GBP vs THB

[Wanderlust]

JimboPSM,
Isn't that a rather simplistic way of looking at this? Most of the banks in question are not 'one nation' entities but multinational corporations, and while the toxicity emanated from the US banking system and was poorly handled or even identified by all banks involved, I can't see how it can have exposed the UK any more than the rest of the world in terms of currency movements. The currency problem is more related to speculation based on the actual strength/weakness of a country's economy, as well as the speculators attempts to create profits for themselves by talking up/down the market. I also think the vast majority of the bad debt in the banking system has either already been dealt with or has been taken into account as regards the currencies.

[loverboy44]

The impact of this is (with all other things being equal) that the GBP and the currencies of other countries (that bought the worthless US paper) will not return to the previous levels that they had against the USD.

Simply wrong. The Euro is on a record high against the Dollar and scince the crunch the germans are going to the UK for shopping because the Pound has lost a third against the Euro.
Other then that Japan, Germany and the US are starting to grow again other than the UK that has no real production any more. Left there is mainly the banking industry. Let the UK grow with saving accounts, life insurances and other banking products?

[miked]

UK that has no real production any more.

that simply is not true. why do you talk the U.K. down.?? yes manufacturing is only 12% of the economy. in terms of size it is slightly smaller than that of France. that 12% in monetary terms is larger than the whole of the Thai economy. the U.K. and Thai population being roughly the same size. the u.k.has been hit hardest because this is a financial services recession. already this is starting to recover.
vast sums of money have been borrowed and poured into banks. eventually this will return a profit to the government of the day. strip out money borrowed and loaned to banks and U.k. borrowing is comparable to other countries.
the taxpayer owns Royal Bank of Scotland and that bank has assets 18 times greater than Thai GDP and one and a half times greater than U.K. GDP.
lastly why do you think the BOE are keeping the value of the pound low.?? it's not to put the cost of imports up and it's not to make expats suffer with a low exchange rate. it to make U.k. exports more competative and for the country to export its way out of reccession.
did you know it is now cheaper to have steel fabricated in England than in Poland.???
if you must then talk the U.K. down but you will be proved wrong. just wait for May 2010 and put an end to this joke of a government. the conservatives are coming to the rescue.
miked

[Korkenzieher]

Right first time Miked, IMHO. Certainly the BOE's deliberate weakening of the pound, by pre-empting the fall in European interest rates would have been called a competitive devaluation not too many years ago, and is why the UK is the only country to have had any inflation in the G7 over the last 18 months (as opposed to deflation, which is bad, bad, bad!).

I think quite a lot of the UK's borrowing is also actually guarantees. Don't have the figures, but liabilities don't necessarily equal borrowings or debts. That plus quantitative easing has rarely involved issuing new money. It is more about monetising gilts which are already in the market (at least that is how Bernanke explained it in Senate Committee hearings last year), and removing the excess liquidity when the money velocity increases ought to be no more complex than selling bonds back into the market at a more attractive interest rate.

I'm no fan of Gordon Brown politically, but when the book is written on the 'CNBC' recession, as I like to call it, Gordon and Mervyn despite their differences will come out looking pretty good compared to their US (Treasury dept) and European (ECB) counterparts IMO.

[loverboy44]

I hope so.

[JimboPSM]

Trying to put it simply - going back in time before the meltdown, the initial transaction was:

• UK banks (the buyer) used real money to purchase (as an investment) US “paper”.
  US banks (the seller) received real money for their “paper”.
  
  • Net result:
    The US banks (the seller) now has real money from its sale.
    The UK banks (the buyer) now only holds “paper” from its purchase.

The economic system then goes into meltdown, the net result now becomes:

• The US banks (the seller) still has the real money from its sale.
  The UK banks (the buyer) now only holds toilet “paper”.

The UK was a net loser and the US was a net gainer in real cash and that impacts on the relative values of the currencies.

[Korkenzieher]

The largest initiator of securitised mortgage debt in Europe was Kensington group of the UK. I hardly think it is just an issue of US paper being fobbed off to us.

Edit: Additionally, I think (if I remember correctly) the largest originator in the US, certainly in the rustbelt sub-prime fiasco, was none other than Deutsche Bank.

