BBC NEWS | Business | Pound close to $2 exchange level — It’s the Iraq war causing this problem. We are slipping into third world nation status.
Sterling hit a 14-year record against the US dollar and Japanese yen as high UK interest rates attracted investors.
The pound rose above $1.99 on currency exchanges, almost breaking the key $2 rate. Against the yen it hit 241.42, a level not seen since September 1992.
Analysts said the shock interest rate rise by the Bank of England had seen many investors shift into the pound and sterling-denominated assets.
Under most circumstances this would be great for exports, but we are a net importing nation meaning it hurts us even more.
Thanks to Ethan Beaman for tip
I was in Malta four years ago, and the Maltese Lira were around 1 for every 2 dollars. I almost wanted to cry… well, ok, not really.
Damn, there were some hot women there.
Well, that will make those laptops well cheap for us brits!
Keep that graph going up!
The Iraq war has little to nothing to do with this. It’s all about interest rates and stability. Our interest rate are low. That hurts us.
The money markets like stability our government is the least stable it has been in years. The markets have now way of knowing what Congress is going to pass and what Bush will veto and whether or not Congress would override the veto. And that really hurts us.
And that Third World Nation status crap is pure BS John and you know it.
It’s a forward interest-rate differential play, nothing more. The UK is in toilet right with the U.S. – the U.S. is just a little closer to that hole where the poopies get sucked into.
Look for Bush in his state of the union to say whow well the economy is doing. I mean just look at the stock indexes. People are living in Wonderland.
Funny how the third-world bait works just as well here as it does with the MarketWatch crowd.
The time to worry is when the Ruble reaches parity with the dollar.
I would disagree a bit with the comment on #3. For sure the Irak war is not the only reason for the dollars slide but the absurdly huge piles of cash that are thrown in to it do little else except undermine the confidence on US economy. The US economy (e.g. deficit) is funded by loans from abroad and at some point, sooner or later, they will be collected. When the government wakes up and notices that it is time to pay up, they will have to tighten the belt and this money will be away from the future investments that could keep the growth rates at high level.
Isn’t it true (if anything is true anymore) that real estate leads the general economy in the U.S.? A friend who brokers real estate told me about a years ago that some reliable Chinese mortgage investors were pulling out of U.S. markets because they saw a crash coming. He was worried because if his Chinese contacts reflected a larger trend, the crash could become a self-fulfilling prophecy. Now we’ve got deficits reaching historic levels (along with the gap between the very rich and the declining rest of us) as our “conservative” government essentially devalues the dollar…
Seems to me we’re seeing some chickens coming home to roost. It’s not as if we’ve been without warning – even superbanker Alan Greenspan was alarmed about it. So what’s special about the $2 British pound? Is that supposed to representing a tipping point or something?
Come here to honduras where the dollar is still worth 19 Lempiras and your retirement money will last until you die or are stupid enough to get a honduran woman pregnant.
John, seriously, this is lame for even you. I hope your bad analysis is just right-wing baiting. If you really believe that its because of the Iraq War, makes us third world, or is bad for us because we import more than we export, you need to retake econ 101. The theory is that the pound is just half as plentiful as the dollar. Thats thanks to our theory of government debt, (tax and spend politicians thank you very much)…not the Iraq War–lest you forget that Britan is neck deep too. As for third world nation status–if that’s the case, where’s our free UN money…no seriously… I want a refund. A strong Brittish pound is always good for exports…always…just because we import more doesn’t mean an narrowing trade deficit is bad. You have to realize that the only case where that scenario is true is assuming we trade only with england. Not true. The only reason the the deficit occurred is the interest rate increase in Britan. Period. The consequence for us? Short term, I’m going to have to wait to buy some of my favorite scotch and beer, long run…nada. We are still the richest, most powerful country in the world…things get a lot worse before we loose that status.
“Cry me a river, Liberal” – Dogbert
#11 – The only reason the the deficit occurred is the interest rate increase in Britan. Period.
Wow. Are you talking about the entire US deficit? The strong UK currency caused the whole thing? Can you explain?
I recently threw out everything in my home that was made in the USA, and all I could find was dental floss and an Apple Macintosh. A declining dollar won’t harm your exports because you don’t have any.
Oy and we’re not even mentioning Euros which have suddenly become a more fashionable to own than $$!
#11,
… , you need to retake econ 101. The theory is that the pound is just half as plentiful as the dollar.
Yes, you REALLY need to take economics 101. You obviously know so very little yourself.
The world is flooded with oil dollars. Until America learns to curb its oil appetite then it will continue to lose influence in the international markets. Add to the number of dollars paying for oil, add in how much is now going straight to China.
A growing deficit, worsening import/export ratio, loss of world respectability, a heavy industry infrastructure that is dying, an educational system that does everything but educate, a real estate bubble, internationalization, job growth only in low tech jobs, growing tech capabilities outside the USA, third world infrastructure in large portions of the country, huge (and growing) expenditures for military adventures… the future of the USA is truly rosy.
Hmm, so the DJIA is breaking records lately. Lets see how it is doing vs British Pound.
Jan 2002 DJIA (9900) / Pound (1.55) = 6387
Jan 2007 DJIA (12500) / Pound (1.96) = 6377
So could it be that DJIA is only breaking records to keep up with the falling dollar?
I’m not sure if anybody has given these three reasons explicitly:
— some oil is being traded in Euros, thus diminishing demand for the greenback;
— global free trade, driven by the agenda of the increasingly dominant multinational corporations, tends to invest where labor, raw materials, and regulatory costs are lowest, also driving down demand for the greenback (relative say to the remnimbi yuan, though not to the Euro or quid);
— high noise ratio in the US economy. Americans work hard, but much of it is syphoned off unproductively.
#9, interesting point about real estate. The suburban / commute model is shaky in terms of national economics and North American demographics. I wonder what will replace it?
#16 –
Spot-on summary there, but you could’ve added:
rapidly growing income inequality and corporate domination of government, and the consequent degeneration into a two-class society of multi-multimillionaires and wage-slaves indentured to the finserv sector. Government by, and for, Wall Street.
I recently threw out everything in my home that was made in the USA, and all I could find was dental floss and an Apple Macintosh.
Must have been a REALLY old Mac. They’ve been made in asia for a long long time now.
but we are a net importing nation meaning it hurts us even more. Hurts you maybe. If you work for a manufacturing company that has to compete with cheap overseas cheap, it’s a blessing.
Bush and the conservatives ran on “making America strong” but their insane fiscal irresponsibility has made us more vulnerable than ever.
#19 – That two-class economic system is a transition currently in progress, reflected by the growing income gap. Here in Mexico there is already a well established two-class economic system and the people have come to terms with it pretty well. The difference may be that in Mexico there’s an established aristocracy with a sense of duty toward the mass of people who don’t live like princes. Corporations have no loyalty or responsibility to anyone or anything. They just play the appropriate tunes to manipulate people’s sentiments. “Do people care? People do,” intones the caring, fatherly voice on TV… pimping for Chevron.
One other difference. In Mexico, at least in boom areas like Baja California, there is a growing middle class and the feel you get from people in the neighborhoods is optimistic. They believe, as people in the U.S. used to believe, that their children will have better lives than they have had themselves. The loss of that belief in the corporate U.S. is, well, it’s just sad. See http://tinyurl.com/33osrr (goes to Pew Research findings from poll in May, 2006).
How do you know it’s the Iraq war? You’re starting to sound like a lazy reporter John. And haven’t you already posted that this is because of the deficit, spending, Socual Security, ans trade deficit?
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