schreef henkway het volgende:
Engelse huizen worden weer goedkoop voor Europeanen

quote:

Op vrijdag 14 november 2008 10:52 schreef sitting_elfling het volgende:
Hoe zit het eigenlijk met het britse bankenstelsel? Is dat écht zo anders dan de rest van de wereld?

quote:

Op vrijdag 14 november 2008 10:52 schreef sitting_elfling het volgende:
Hoe zit het eigenlijk met het britse bankenstelsel? Is dat écht zo anders dan de rest van de wereld?

quote:

Op zaterdag 15 november 2008 13:42 schreef Stephen_Dedalus het volgende:

[..]

Sinds 1694 is het britse bankstelsel het meest stabiele bankstelsel van de wereld geweest. Ik heb er alle vertrouwen in dat het nu ook weer zal herstellen.

quote:

Op donderdag 13 november 2008 23:57 schreef Yi-Long het volgende:
Lekker games en boeken etc kopen op deze manier bij play.com

quote:

Op zaterdag 15 november 2008 08:38 schreef henkway het volgende:
Engelse huizen worden weer goedkoop voor Europeanen

quote:

Op zaterdag 15 november 2008 20:05 schreef Emu het volgende:

[..]



Zijn er bovendien niet veel Britten die in Spanje en Frankrijk een vakantiehuisje kopen.

Met de klappen die de pond nu krijgt zullen zij een pak minder kunnen kopen, en zal de vraag is Spanje en Frankrijk nog meer dalen, wat weer prijsdruk tot gevolg zal hebben... lijkt geen einde aan te komen.

quote:

Op zaterdag 15 november 2008 20:18 schreef henkway het volgende:

[..]

Als ik een tweede huisje in Spanje had en weg kon, dan verkocht ik nu het eerste huis hier

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Op zaterdag 15 november 2008 18:21 schreef Aether het volgende:

[..]

De koers die play.com rekent wijkt steeds meer af van de officiële. Twee jaar geleden hebben ze de mogelijkheid om in ponden te betalen al afgeschaft voor iedereen buiten het VK.
Met het ‘anti-vasteland-sentiment’ bij de Britten zie ik geen snelle toenadering tot de euro.

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Op zondag 16 november 2008 15:25 schreef SeLang het volgende:
Ik weet niet of de EU ons nog wel wil hebben

quote:

Op zondag 16 november 2008 17:30 schreef SeLang het volgende:
Ze beginnen hier nu behoorlijk in paniek te raken.
Het ziet er echt slecht uit, en ik hou er serieus rekening mee dat ze over een tijdje gedwongen worden om de rente juist fors te verhogen om de £ te redden.

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Op zondag 16 november 2008 17:32 schreef henkway het volgende:

[..]

Dat zou pas helemaal dom zijn

quote:

Op zondag 16 november 2008 17:32 schreef henkway het volgende:

[..]

Dat zou pas helemaal dom zijn

quote:

Op zondag 16 november 2008 17:48 schreef HarryP het volgende:
De reden voor de laatste rente verlaging was toch om samen met de EU goede sier te maken tegenover de pers om te laten zien dat ze samen stappen kunnen ondernemen om de banksector en de economie te ondersteunen.

quote:

En een lagere waarde vvan de Pond is toch goed voor de export....
Mmm inderdaad wel lastig als je handels balance zo zwaar negatief is.

quote:

Op zondag 16 november 2008 17:48 schreef HarryP het volgende:
En een lagere waarde vvan de Pond is toch goed voor de export....
Mmm inderdaad wel lastig als je handels balance zo zwaar negatief is.

quote:

Joining the euro would be the worst possible response to the sterling crisis
The pound's slide has Euro-enthusiasts slavering with anticipation. "Calls for the euro are likely to reach fever pitch if there is a collapse in sterling," writes Roland Rudd, chairman of a pro-euro lobby group, in the London Evening Standard. "Suddenly membership of the euro is beginning to look a very attractive escape route," agrees Will Hutton in The Observer.

Hang on, chaps: weren't you arguing that we should join eighteen months ago, when the pound was more than 30 per cent more valuable than now? What if we had taken your advice then? The financial crisis in Britain could not have been cushioned by the exchange rate; it would instead have been felt in output and jobs. Rather than a 30 per cent reduction in sterling, we'd have suffered a 30 per cent reduction in wages, with a cycle of strikes and sackings as people struggled to adjust to the new reality.

Happily, being outside the euro, we are able to respond to the shock with policies determined by our own needs. We have fiscal and monetary independence, and we are using both. The cheap pound means that Britain can now price itself into the market. It makes possible an export-led recovery.

