Foreigners control Britain's currency after Brexit

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    (Original post by Luke Kostanjsek)
    Ah yes, what an insightful response. Obviously, the pound will keep falling until it's worth nothing and eventually, it'll assume negative value........

    I dare say it should be obvious that the fall will bottom out, and likely the pound will recoup at least some of the lost ground. But if sterling ends up dropping 15% or so in value, as is being tentatively estimated as the likely end result, it could really be quite a good thing for the British economy as a whole.
    Its already dropped 18%
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    (Original post by Maker)
    Its already dropped 18%
    What almost always happens in scenarios such as these is that the price will drop substantially, below the 'true' value, and then rebound somewhat as people take the opportunity to buy on the cheap. The tentative 15% figure is an estimate as to where the pound will finish once the dust settles. And I said estimate for a reason; no one knows exactly what value it'll settle on, but it could reasonably be predicted to be somewhere between 15 and 20% down in total. And we are seeing the positive effects of this already, with all the FTSE indices performing well above expectations. In fact, pretty much all measures of the strength of the British economy since Brexit have been unexpectedly positive.
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    (Original post by Edo123)
    So perhaps you're certain that the EU would be interested in doing a free trade deal with the UK even post Brexit.
    Not certain as they may punish us to make an example of us like they did with Greece. However, we are a much bigger economy than Greece and it is in their economic interest to do a free trade deal as they sell us more than we sell them. If we can't do a free trade deal then small tariffs may not be a disaster as the euro and pound fluctuate against each other everyday, although these movements can be hedged against...
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    (Original post by Luke Kostanjsek)
    What almost always happens in scenarios such as these is that the price will drop substantially, below the 'true' value, and then rebound somewhat as people take the opportunity to buy on the cheap. The tentative 15% figure is an estimate as to where the pound will finish once the dust settles. And I said estimate for a reason; no one knows exactly what value it'll settle on, but it could reasonably be predicted to be somewhere between 15 and 20% down in total. And we are seeing the positive effects of this already, with all the FTSE indices performing well above expectations. In fact, pretty much all measures of the strength of the British economy since Brexit have been unexpectedly positive.
    There are numerous predictions on where the pound is headed and where it might stay. I think with the present government determined for a hard Brexit and the rest of the EU indicating they won't compromise on freedom of movement, I think Britain and the pound has further to drop.

    Lots of people in Britain don't know how much foreign money comes into Britain to finance the deficient and keep the pound high. Less foreign money is coming in because Britain's trade is threaten to get less and less and foreign investors are doubtful they will get as much return as they would if they put their money elsewhere.

    My only stake direct in all this is a couple of hundred US dollars I have in my paypal account which has increased quite a bit against the pound, enough for a new jumper.
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    (Original post by Maker)
    There are numerous predictions on where the pound is headed and where it might stay. I think with the present government determined for a hard Brexit and the rest of the EU indicating they won't compromise on freedom of movement, I think Britain and the pound has further to drop.

    Lots of people in Britain don't know how much foreign money comes into Britain to finance the deficient and keep the pound high. Less foreign money is coming in because Britain's trade is threaten to get less and less and foreign investors are doubtful they will get as much return as they would if they put their money elsewhere.

    My only stake direct in all this is a couple of hundred US dollars I have in my paypal account which has increased quite a bit against the pound, enough for a new jumper.
    And if Donald Trump wins you can say goodbye to that jumper and more
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    (Original post by Rakas21)
    The fall in sterling will produce an inflationary effect however it is my belief that this is a short to medium term consequence and that post-exit we will see Sterling gain strength.
    Agreed I see it a bit of a short to medium term panic
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    (Original post by Maker)
    Everyone in Britain is a foreigner to me.
    Care to expand on this?
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    (Original post by KimKallstrom)
    Care to expand on this?
    Maker is a foreigner methinks
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    (Original post by Maker)
    There are numerous predictions on where the pound is headed and where it might stay. I think with the present government determined for a hard Brexit and the rest of the EU indicating they won't compromise on freedom of movement, I think Britain and the pound has further to drop.

    Lots of people in Britain don't know how much foreign money comes into Britain to finance the deficient and keep the pound high. Less foreign money is coming in because Britain's trade is threaten to get less and less and foreign investors are doubtful they will get as much return as they would if they put their money elsewhere.

    My only stake direct in all this is a couple of hundred US dollars I have in my paypal account which has increased quite a bit against the pound, enough for a new jumper.
    Absolutely; it isn't set in stone and no one can predict with any certainty where precisely the pound will settle. However, the general consensus seems to be in the 15-20% drop margin. The pound may well drop further in the future, but it seems unlikely we're gonna see the kind of catastrophic drop that would spell trouble for our economy. As I said, all the indicators suggest the British economy is actually performing well above expectations, with the trade figures only improving off the back of this currency fall.

    The pound was so overvalued because London was seen as the gateway to the European services market, and so property prices went up and up and up, thus forcing the pound up. The success of our property market, and hence the rising value of the pound, was essentially built on sustained hiking of property prices within British cities and especially within London. This was clearly unsustainable. The high value of the pound meant our foreign trade was suffering and hence the government was having to borrow extensively to fund the deficit. The falling pound should hopefully have the effect of starting to rebalance the economy, improving our exports and trade and lessening our reliance on the banking-property axis.

