GBP - How low will it go?

[Zigenare]

Another 1% drop today as the pound sinks to parity and beyond with the Euro and USD.

You need to get on the right side of the trade.

I've just got to quote this for posterity - ready for when it bites you in the arse.

[VirtualMonkey]

*are

I live in Hull...not looking forward to my Pie bill next time i go to Spain

[JohntheBike]

soon it will be GBP=USD=EUR=CHF

does it really matter in the long term?

In 1963 £1 = CHF12, in 1970 £1 = CHF10 today, £1 = CHF1.19

I last visited Switzerland in 1997 and I was surprised to see that in real value terms, prices were lower relatively than they were in 1970. Petrol was certainly cheaper in Switzerland in 1997 than it was here. However, I'm earning 50 times more in actual amount now than I was in 1970.

So, exchange rates can only be relative to your income. There was a time when £1 = USD4, but most people in the UK couldn't afford a car then and certainly not a black and white TV, let alone a coloured one.

Can't remember when exactly, but I believe it was in the 1950's that France re-valued its Franc to 100 old Francs = 1 new Franc. The time will come when the UK may have to do the same and then exchange rates will become meaningless.

It would be better to compare prices based on more realistic criteria, e.g. how long must someone work at a country's average wage to buy specific items. So e.g., how long does someone have to work in the UK at the average wage in order to buy a litre of petrol, etc. then compare this with the same figure for Germany for e.g.

[darmstadt]

[CryingSheep]

does it really matter in the long term?

In 1963 £1 = CHF12, in 1970 £1 = CHF10 today, £1 = CHF1.19

I last visited Switzerland in 1997 and I was surprised to see that in real value terms, prices were lower relatively than they were in 1970. Petrol was certainly cheaper in Switzerland in 1997 than it was here. However, I'm earning 50 times more in actual amount now than I was in 1970.

So, exchange rates can only be relative to your income. There was a time when £1 = USD4, but most people in the UK couldn't afford a car then and certainly not a black and white TV, let alone a coloured one.

Can't remember when exactly, but I believe it was in the 1950's that France re-valued its Franc to 100 old Francs = 1 new Franc. The time will come when the UK may have to do the same and then exchange rates will become meaningless.

It would be better to compare prices based on more realistic criteria, e.g. how long must someone work at a country's average wage to buy specific items. So e.g., how long does someone have to work in the UK at the average wage in order to buy a litre of petrol, etc. then compare this with the same figure for Germany for e.g.

I think things changed a bit in 50 years!

So let's say as an example at some point 1USD = 2£, so the UK would just print loads of money and double everyone's salary, that way the value of the average Brit salary in pounds would still be about 1:1 with the dollar. Obviously isn't that simple... With the amount of money UK would have to print and such a measure would depreciate the pound (way) further and potentially to 1USD = 4£ then the problem would stand...

Unless you know any miraculous solution to drastically increase salaries without printing money...or any other measures that would depreciate further a currency!

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[CryingSheep]

To answer your question let's imagine 1€=1£ a Mercedes class c costing 40k€ would cost 40k£, someone earning 2000£ (a month and after taxes) would need 20 salaries to pay the car.

Now at some point 1€=2£, now the same car would cost 80k£ and the person on the same salary would need 40 salaries now.

An (apparently) easy solution would be to double Brits salary and now the same person would make 4000 and would be back on 20 salaries to buy the car...

The question is, how can a country do such thing without depreciating further their currency? I don't have a clue, do you?

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[JohntheBike]

I think things changed a bit in 50 years!

So let's say as an example at some point 2USD = 1£, so the UK would just print loads of money and double everyone's salary, that way the value of the average Brit salary in pounds would still be about 1:1 with the dollar. Obviously isn't that simple... With the amount of money UK would have to print and such a measure would depreciate the pound (way) further and potentially to 4USD = 1£ then the problem would stand...

Unless you know any miraculous solution to drastically increase salaries without printing money...or any other measures that would depreciate further a currency!

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yes, clearly things have changed in 50 years. The standard of living of most in the UK has improved immeasurably, but I contend that if comparisons were made along the lines of what I suggested, then exchange rates become meaningless. Don't forget that the EU's improvements in their standard of living is due in no small measure to the Marshal plan. Note sure if the UK benefited from that.

The miraculous solution HMG employed in the 1970's was to introduce decimalisation of our currency. Overnight, the smallest increase in price was 2.4 times greater than previously. The policy resulted in 29% inflation at its height and brought our salaries and prices in line with those of the EU, so that we could join on fairly even terms.

[JohntheBike]

To answer your question let's imagine 1€=1£ a Mercedes class c costing 40k€ would cost 40k£, someone earning 2000£ (a month and after taxes) would need 20 salaries to pay the car.

Now at some point 1€=2£, now the same car would cost 80k£ and the person on the same salary would need 40 salaries now.

An (apparently) easy solution would be to double Brits salary and now the same person would make 4000 and would be back on 20 salaries to buy the car...

The question is, how can a country do such thing without depreciating further their currency? I don't have a clue, do you?

Sent from my ONEPLUS A6000 using Contractor UK Forum mobile app

see my latest reply and what happened to the French Franc.

Also consider the reverse, i.e. our products would be half the cost in your scenario and so Germans would buy Jaguars for a time until things were levelled out again. This is what HMG engineered in the 1970's with decimalisation.

Our currency has been repeatedly devalued in exchange rate terms all my life, but we are still better off than we were when I was a child. This is why I contend that exchange rates are only a short term issue.

Venezuela is an interesting condition though. It has the largest oil reserves in the World and per capita, at its height, the ordinary person was better off apparently than we in the UK were. But then that's statistics for you.

[CryingSheep]

see my latest reply and what happened to the French Franc.

And what do you think it would happen if you would get 30% inflation today in the UK!? 2008 would look like a good year compared to...

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[JohntheBike]

And what do you think it would happen if you would get 30% inflation today in the UK!? 2008 would look like a good year compared to...

Sent from my ONEPLUS A6000 using Contractor UK Forum mobile app

I guess the same as happened in the 1970's until things stabilised. In 1970 my house was valued at about £3000, it's now valued at about £300000. That increase isn't a result of anything I did. My water rates were about 5% of the general rate, now they are 40%. I guess there's your answer.