I know that the decline of sterling is bad news for many of my readers. It's no picnic for me, either: I'm paid in sterling, and I work in Brussels and Strasbourg. But there is a reason why the pound is taking a pounding. Investors can see that Gordon Brown squandered our resources, leaving Britain with the worst deficit of any advanced economy. They know that he has committed more to the bail-out than any other country (hat-tip, Iain Dale). It gives me no pleasure to say this, but the sterling crisis is a market comment on eleven-and-a-half years of Labour profligacy. The Broon, to borrow John Smith's phrase after Black Wednesday, is "the devalued prime minister of a devalued government".

If the ERM taught us anything, it is that there is no such thing as a permanently correct exchange rate. After Black Wednesday (or, rather, White Wednesday), Europhiles toured the studios telling anyone who would listen that "we joined at the wrong rate". But the idea that 3 DM to the pound was too high a rate is hard to reconcile with it having been too low a rate two years before; and, sure enough, we had reached that rate again within five years.

The Hutton/Rudd arguments for joining the euro are terrifyingly similar to the arguments for joining the ERM. Then, as now, Europhiles claimed that membership would boost business. In fact, more than 100,000 firms went bankrupt during our 23 months inside the system. Then, as now, they promised that membership would create jobs. In fact, unemployment doubled to just under three million. Then, as now, they claimed that it would bring lower interest rates. But interest rates were in double figures for most of our time in the ERM - despite inflation at barely three per cent - and 1.75 million homes were overtaken by negative equity. Then, as now, they assured us that participation would bring stability. In the event, our trade-weighted exchange rate was less stable during membership than before or since.

Is there any circumstance in which these zealots would not advocate euro membership? If the pound bounces back in 2010 on the basis of a recovery, will they still be whistling the same old tune? How many times do they need to be proved wrong before we stop listening?

quote:

Senior UK politician warns of run on the pound
LONDON (AP) — Britain's government risks seeing the value of its currency collapse unless public borrowing is kept under control, one of the country's senior opposition politicians said in an interview published Saturday. Conservative lawmaker George Osborne told a British newspaper there could be a run on the pound sterling if the country's debt keeps growing.

"We are in danger, if the government is not careful, of having a proper sterling collapse, a run on the pound," he was quoted as saying in the Times of London newspaper Saturday. "The more you borrow as a government the more you have to sell that debt and the less attractive your currency seems."

British Prime Minister Gordon Brown, in Washington for an economic summit intended to relaunch the crippled global financial system, said he regretted what he called "partisan talk." "I believe that at a time when nations are coming together all over the world to deal with these problems, I think people are looking to politicians to be responsible and to show leadership," Brown said.
He had no apologies for his government's plan to extend borrowing to jump-start Britain's faltering economy, saying the country's central bank backed his move. "The governor of the Bank of England has made it absolutely clear that it is not only right to cut interest rates, but it is perfectly reasonable to have a fiscal stimulus," Brown said.

The pound fell to a six-and-a-half-year low against the dollar and a record low against the euro this week amid mounting fears that Britain could be in for a long and deep recession — and market rumors that the Bank of England could eventually cut interest rates to as low as 1 percent. The government has stated that it will increase government spending in an effort to push back against the looming recession, and suggested it would drop a decade-old fiscal rule that public spending cannot exceed tax revenue over the course of a complete economic cycle.

British treasury chief Alistair Darling has said that strictly following the rules on borrowing would be perverse during a downturn, but Osborne, Darling's opposition counterpart in Parliament, condemned the move. "The public is very concerned about how much money is being racked up on the country's credit card," Osborne was quoted as saying by the Times. "They know you can't just borrow your way out of debt."

quote:

Op maandag 17 november 2008 00:39 schreef HiZ het volgende:
Voor de mensen die lopen te roepen dat het zo goed is voor de Britse export als de pond minder waard wordt; kunnen die ook eventjes vertellen wat de Britten dan moeten gaan exporteren? Werkloze bankiers of zo? De Britse industrie is in de laatste decennia nagenoeg verdwenen en maakt nog maar 17% uit van de volledige economie.

quote:

Op maandag 17 november 2008 07:29 schreef The.Apple het volgende:
Wacht maar tot de euro meegaat......

Stelletje dom volk....
Waar denk je dat al dat geld vandaan komt wat nu "uitgegeven wordt aan het redden van de markt"
Precies dat wordt gewoon geprint, gevolg.... hyper inflatie....

Simpele economie.

Dit zijn de identieke ellende die in 1929 en 1932 zijn gebeurd, waarom ziet niemand in dat dit een cycle is van 80 to 100 jaar,

2008 Wall street en de rest
1929 wall street
1778 Franse revolutie/amerikaanse revolutie (vanwege een kredit crisis in europa met name frankrijk)

waarom zijn mensen zo dom om niets te leren van hun geschiedenis

quote:

Op maandag 17 november 2008 10:46 schreef Emu het volgende:

[..]

Hyperinflatie, laat me niet lachen, iedereen die die woorden in zijn post zet, kan ik met alle moeite van de wereld niet eens serieus nemen.

