Up and down like a bride's nightie.
Brexit and Financial Markets
- Thread starter Raoul
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In the latest episode of the United Hour Podcast, Nik (@Rood) is joined by CEO Duncan Drasdo and Financial Director Andy Green from the Manchester United Supporters Trust for a special episode on all things behind the scenes at Old Trafford including a brief history of MUST and their aims today, views on INEOS and Sir Jim Ratcliffe so far, and the Old Trafford regeneration.
What on earth...?
Currency devaluation is the primary cause of balance of payments crises.
You're thinking of the likes of Zimbabwe, although even there it's more of a symptom than a cause. They import everything and have little to sell.
For a manufacturing and exporting nation, and despite popular opinion the UK still is one, then exports become cheaper for others to buy and volumes increase. Importing raw materials costs more, but manufactured goods too are dearer, and for these people are more likely to buy British alternatives, where available. For a country like the UK a devaluation normally provides a big boost to it's manufacturing sector and exports, and the balance of payments improves.
I wonder how this recession will be felt by the working class and the elderly especially now that there's no EU laws to protect them
If we're a manufacturing and exporting nation why do we run such a large deficit? We are currently only able to manage this deficit through our strong £ and growing economy, with the current fall in valuation our ability to service the debt will be nulled.
Err, we're still in the EU for now! I don't Theresa May or whoever isn't going to reintroduce poor houses immediately after we actually leave.
I'm sure they'll come up with a snappy name like 'Aspiration Houses' or 'Strivers Houses' or something.
I think you need to pay more attention in your Economics class.
If the Pound weakens, our exports get "cheaper" to johnny foreigner and volumes should increase. Balanace of trade improves.
Likewise; Imports to the UK become more expensive and consumers switch to domestically produced alternatives. Balanace of trade improves.
Edit: Ceteribus Paribus- all else being equal.
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I think you are confusing budget deficit with trade deficit.
Hehe. Ceteribus Paribus my friend!Not if tariffs are imposed they don't
Some things, such as oil, have to be paid for in dollars. They'll be more expensive too.
There are going to be a lot of variables in these equations, playing russian roulette with the British economy
Not if tariffs are imposed they don't
Yes, a German buying a British widget might have to pay 8% tariffs, say, but the £ has dropped 10%, so the product costs 2% less to him.
Now a Brit is buying a German wodget, he pays exactly the same 8% tariff, plus the same 10% extra for currency movement, so 18% more.
What's the effect on sales?
Would be a Grade C GCSE answer.
And how do we service trade deficit (+ negative net income + net overseas transfers)? The two are intrinsically linked in any case wouldn't you say?
It depends on the price elasticity of demand of imports and exports.
If the currency drops by 10%, the price of exports on foreign markets drops by 10%, resulting in an increase in export volume of greater than 10%, and a rise in total export revenue.
Likewise, the cost of imports increases by 10%, resulting in a drop in import volume of more than 10%, and a reduction in total import costs.
Higher exports, lower imports > improvement in balance of payments.
Yes but how much did the British widget manufacturer have to pay in importing the raw materials to produce his widget
or
the Brit buying his VW BMW etc will be paying slightly more as well - Brits will all be driving round in Reliant Robins
Yes but how much did the British widget manufacturer have to pay in importing the raw materials to produce his widget
or
the Brit buying his VW BMW etc will be paying slightly more as well - Brits will all be driving round in Reliant Robins
You made a good point and then wrecked it with the laughing smilie. Shame.
Yes, there are downsides to a falling currency which you can focus on if that's all you want to see, but there is a net effect on manufacturing and the balance of payments nonetheless.
The problem is that there are so many variables - the main one being what happens with the discussions of the UK leaving the EU and the new deals they have to negotiate, this is all going to take years, during which time the uncertainty will hang over the economy like a bad smell - how does anyone cope with this
This is assuming of course that we actually produce a domestic alternative.
Sound economics but people tend to look at their own personal situation rather than the state of the nation or long-term sustainability. While there will be some timelag before the devaluation is reflected in the price of retail goods, basically all the things we import are 15% more expensive, and, if they can't negotiate a sensible way out of this quagmire, that 15% will be 20% or more. The most bearish I have seen is dollar parity, which seems excessive, but plenty are predicting 1.20 or less.
If you ignore the fact that we run up an annual BoP deficit of about £100bn these days that we were just about keeping on top of; it will take a hell of a shift in export volumes to counteract the effect that our falling pound and potentially receding economy will have on our monumental current BoP debts.
Of course.
Yeah, I think most of the people making sensible economic points on here were remainers, we're just looking for what positive aspects we can, and whilst it's speculative as you say, a lower pound is likely to be a bit of a silver lining. Just incredibly fortuitous timing that inflation is almost non-existent, or it would be a different matter entirely.
Looks like Italian banks are in the shit, maybe the next eu / zone crisis.
Just a shame we're still in the EU and obliged to help bail them out.
All the financial whizes were saying it'll be curtains for us if we didn't go into the Euro. We didn't thank God.
The same people were saying it'll be curtains for us to brexit. We did thank God.
Im sure German banks will bail them out keeping the project ticking along wonderfully
Thanks professor. Its a wonder that i managed to pass my GCSE, let alone my degree in Economics.
Im intrigued; do you honestly think a weak GBP is bad for UK exports?
It's well known that anyone who voted remain is an economics and business expert, duh!
It's also well known that anyone who voted leave doesn't even know what an expert is.
I see in one of your posts you said that you voted Remain, despite arguing the opposite at length before the vote, where do you stand now as you seem to have swung back the other way by your comment, or is it a case of it wasn't me guv, who's responsible for the mess the UK is now in.
We have a relatively recent example in the exit from the ERM. It was a massive positive for the UK. Right now we have access to the free market and have reduced our costs compared to our closest competition. There is reason to hope that the EU sees sense for its own sake and does what is in the best interests of domestic industries of the major EU economies and looks for a close trading relationship with the UK.
Still a lot that can go wrong though.
It's good for exports, bad for us. I'm sure you know from your studies that we have been running a massive deficit for many years now, the chickens are about to come home to roost.
Politicians dont often do what is sensible, sadly!
If its good for exports (and reduces imports) then it will reduce the deficit. How is that not good for us?!
Shit will get more expensive for Brits, which will have a suppressive effect on spending, bad for everyone
If you had checked the context of the debate you would know we are talking specifically about trade, because that is the post that @endless_wheelies jumped on.
What a about UK businesses that rely on imports?
They may suffer. Whilst UK businesses that rely on exports prosper. Hopefully.