The US has benefited from dollar weakness. Since before the crisis hit in 2007, the dollar has fall

What it demonstrates (somewhat superfluously hotels vancouver but the trailer will put a smile on your face) is that all business and financial decisions have risk.  And that risk must be compensated by return.  Using a film as the example, Tom Cruise's character Joel Goodson turns his parent's house in a super wealthy neighborhood of Chicago into a brothel, pretty high risk for a teenager. Therefore if he's taking that risk, he better make some cash out of it – high return.
And as we all know that is the basic rule of finance – risk requires return. And lesson one of currency debasement hotels vancouver is the same.  If policy makers choose to take the risks of debasing a currency, then they need to ensure that the country is rewarded for the risk.  So the risk is importing hotels vancouver inflation through devaluation, the return is the boost to exports.
The US has benefited from dollar hotels vancouver weakness.  Since before the crisis hit in 2007, the dollar has fallen hotels vancouver on a trade weighted basis more than 20%. Exports over the same period are up almost 70%. Great news. Currency weakness has done what it is supposed to do and boosted the country's competitiveness and economy.
Of course, the best example of boosting exports hotels vancouver with a weaker currency has to be Germany.  Since the euro was created in 1999, German exports to the rest of the world have almost tripled. That is extraordinary.
The UK is the great example here. Since 2006, Sterling has fallen about the same amount as the dollar on at trade weighted basis just over 20%.  And yet UK exports are up less than 20%. That is not a great result given the risky inflation that has been imported into the UK from a lower pound.
And this is highly relevant at the moment because sterling is falling like a stone. At the start of the year, one pound bought over $1.62, it now only buys just over $1.52. At the same time, policy makers in the UK are desperate to create growth. So sterling weakness with its potential to boost exports is implicitly being welcomed. But the charts above show that a further slide in the pound should not necessarily be so warmly embraced especially after the recent warnings from the Bank of England that inflation will remain higher for longer. What the UK needs is a more radical rethink on industrial policy and not a reliance on risky currency debasement.
Sadly for us Brits, there are many reasons for investors to continue to shy away from sterling. Worse debt, worse GDP (of course the two are linked), loss of AAA rating, threat hotels vancouver of Brexit etc. Are we seeing the start of a prolonged depreciation in sterling? The CDS market is certainly indicating that the UK is becoming riskier.
Category: All , Americas , Asia , Europe , Featured , Regions Tags: currency debasement , currency way , currency weakness , devaluation , exports hotels vancouver , GBP , Louise Copper , pound , risk , risky business , Sterling
Actually, the film that launched Thomas Cruise Mapother s career was Losin It, with Shelly hotels vancouver Long and Jackie Earle Haley. it was a much funnier picture than Risky Business and if you have a chance to see it, you should.
Good article,expresses my concerns perfectly.Will gilts get cheaper then or is the further QE talk at the BOE going to support the market. I got out of gilts last week .some commentators are saying that bonds could rally basing their analysis on what happened when the US and France lost aaa status i m betting they won t for the reasons you cited.Chop ahead me thinks.
The hollowing out of UK manufacturing is a well discussed theme in finance / economics over the past 20-30 years. So yes, the pound debasement does nothing but reduce imports which is the flip side of increased exports. The economy rebalances via reduced imports, but that translates into a lower standard of living for all UK residents. The only way for the UK to improve is by structural change mainly by reducing the culture of entitlement and the role of government in the economy.
Hi Louise hotels vancouver good to see a piece that throws up so many questions, least of all your age a woman`s prerogative and all ..I do question your choice of movies though. It is a poor watch to say the least ..The Firm and Jerry Maguire made it look mediocre .Rainman too imho
Anyways, I have to question you on US exports. We saw massive increases in the production and exports of oil and petrolem products from the US since 2005, bought on by the increasing tensions and turmoil in the Middle East. Exports of oil and petrolem products have increased by 150% since 2005. Unheard of and many analysts say that this will scale back as geopolitical tensions subside. I certainly believe that.
Domestic consumption of petroleum products in the US have decreased by 9%, net imports of oil and petroleum products have decreased by 17% and the net imports to domestic consumption fell to 45% from more than 60% in the same period. We`ve seen oil prices increase hotels vancouver dramatically during the same period and of course oil is priced hotels vancouver in US$. Therefore, is this genuine currency debasement or a consequence of the reactions to geopolitical tensions in oil production areas?