De economie KRIMPT, de inflatie daalt in een snel tempo, en we hebben zelfs kans op DEFLATIE !

quote:

Op maandag 17 november 2008 07:20 schreef hondjes het volgende:
Spanje is heel erg, wat de huizen betreft.
de rente ging omhoog, salarissen niet., en nu in deze tijd vallen de huizenprijzen om.
flats staan al meer dan twee jaar leeg, en mogen alleen verhuurd worden voor 750 euro, de bank beslist dit.
ben zelf van plan een huis te kopen, en zie aan de kust de huizenprijzen zakken met gemiddeld, 250.000 euro.
mijn dochter, die daar woont, ging al op huizenjacht voor me, de mensen, veel engelsen , zijn wanhopig , willen weg, en zakken en zakken maar met de prijs

quote:

Op maandag 17 november 2008 00:39 schreef HiZ het volgende:
Voor de mensen die lopen te roepen dat het zo goed is voor de Britse export als de pond minder waard wordt; kunnen die ook eventjes vertellen wat de Britten dan moeten gaan exporteren? Werkloze bankiers of zo? De Britse industrie is in de laatste decennia nagenoeg verdwenen en maakt nog maar 17% uit van de volledige economie.

quote:

Op maandag 17 november 2008 07:29 schreef The.Apple het volgende:
Wacht maar tot de euro meegaat......

Stelletje dom volk....
Waar denk je dat al dat geld vandaan komt wat nu "uitgegeven wordt aan het redden van de markt"
Precies dat wordt gewoon geprint, gevolg.... hyper inflatie....

Simpele economie.

Dit zijn de identieke ellende die in 1929 en 1932 zijn gebeurd, waarom ziet niemand in dat dit een cycle is van 80 to 100 jaar,

2008 Wall street en de rest
1929 wall street
1778 Franse revolutie/amerikaanse revolutie (vanwege een kredit crisis in europa met name frankrijk)

waarom zijn mensen zo dom om niets te leren van hun geschiedenis

quote:

Op donderdag 13 november 2008 23:57 schreef Yi-Long het volgende:
Lekker games en boeken etc kopen op deze manier bij play.com

quote:

Op maandag 17 november 2008 07:29 schreef The.Apple het volgende:
Wacht maar tot de euro meegaat......

Stelletje dom volk....
Waar denk je dat al dat geld vandaan komt wat nu "uitgegeven wordt aan het redden van de markt"
Precies dat wordt gewoon geprint, gevolg.... hyper inflatie....

Simpele economie.

Dit zijn de identieke ellende die in 1929 en 1932 zijn gebeurd, waarom ziet niemand in dat dit een cycle is van 80 to 100 jaar,

2008 Wall street en de rest
1929 wall street
1778 Franse revolutie/amerikaanse revolutie (vanwege een kredit crisis in europa met name frankrijk)

waarom zijn mensen zo dom om niets te leren van hun geschiedenis

quote:

Op maandag 17 november 2008 12:24 schreef HarryP het volgende:

[..]

Ja deflatie voor een paar jaar maar wat gebeurt er daarna.
Wat gebeurt er als de dollar onderuit schiet en de euro wordt meegesleurt in de val van de dollar? Er worden meer Euro's "bijgedrukt" dan dollars. Verschillende landen (China en Saoedi-Arabië) zijn hun dollars al aan het omzetten naar goud. Wat als de goudstandaard weer belangrijker gaat worden, wat heeft dat voor gevolgen voor de Euro als munt.
Dat zijn toch invloeden van buiten de economie op het vertrouwen in een munt.

Waarom koop jij anders geen dollars..??..
De economie van de US krimpt ook sterk. Dus daar kunnen we volgens jouw redenatie ook deflatie verwachten.

quote:

Op dinsdag 18 november 2008 22:09 schreef Emu het volgende:

[..]

Ik ga voor de komende 1-2 jaren gewoon uit van een terug lichtere inflatie. Wetende wat de omstandigheden zijn. Doemdenken doe ik niet, want daar verdien je meestal niets mee. Wat over 5 of 10 jaar gaat gebeuren kan niemand accuraat voorspellen. Waar we echter wel zo goed als zeker van kunnen zijn is dat van hyperinflatie geen sprake zal zijn. Terug hogere inflatie is natuurlijk wel mogelijk, maar dan zullen de banken binnen enkele kwartalen de financieringskraan toch wel volledig moeten opentrekken, want het is ZO dat geld wordt gecreërd, en niet door een of ander mannetje in een donkere kelder die geld een drukpers start.

quote:

Op dinsdag 18 november 2008 22:14 schreef sitting_elfling het volgende:

[..]

Het probleem is alleen dat mensen het altijd wel proberen .. en dan over een jaar of 10 zeggen .. zie je wel !! Hij had gelijk!!

zucht.