oh dear: Morgan Stanley fears UK sovereign debt crisis in 2010

[DiscoStu]

Possibly. My understanding of currency collapse was that the currency buys much much less. Microsoft may of course have reinvented the term so I'm happy to be schooled. Bring it on.

I'll try and keep it simple for you

This thread is talking about the collapse of the GBP.

bobhope was asking whether he'd be able to buy Prawn Towers with a few Euros and Aussie Dollars.

You replied

Er, not really. During a currency collapse you'd be buying a loaf of bread of a couple of million euros.

HTH

Which, if the GBP were to collapse, would be incorrect. A few Euros would buy you lots more GBP's than it would before the GBP collapsed, so you would infact be using fewer Euros to buy your loaf of bread.

HTH

[milanbenes]

hmmm not necessarily,

for UK residents to buy their loaf of bread then yes it will cost more GBP's

but for forex, for people converting euro to gbp to buy the loaf of bread, as long as they convert just before they buy the bread then in general it would cost the same number of euros except you'd get more gbp for your euros but the bread would also cost more gbp's



of course there will be fluctuations, for example, since the pound devalued 30% against the Euro, BUT, in the same period, local prices did NOT increase too much, classic car dealers from the mainland have done very well going to the UK and buying left hookers at the discount and selling them on the mainland, on the otherside, had there been respective local inflation to compensate the 30% fall of the currency then prices would have become higher for domestic buyers but remained the same for overseas buyers

hope that helps


Milan.

[Sysman]

Zimbabwe solved their inflation problems by abandoning their currency and instead use US dollars now.

Simples!

Well at least they've had some practice...

[milanbenes]

having said all of that,

if domestic people do not have reserves in alternative currencies, then when the pound crashes, and prices rise respectively, then the domestic people will not be able to afford to buy things which can have an effect that prices do fall eg

Price before pound crash

1 loaf of bread 1 pound

1 euro 1 pound


After crash eg

1 loaf of bread 100 pounds

1 euro 100 pounds


But domestic buyers do not have enough pounds to pay 100 for a loaf of bread so the price falls to 75 pounds adjustment for the market

which consequently makes the loaf cheaper for people with euros


hope that helps

Milan.

[AtW]

of course there will be fluctuations, for example, since the pound devalued 30% against the Euro, BUT, in the same period, local prices did NOT increase too much

Food prices pretty much doubled IMHO - especially the wallnuts

[milanbenes]

this thread's gone quiet, where are the domestic contributors ?

guess they're all phoning their banks to open euro denominated accounts

Milan.

[HairyArsedBloke]

The other day I joked with one of my clients that I was going to bill them in euro's and he gave me a long stream of abuse in Septic.

[HairyArsedBloke]

The UK may be the first G10 to have problems, but we will have euro members Greece and Ireland to entertain us all before that happens.

Sminki Pinki
And so it begins .......

[AtW]

Sminki Pinki
And so it begins .......

Euro zone has got the resources to bail them out - at least they won't suffer currency drop. UK is on its own.

[HairyArsedBloke]

Ah.

The Last Best Hope for Peace. (Spoken in a Portentous Voice).

Or something.

And look what happened to that!