    Foreign investors are taking advantage of the fall to make quick money by short selling. That is pretty much the only reason for the scale of the fall in the pound. I would predict that once the smoke clears, we'll see the pound start to slowly climb, but hopefully not to the same unrealistic heights.
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    (Original post by Luke Kostanjsek)
    Absolutely; it isn't set in stone and no one can predict with any certainty where precisely the pound will settle. However, the general consensus seems to be in the 15-20% drop margin. The pound may well drop further in the future, but it seems unlikely we're gonna see the kind of catastrophic drop that would spell trouble for our economy. As I said, all the indicators suggest the British economy is actually performing well above expectations, with the trade figures only improving off the back of this currency fall.

    The pound was so overvalued because London was seen as the gateway to the European services market, and so property prices went up and up and up, thus forcing the pound up. The success of our property market, and hence the rising value of the pound, was essentially built on sustained hiking of property prices within British cities and especially within London. This was clearly unsustainable. The high value of the pound meant our foreign trade was suffering and hence the government was having to borrow extensively to fund the deficit. The falling pound should hopefully have the effect of starting to rebalance the economy, improving our exports and trade and lessening our reliance on the banking-property axis.

    Foreign investors are taking advantage of the fall to make quick money by short selling. That is pretty much the only reason for the scale of the fall in the pound. I would predict that once the smoke clears, we'll see the pound start to slowly climb, but hopefully not to the same unrealistic heights.
    I am a bit more pessimistic that you about Britain's prospects. I think the pound will fall to around $1.05 to $1.10 because even with a devalued pound, Britain only exports around 11% of visible exports like cars and the rest is services like finance, law and IT services of which there is limited demand even if prices of UK service providers were to fall a lot.

    If Britain's access to the EU is on WTO terms or near it, Britain would loose a lot of business due to the costs and delays associated with tarrifs and customs and investors would rather put their money into firms in the EU with far fewer trade barriers rather than into the UK with limited and costly access to the EU.

    I also doubtful if enough trade can be done with other countries outside the EU to offset the lost of trade with the EU. Small and medium size firms would find it costly to open up new markets where they have no experience of operating in before with no certainty of success.
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    (Original post by Maker)
    Foreigners now have more control over Britain's currency than the British because of Brexit.

    We now have to pay more for petrol and energy and soon, prices will rise for food, electronics, cars, clothes and anything that is imported. Even prices for food grown in Britain will rise because increases in prices for fuel, fertilisers and processing.
    https://www.theguardian.com/business...e-economy-rise

    Quit whinning like a kid.
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    (Original post by Maker)
    I am a bit more pessimistic that you about Britain's prospects. I think the pound will fall to around $1.05 to $1.10 because even with a devalued pound, Britain only exports around 11% of visible exports like cars and the rest is services like finance, law and IT services of which there is limited demand even if prices of UK service providers were to fall a lot.

    If Britain's access to the EU is on WTO terms or near it, Britain would loose a lot of business due to the costs and delays associated with tarrifs and customs and investors would rather put their money into firms in the EU with far fewer trade barriers rather than into the UK with limited and costly access to the EU.

    I also doubtful if enough trade can be done with other countries outside the EU to offset the lost of trade with the EU. Small and medium size firms would find it costly to open up new markets where they have no experience of operating in before with no certainty of success.
    Can you see any benefits of Brexit? Is your dad Jean Claude Juncker?
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    (Original post by ckfeister)
    https://www.theguardian.com/business...e-economy-rise

    Quit whinning like a kid.
    Is that Guardian article meant to support your point because its doesn't.
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    (Original post by usainlightning)
    Can you see any benefits of Brexit? Is your dad Jean Claude Juncker?
    There are lots of positives, cheaper prices in the shops for foreigners, cheaper borrowing if you borrowed in USD or Euros and pay back in GBP, people with gold and silver gained a lot too. Not a lot if you live in Britain and get paid in GBP or have savings in GBP.

    The funny thing is Brexiters don't want Parliament to be involved in the Brexit process even though they banged on about getting back sovereignty for Parliament during the Brexit campaign, hypocrites.
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    (Original post by Maker)
    I am a bit more pessimistic that you about Britain's prospects. I think the pound will fall to around $1.05 to $1.10 because even with a devalued pound, Britain only exports around 11% of visible exports like cars and the rest is services like finance, law and IT services of which there is limited demand even if prices of UK service providers were to fall a lot.

    If Britain's access to the EU is on WTO terms or near it, Britain would loose a lot of business due to the costs and delays associated with tarrifs and customs and investors would rather put their money into firms in the EU with far fewer trade barriers rather than into the UK with limited and costly access to the EU.

    I also doubtful if enough trade can be done with other countries outside the EU to offset the lost of trade with the EU. Small and medium size firms would find it costly to open up new markets where they have no experience of operating in before with no certainty of success.
    Is there any basis for your pessimism? By all measurable parameters, the British economy is practically flourishing. Investors are avoiding the pound because of the uncertainty surrounding Brexit, nothing more. Once the negotiations start, and we actually know where we stand, everything will stabilise. The markets aren't responding to a weak British economy, they're responding to uncertainty about Brexit.

