Supposedly, the devaluation of the Pound was going to help our economy by boosting exports. We consumers in the UK would buy less stuff from abroad, and the consumers abroad would buy stuff from us instead.
This plan works in theory, looking backwards to when Britain was a manufacturing powerhouse, but all along I have said I couldn't see this working this time around, since we don't make much any more. We just sell each other houses, haircuts, do each others nails -- and sell global investors complex financial instruments, which those investors now see as toxic and no longer wish to buy. To make matters worse, the whole world is in economic trouble so even if we did still make great stuff that people really wanted, nobody is in a position to buy it all anyway.
Today the good old BBC have an article stating this indeed has proven to be the case -- the trade deficit has widened, not narrowed.
All that we have to show for this devaluation of our currency, through Quantitative Easing that our benevolent government have mandated, is that everything now costs us more to buy on world markets. Nice going, bozos! This is why you will notice that discretionary goods (things you don't HAVE to buy, like a sofa or a new bath or kitchen cupboards, etc) are down in price, but staple goods (things you DO, like food and energy) have not. This diverging trend is set to continue and become more marked in my opinion. Buy consumer staples on dips, sell consumer discretionary on rallies.
Most importantly, sell the Pound. Thats what Gordon Brown wants to do.
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