November 25th, 2004


userinfo senji
2004/11/25 21:50:00 - *boggle*
How the fuck did the exchange rate end up as $1.88 to £1?
Current Mood: [mood icon] shocked
Current Music: Eric Clapton -- Tears in Heaven [last.fm]
Entry Tags: observation, one-liner, world

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userinfo ilanin
[userpic]
2004/11/25 14:47:33
A mixture of the fuckwit in the White House and the fuckwits on British High streets, who have a similar economic sense when it comes to running up debts...
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userinfo sesquipedality
[userpic]
2004/11/25 14:47:42
Bush f***ed the American economy.
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userinfo ewx
[userpic]
2004/11/25 15:42:08

He had some help from a zillion credit-card-wielding consumers...

(Not a consequence of the financially promiscuous Bush regime; Britain has the same disease despite a lengthy period of much more competent economic stewardship.)


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userinfo mhw
[userpic]
2004/11/25 15:06:32
Economic incompetence.

Still, I'm not complaining; it's worth buying imports (and renewing LJ subscriptions).
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userinfo mobbsy
[userpic]
2004/11/25 15:19:39
There was a byline on the front page of the FT yesterday saying one respected analyst was predicting that it might reach $2.30/£1

This is good for buying consumer electronics from the US, bad if your share options are in US$.
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userinfo ankaret
[userpic]
2004/11/25 15:46:17
I thought it had been hovering around there for a while.

It definitely encourages me to buy stuff from the USA, though the difference quite often gets made up in custom charges.
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userinfo senji
[userpic]
2004/11/25 17:05:57
Last I looked it was sitting on about 1.75. Practically 1.9 is out into the "when did the US start becoming a second-world economy" questions level; at least in the time it's taken to get there.

I'd sell my dollars; but I only have 1 of them :).
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(Anonymous)
2004/11/26 01:12:10
I thought second-world meant the Communist bloc (as was).

(S)
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userinfo mtbc100
2004/11/28 19:18:22
Mmmm. By some sets of measures, the only reason the US isn't being thought of as approaching economic apocalypse is that it's the US. The current situation's horribly untenable. Greenspan probably will have to raise interest rates, thinking the dollar really rather worth defending, which will really punish all those debt-laden American consumers.
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userinfo ex_lark_asc
2004/11/25 16:54:52
I don't know but I'm buying lots of Ebay stuff from the States this year :)
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userinfo hairyears
[userpic]
2004/11/25 16:58:58 - Actually, it's surprising anyone pays 50p for a dollar

You read it here first. Or maybe you read it elsewhere, like the FT and the Economist: I did. I have no special knowledge, despite working on the trading floor, and my grasp of economics is best described as broad but shallow.

Prediction? Capital formation in the USA has effectively ceased: their savings rate is barely four percent, Asian savers have invested as much in America as they are ever going to, and their governments have bought as much Treasury stock as they wanted, and more. It helped finance their export boom, and stabilised them against contagious currency crises, and now the USA is the weak economy dependent on foreign capital.

And I mean weak: America's got two deficits, not one: the whole country is buying more than it sells, generating a massive trade deficit, and their government's response to it's own appalling indebtedness is both cutting taxes and raising spending while permitting massive unfunded liabilities to accumulate in the health and social welfare. Worse, and unlike previous borrowing binges, America isn't building up a stock of public assets with this extravagance: it's all current-account spending and the infrastucture is, if anything, deteriorating more rapidly than it did under Reaganomics.

That's the domestic reason why the dollar, representing America Inc. isn't a desirable asset. Of course, the Autistic Administration has found ways of worsening the matter by upsetting the neighbours, who turn out to be the bank manager, the shareholders, the dry goods store and the gas station.

Yes, post-Clinton American Diplomacy is in action again.

Recent comments and loud hectoring from Washington about the need to devalue Eastern currencies have been heard with mounting anger in the capital cities and boardrooms of the Pacific Rim. All the things they were told were their own fault in the Asian currency crises a decade ago, in lecture after patronising lecture, have turned out to be the preferred pracice and malpractice of the Bush Administration. Apologise? No, lets make demands.

