How much longer before the artificially high pound peaks? When it falls watch inflation soar! Labour wont know what has hit them! Better hurry up and call that election Mr Brown!

From The Times:

Sterling and oil advance into record territory
The pound is worth $2.04, a 26-year high.

It is dollar weakness not pound strength. Check the cross rates to the euro ect. The pound has been in a narrowing range againt them for years.

DavidBodden, The Labour government has been deliberately working to keep the pound high to mask inflation which experts say is really running at 7%. Watch how events unfold and when the pounds strong position can no longer be maintained, you will see the true rate of inflation rocket upwards and the Bank of England forced to raise the cost of borrowing again and again. If inflation is as low as the governments doctored figures show, why is the Bank of England so worried?

French President Nicolas Sarkozy has said several times that the Euro is overvalued, Sarkozy is so worried by this he even wants the Euro devalued, so how can the Euro be responsible for the pounds strength?

Tony, you complain about the ‘pound strength’ and want devaluation, but fear the inflation that it would bring. You then quote Sarkozy also lamenting the euro / USD exchange rate. The common factor here is the US dollar. In fact cast the net further and look the US Dollar index which is a weighted average of the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Look at this chart. http://charts3.barchart.com/chart.asp?jav=adv&vol=Y&grid=Y&org=stk&sym=%24DXY&data=H&code=BSTK&evnt=adv It shows the weakening of the USD against all of them.

Devaluing the pound to make our exports more competitive is a failure of a policy that belongs in the past.

DavidBodden, I've never called for a 1967 style devaluation. All I ask is that the pound is allowed to operate at its natural equilibrium. I quoted Sarkozy to illustrate the point that the Pound isn't strong on account of the Euro being weak as you indicate.

Its true that some countries have devalued their currencies to kick-start growth, but we all know they will pay for it in the long run with inflation. However I do not advocate such an approach. Rather I should like to see Sterling operate at natural market-driven levels.

New Labour's economic one-card-trick, The strong pound, has bailed them out of having to address the underlying high level inflation which has been fuelled by government spending and cheap credit. However the days of relatively low interest rates and low inflation are soon to end. I predict full blown stagflation. The pound can't stay strong forever and Gordon Brown knows this, that factor alone may well determine when Brown calls the next election.

I never said anything about the pound being strong because of the euro was weak. I said the dollar was weak. I said the pound has been stable against the euro. Look: http://finance.yahoo.com/currency/convert?from=GBP&to=EUR&amt=1&t=5y Please trust me on this one; I know quite a bit about the financial markets even though I’m not allowed to work anymore.

I agree that Browns economy is a house of cards maintained by the wealth effect of excessive house price inflation. I also agree that there is a risk of stagflation. But if interest rates are artificially low, that would be keeping sterling weak. Increase the interest rates will strengthen the pound. That’s the way it works. It’s already at it “natural market-driven level”. Just how would you drive down the exchange rate while having high interest rates? [I do know, but I’m not going to give the bastards ideas as it involves the tax system.]

David Bodden, I apologise if I mis-read your post. The dollar does have a few problems as you correctly say, it is slowly becoming an abandoned trading currency, but I maintain that the pound is artificially high, which suits labour, and that the pound is set for a big fall, which won't suit Labour one bit!

On the subject of interest rates, the economic mess created by Gordon Brown means that the Bank of England have little room for manouvre when the pound does fall. As regards exchange and interest rates, much of the problems in the world today stem from the nature of the global economy. My own remedies would involve building a home-market economy where possible.

Finally, do you feel that the end of Bretton Woods was the start of the beginning of the end of economic stability?


PS: You don't get debates like this on Labour and Liberal websites!