    You seem to be both presuming the Brexit negotiations will be a bust, and that the eurozone economies are going to prosper over the next couple of years in a way which currently seems rather implausible. Putting your money into an EU which - now that Britain has left - is going down the path of tight, centralised fiscal control would hardly be an ideal option for investors. And that's ignoring the elephant in the room, which is that the euro is still very much in the toilet. The falling pound is hurting european exports at a time when it can ill be afforded. The Greek economy is in as big a mess as ever, the Portuguese are wobbling again and the Italian economy is currently in incredibly hot water. As much as their may be a political desire to be punitive, so as to dissuade other countries from leaving, the eurozone is far too fragile for this to be a practical course of action.

    Short term, I'm of a mind to agree with you. I imagine there will be a short term hit. However, long term it seems fairly obvious that the potential for trade outside of Europe exceeds the potential for trade inside Europe. Were we to establish a trade deal with the US, or with China, it would immediately offset any losses from leaving the EU. The EU has recently shown its outright hostility to trade agreements vis-a-vis TTIP, and the comments of some other EU leaders have been rather telling. I think that long term, we are going to reap the rewards of bailing out of the sinking ship, so to speak.
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    (Original post by Maker)
    There are lots of positives, cheaper prices in the shops for foreigners, cheaper borrowing if you borrowed in USD or Euros and pay back in GBP, people with gold and silver gained a lot too. Not a lot if you live in Britain and get paid in GBP or have savings in GBP.

    The funny thing is Brexiters don't want Parliament to be involved in the Brexit process even though they banged on about getting back sovereignty for Parliament during the Brexit campaign, hypocrites.
    There will be a vote on the final deal, parliament is not being excluded.*
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    (Original post by Luke Kostanjsek)
    Is there any basis for your pessimism? By all measurable parameters, the British economy is practically flourishing. Investors are avoiding the pound because of the uncertainty surrounding Brexit, nothing more. Once the negotiations start, and we actually know where we stand, everything will stabilise. The markets aren't responding to a weak British economy, they're responding to uncertainty about Brexit.

    You seem to be both presuming the Brexit negotiations will be a bust, and that the eurozone economies are going to prosper over the next couple of years in a way which currently seems rather implausible. Putting your money into an EU which - now that Britain has left - is going down the path of tight, centralised fiscal control would hardly be an ideal option for investors. And that's ignoring the elephant in the room, which is that the euro is still very much in the toilet. The falling pound is hurting european exports at a time when it can ill be afforded. The Greek economy is in as big a mess as ever, the Portuguese are wobbling again and the Italian economy is currently in incredibly hot water. As much as their may be a political desire to be punitive, so as to dissuade other countries from leaving, the eurozone is far too fragile for this to be a practical course of action.

    Short term, I'm of a mind to agree with you. I imagine there will be a short term hit. However, long term it seems fairly obvious that the potential for trade outside of Europe exceeds the potential for trade inside Europe. Were we to establish a trade deal with the US, or with China, it would immediately offset any losses from leaving the EU. The EU has recently shown its outright hostility to trade agreements vis-a-vis TTIP, and the comments of some other EU leaders have been rather telling. I think that long term, we are going to reap the rewards of bailing out of the sinking ship, so to speak.
    I think Brexit has rather exposed Britain as the emperor without clothes. While the UK was in the EU, FDIs were happy to invest in the UK because it had easy access to the EU and lots of businesses like Nissan built large factories with the major aim of exporting cars to the rest of the EU without tariffs.

    The EU is no doubt having its problems and you are right to highlight the many problems in Italy, Greece and elsewhere. But the point is Britain is earning nearly half its exports to the EU. If you reduce that even by a small amount, lots of things are in jeopardy. Most businesses earn their profits from narrow margins, reduce those margins and the who business becomes unprofitable or less profitable.

    If you have large companies like Nissan who have no emotional ties to the UK and they are here purely because of profit, a small disruption in their business can cost them millions and can make them switch their investment to any number of alternatives in the EU. The UK has found it does not have a lot of control over the EU and investors that keep the pound afloat are looking elsewhere. While it is true these are early days in Brexit, the long term outlook does not seem to get better, in fact I think it will get worse if investors stop investing and companies find it harder to raise money for investment.

    There is little preventing Britain trading with the rest of the world before Brexit, I don't think Brexit makes that any easier. You can make the same case of say China having problems with a growing poor and elderly population, dependency on exports and inefficient state owned factories as Greece and Italy's problems but I don't think a car maker is that bothered as long as the Chinese buy their cars.
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    (Original post by usainlightning)
    Can you see any benefits of Brexit? Is your dad Jean Claude Juncker?
    At least I am not related to Farage.
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    (Original post by Maker)
    Is that Guardian article meant to support your point because its doesn't.
    Lower value improves the economy.
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    (Original post by ckfeister)
    Lower value improves the economy.
    Not if export markets are closed.
 
 
 
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