It's going down a treat in Beijing, who have managed their trading surpluses by accumulating half a trillion dollars in US Treasury bonds. I look forward to seeing what happens at the next Treasury Auction. What if nobody turns up?

Meanwhile, the dollar will go even lower against the Euro. It's only the sluggish Eurozone economy and sclerotic economic policy that's keeping it low against the dollar. Sterling will act as a buffer currency or, truthfully, a buffeted currency traded between the two.

$1.8842? You ain't seen nuthen' yet.
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userinfo senji
[userpic]
2004/11/25 17:06:47 - Re: Actually, it's surprising anyone pays 50p for a dollar
$1.8842? You ain't seen nuthen' yet.

I was fearing that....
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userinfo timeplease
[userpic]
2004/11/25 18:00:02 - Re: Actually, it's surprising anyone pays 50p for a dollar
I'm very glad I have no direct exposure to the dollar. Indirect, of course, is another matter...
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userinfo hairyears
[userpic]
2004/11/26 02:47:37 - Re: Actually, it's surprising anyone pays 50p for a dollar
Yes, the indirect exposures can be quite unpleasant...

But not always. Energy is dollar-denominated and, bar profiteering, we should get pleasant surprises on:
  • Aviation fuel
  • Imported gas
  • Imported coal
Cheaper electricity anyone?

I haven't included petrol, diesel and chemical feedstock because we're self-sufficient (and sterling-denominated!) in those, as well as being buffered by heavy taxation on road fuel.

What about you? Well, the licensed victuallers don't actually import any American beer. Budweiser, Coors, Miller Lite and all that dogswater are manufactured in plastic vats in the Midlands - so no currency gains there. Or losses, of course.

And that's the crux: 15% of our traded GDP is with the USA and it's a balanced trade - winners and losers when it goes up or down - but volatility will cause a contraction in trade. It just becomes too risky - and in all overseas trade, not just with the USA.

Profitable to me, of course: currency hedging and Forex desks look like good job opportunities.

Anyone care to guess what'll happen to computer components? Memory is largely priced in dollars but that could change.
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userinfo timeplease
[userpic]
2004/11/26 04:00:14 - Re: Actually, it's surprising anyone pays 50p for a dollar
Cheaper electricity anyone?

That would be nice, but electricity prices are going up at the moment.

What about you? Well, the licensed victuallers don't actually import any American beer.

Our suppliers sometimes use American hops. A very minor component of the cost of beer, admittedly.
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userinfo senji
[userpic]
2005/11/30 14:08:37 - Re: Actually, it's surprising anyone pays 50p for a dollar
IAMFI; any thoughts on this analysis a year on?
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userinfo hairyears
[userpic]
2005/12/09 00:07:47 - Re: Actually, it's surprising anyone pays 50p for a dollar


Well, I was wrong about GBP volatility: and the cable rate today is actually 8% better, at $1.75. Part of that is that high oil prices (denominated in dollars) are pushing up demand.

But the underlying imbalances have worsened, America's public finances worst of all. And the ultimate beneficiaries of high dollar prices for oil aren't reinvesting much of it in the USA - ask P&O - so the long-term outlook remains bearish on the Dollar.


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userinfo robinbloke
[userpic]
2004/11/26 00:52:32
No idea, but amazon.com is going to get a lot of my business!
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userinfo ewx
[userpic]
2004/11/26 01:26:01
That's not an acronym!
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userinfo requiem_17_23
[userpic]
2004/11/26 02:57:35
Because the currency traders see four moron years and reckon things will go further downhill, and because when America sneezes due to its self-inflicted disease the rest of the world catches a cold.

God help America.
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userinfo bellinghman
[userpic]
2004/11/26 09:58:13
It was $1.91 back in February. I think the dollar rose for a while when it looked like Kerry might get in (and perhaps return the US economy surplus that Clinton had), but it's falling again now.
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userinfo teleute
[userpic]
2004/11/26 10:42:47
We are so wishing we had sterling to move over here right now. It would rule. Sadly, we moved all our money over when the exchange rate was more like $1.45 *sigh*
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*boggle* - Squaring the circle...

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