[miked]

never heard of this theory before, wonder why.?? the only problem with your argument is that U.S. banks lost more "real money" buying "paper" than all the worlds bank put together.
if we take your argument as correct the the U.S. dollar should be exceptionally strong. it is not.
miked

[JimboPSM]

... the only problem with your argument is that U.S. banks lost more "real money" buying "paper" than all the worlds bank put together.
if we take your argument as correct the the U.S. dollar should be exceptionally strong. it is not.
miked

My argument was not that the USD should be strong, but, with all other things being equal that the USD would be ralatively stronger against the GBP after the meltdown than before - there are a myriad of factors affecting exchange rates, I was pointing out the impact of one facet which has largely been overlooked, the media has concentrated on bailouts, TARP etc. For those who care to do the research it can be found by detailed analysis of bank balance sheets.

From an international perspective it hardly matters a jot how much US banks bought or sold of US junk paper to or from other US banks - it has no effect on relative international currency values, it is purely internal to the US market.

In addition to its budgetary and trade deficits, the US has colossal long term liability problems that it continually fails to address - this weighs heavily on the prospects for the longer term value of the USD.

The recent USD strength (since July 2008) has related almost wholly to short-term safe haven perceptions rather than any fundamental US economic strengths.

[redzonerocker]

the conservatives are coming to the rescue.
miked

cheers mike that really livened up my day

[STEVE G]

As to the UK manufacturing industry being dead, and due to the downturn in the civil aviation industry, I'm down in Yeovil at the moment trying to sort out a job at Westlands where they build military helicopters.
They export quite a lot of them as well so I'm trying to do my bit to push the pound back up a bit!

[Khundon1975]

As to the UK manufacturing industry being dead, and due to the downturn in the civil aviation industry, I'm down in Yeovil at the moment trying to sort out a job at Westlands where they build military helicopters.
They export quite a lot of them as well so I'm trying to do my bit to push the pound back up a bit!

STEVE G

Good luck with the job hunt Steve. The aviation industry has, as you say, taken a beating with many companies either cancelling or postponing orders for new planes.
Westlands produce a lot of military helicopters, so you may be lucky, as that section seems to be buoyant at the moment. Drove past there at 4pm yesterday and the site looked very busy.

Miked

Not sure the Conservatives will have a lot to work with, as they will be handed a poisoned chalice if they get in.

I have a feeling the "Red Book" will be full of red ink and the UK will take a long time to get up from it's knees. Much longer than The US or many other EU member states, which are now starting to show the first signs of recovery.

[PeteC]

Some strange things happening as we end this year. The Dollar has strengthened a bit against the Baht sitting at about 33.x for a couple weeks. As the dollar strengthened, the Pound fell almost to 1.58 and at around 53.x to the Baht.

Today the Dollar remains at 33.x and the Pound at 53.x against the Baht, but the Pound has risen to 1.61 against the Dollar from something like 1.59 yesterday. Anyone can explain it? Pete

[Korkenzieher]

Not sure if you buy this explanation, but if you look back historically, there is quite frequently strength in the USD and the US markets in the last week or 2 of the year. The much vaunted 'Santa Claus' rally. I have always thought it was to do with attempts by market makers chasing the market up in order to book as much profit for end of year cosmetic purposes as possible. A fall off in the first couple of weeks also seems common, which I look at as that demand for securities and therefore money waning. I have always looked to buy into the US markets following the drop - say around mid Feb. Of course this year if I'd had the money to do that, then I would have a) felt an idiot by the beginning of march and b) made a hell of a lot by now to make up for it. But I didn't. No free cash anyway.

[Korkenzieher]

Reading back through some of the earlier postings on this thread, particularly on the UK's competitive position. To the extent that things have changed, and they have, I find Brown and Darling, attempting as they are to re-start the class war in England are probably doing more now to damage the UK's outlook than I would have believed possible. As an un-reconstituted tax-and-spend socialist, Brown has effectively unwound all the progress made in the UK over the last 25 to 30 years and with the huge and increasing regulatory overburden now in place, even todays highly competitive (in trade terms) GBP exchange rate may not be enough to save the vast numbers of productive jobs that are needed to support New Labour's gargantuan state-jobs tax bill.

Time for a change...