A stronger pound will keep Britain ticking over – MoneyWeek

2020年3月7日 admin yabo亚博直播

That’sareliefforholidaymakers–butitmightwellbearelieffortheBankofEnglandandBritisheconomytoo。

Astrongerpoundwilldothreethingsthathaveyettomaketheirwayintomostmainstreamforecasts。

Itwillbringinflationdown。

Itwillallowthegovernmenttokeepborrowingatverylowrates。

AnditwillallowtheBanktopressthebuttononmorequantitativeeasing(QE),supportingflaggingstockmarketsandkeepingthepropertymarketalive。

Allthreewill–justabout–keeptheBritisheconomytickingover。

Inthewakeofthecreditcrunch,sterlingfelloffacliff。

Ithadbeenupashighas€1。

50againsttheeuro,andabove$2againsttheUSdollar。

Asourbankingsystemfellapartandthegovernmentembarkedonaseriesofexpensivebail-outsthatsentthedeficitsoaring,investorstookfrightandstarteddumpingsterlingasfastastheyditchedtheIcelandickrona。

Thepoundfelltonear-paritywiththeeuroand$1。

40againstthedollar。

Exportersmighthavecelebrated。

Butforeveryoneelse,itcompoundedthemiseryofadeeprecession。

Holidayscostmore。

Inflationstartedtorisesteadily。

Butthisyear,sterlinghasbeguntostrengthenagain。

Thepoundisupto€1。

24againsttheeuro,andabove$1。

60againstthedollar。

Thegainagainsttheeuroisparticularlyimportant,becausetheeurozoneisourkeytradingpartner。

Formuchofthepasttwoyearsthesinglecurrencyhasstayedremarkablystrong,despitetheregion’sdebtcrisis。

Now,withGermanyandFranceatloggerheadsoverausterityplans,SpainindeeprecessionandGreeceontheedgeofwithdrawal,thatconfidencehascracked。

It’sunlikelytoreturnsoon。

Britainhasplentyofproblems–butcomparedwiththeeurozone,itlookslikeanoasisofstabilityandgrowth。

Nooneshouldexpectthepoundtohitthelevelsreachedin2006and2007。

Butneitheristhisablip。

Itcangetstrongerstill–andremainstrong。

Forasmall,openeconomylikeBritain,whichbothimportsandexportsmuchofwhatitconsumesandmakes,theexchangerateiscrucial。

StrongersterlingwillshiftthepolicyoptionsfortheBankofEngland。

Tostartwith,itwillbringinflationundercontrol。

TheBankhasmisseditsinflationtargetmoreoftenthanGreecehasmisseditsdeficit-reductionplans。

Butthelinebetweenahigherpoundandlowerpricesintheshopsisastraightone。

Thecostofpetrolwillfall,makinganimmediatedifferencetotheheadlineinflationrate–aswellastohard-pressedmotorists。

Everythingweimportwillstarttogetslightlycheaper–fromclothes,tofood,toelectronics。

Lowerinflationwilleasethepressureonconsumers。

Withwageslargelystatic,theonlywayfamiliescouldcopewithhigherpriceswastospendless。

Ifpricescomedown,theywillspendmore–andthatmaygetthehighstreetmovingagain。

Next,itwillmakeBritain’svastbudgetdeficiteasiertofund。

Thegovernmentisstillborrowinganextraordinary10%ofGDP,aroundathirdofwhichcomesfromabroad。

Perhapssurprisingly,itcanstilldosoatverylowrates。

ButanattackbythebondvigilantesremainsthesinglegreatestthreattoBritain。

Ifwesuddenlyhadtopay6%forourmoney,liketheSpanishorItalians,we’dbebroke。

Butastrongerpoundmakesiteasiertosellallthosegilts–forEuropean,AmericanorAsianinvestorsitautomaticallyraisesreturnsmeasuredintheirowncurrency。

Assterlingstrengthens,thedayofreckoningwiththebondmarketscanbepostponedyetagain。

Lastly,byeasinginflationandkeepingthegiltsmarketshealthy,itwillallowtheBanktopushthroughmoreQE。

Withaflateconomy,theonlythingholdingtheMonetaryPolicyCommitteebackfromreactivatingtheprintingpresseswasthethreatofhigherpricesandacollapseofconfidenceingilts。

Withthatlifted,theycanletrip。

MoreQEwilldrivesharepriceshigher。

Itwillmeaninterestratesremainatrecordlowsforlonger–whichwillhelpkeepthepropertymarketalive,evenifitwon’treviveit。

True,astrongerpoundmightnotbewhatBritainneedsinthemedium-term。

Itwon’thelptheeconomyrebalance(althoughtherewaslittlesignofthisevenaftersterling’sfall)。

ButitwillhelpBritaingetthroughatoughyear,whichmightbethebestwecanhopeforrightnow。

Andatleastyou’llbeabletoaffordacoffeeoraglassofwineonholidaythisyear。

NakedTextNakedText


admin