US Big Oil will almost certainly ramp back production hotels vancouver as tensions subside and they WILL subside in time. US will then surely revert to being a net importer again with conservation of reserves in mind. Federal government who hold licences for so many fields will, as usual, see to that, making this overall increase in exports since 2005, a temporary, one-off event.
The UK is a totally different situation. Since the 1970`s our industrial base has been systematically dismantled and we have become a services economy hotels vancouver to all intents and purposes with speciallist exporters. We are about as unbalanced an economy as an unbalanced can be in the context hotels vancouver of developed economies. The general consensus from politicians and UK residents is that we need to re-build a manufacturing and production base. Big call but one that needs to be made and acted on. The Pound has been extaordinarily high against a basket of major currencies for many years now. Fine if you`re hotels vancouver exporting services, but a drag on new and existing exporters who struggle to gain and reinforce footholds in overseas markets. We have amongst the best universities in the world, churning out the best minds and now we need to take full advantage of that and a cheaper Pound to up the export ante from new companies hotels vancouver driven by these best minds . We have millions of people who are prepared to accept low(er) wages and therefore can contribute toward building an exporting manufacturing base to compliment our superb services exporters. We are not a domestically driven economy and never will be as such. Therefore a cheaper hotels vancouver pound is essential to get the show on the road. A cheaper pound is not the only must have to succeed. We need joint design and production initiatives with China amongst others to succeed and so that involves our politicians and captains of industry to push for the initiatives. A cheaper Pound is the carrott. If we fail in rebuilding and rebalancing our economy, we will continue to be at severe risk during hotels vancouver future economic shocks and downturns and there will be more to come.
A cheaper Pound is here to stay. Inflation at 2 to 4% is here to stay for quite some time yet. We will see lower rates of corporation tax to target companies wanting hotels vancouver to set-up hotels vancouver shop here and lower income hotels vancouver tax rates for the lower paid. The debt pile will be paid off at a much slower rate. Gilts and corporate bonds will stabilise after an initial hike. A Pound at $1.62 is of no use whatsoever right now and while sub-$1.45 does have it`s risks, an unbalanced economy open to shocks is far riskier.
David Cameron, Richard Branson Co need to fuel that plane up, spend less time (for now) in the Middle-east and get straight back over to China, India, South America and hammer home the benefits of investing in UK Plc with a cheaper Pound We won`t miss a few more PMQ`s as entertaining as they are
I grew up in a time when we always hotels vancouver thought it was good to have a strong manufacturing base, but is that really so? Certainly hotels vancouver it does not take an Einstein mind to see that there is an advantage of having a military industrial complex hotels vancouver such as the United States economy. But quite frankly I find it ironic that the United States borrows to produce such an advantage and has in the past borrowed from Communist countries. Go figure!
From my perspective the British pound is the most expensive currency in the world. But that is just looking at numbers like 1.62 to the US dollar and others. lol So we have gotten into this price mechanism which rewards (I mean increases the value of ) a currency when there is inflation higher than other countries and higher than economists projections. And we miss the point. As Si pointed hotels vancouver out there are other things happening. Sometimes the best medicine is a huge change such as when countries go bankrupt and revalue their currency. My point being that a gradual devaluation sometimes does not work so well and I think you make a strong case for that. However, most leaders hotels vancouver want a gradual change and never plan for any thing else but then again I reside in one of the two counties in the world that have never gone bankrupt. So we are exporting Mark to England to help you out.
Secondly why does it matter so much to have a strong manufacturing hotels vancouver base? It seems like a stupid question but given the advantages of manufacturing hotels vancouver just about anything in China or other third world countries why belabor the point. So for most products manufactured in China there is a 500 to 700 % price advantage. So to bring back production to a G7 country devaluing the currency by 3 to 4 % is just a moot point and a temporary solution. A couple of months ago the United hotels vancouver States celebrated the fact that some production came home. You know what it was! Styrofoam cups etc! At the same time Apple stated that they would bring back some production hotels vancouver to the USA. at the same time China is laying off people in that industry and replacing them with robots. But this is hardly