Osborne Fears 'Collapse' of Pound.

[Big Orange]

Uh-oh:

Saturday 15 November 2008, 11:50am
Osborne fears 'collapse' of pound

Gordon Brown's promise to kick-start the economy with borrowing could cause the 'collapse of sterling', George Osborne has warned.

The shadow chancellor risked accusations that he was talking down the pound as he mounted a ferocious attack on the Government.

He said the Prime Minister was pursuing a 'scorched earth' policy, intending to leave the economy in ruins for when the Tories came to power.

Mr Osborne said people instinctively understood that the state could not borrow itself out of trouble. The weight of debt would stifle recovery and create a major risk for sterling, he added.

'Sterling has devalued rapidly against the euro and the dollar,' Mr Osborne said.

'We are in danger, if the Government is not careful, of having a proper sterling collapse, a run on the pound.

'The danger of a run on the pound . . . is that it pushes up long-term interest rates, which is a huge burden on the economy.

'The more you borrow as a government the more you have to sell that debt and the less attractive your currency seems.'

Mr Osborne's words could be seen as breaching the convention that senior politicians avoid warning of runs on sterling - for fear that their words become self-fulfilling.

The pound has slipped to a 13-year low against a basket of other currencies.

Its value against the dollar rate fell below 1.48 dollars, while against the euro it reached a record low of 1.17.

© Independent Television News Limited 2008. All rights reserved.

[Psychic_Sandwich]

Well, it's going to collapse now. Thank you very much, Mr Osborne.

[Winston Blake]

In related news, Mr Osborne was later found wandering the streets in torn clothes, shouting at passersby: "The banks are collapsing! Get your money out quick! Before it's all gone!".

[The Guid]

So Mr. Osborne is literally accusing the government of DELIBERATELY screwing the ENTIRE ECONOMY???!?!?!? What a fucking loon. And people are arguing the Tories are becoming "serious". Fucking crackpots.

[Big Orange]

I'm certainly not voting Tory, especially when they built the foundations of the current rubbish economy back in the 1980s.

[J]

I'm unfamiliar with British politics, however, from the tone of the replies I gather Mr. Osborne is regarded as a certifiable loon.

Unfortunately, he's right.

Borrowing money you don't have, and will likely never have is a great way to devalue the country's currency. The US being the reserve currency of the world can get away with it for a time, the UK cannot, and has a much smaller margin of error.

Arguably, the current economic crisis hit the UK well before the US last year with the failure & nationalization of Northern Rock. It was our first real warning that things weren't going well, and a preview of things to come. The problem is the UK is even more vulnerable to the current crunch than the US, properties & housing over there are even more overvalued with repect to income, and the banks were leveraged up just as much as they are on this side of the ocean. The crash potential of the country is every bit as great, if not more, and you don't have the luxury of being the world's reserve currency so other nations & parties aren't as compelled to buy your nation's currency issues and keep the value up. Unlike the US dollar, the Pound can crash and become worthless without killing everyone else with its death.

If other nations & investors feel the UK is going into too much debt, they can and will stop buying treasury bonds issued by the British government and begin liquidating their Pound holdings, and if it gets wings the UK will go the way of Iceland.

[Ubiquitous]

I'm unfamiliar with British politics, however, from the tone of the replies I gather Mr. Osborne is regarded as a certifiable loon.

Unfortunately, he's right.
.

Not really, J. Everyone who has posted in this thread are well known Lib Dem/Labour activists. It is their mandate to try and put down the Tories.

Osborne is going to be one hell of a Chancellor, although he is going to struggle at first inheriting Labour's trashed economy.

It's simple economics that if you borrow money that you don't have then your currency will be devalued. Any 14 year old who studies the Weimar Republic can tell you this. Why can't the people who run our country adhere to simple fundamentals? Brown is recklessly endangering our currency acting the "strong man". His ego is going to be responsible for years of pain for Britons.

[Crazy_Vasey]

"He said the Prime Minister was pursuing a 'scorched earth' policy, intending to leave the economy in ruins for when the Tories came to power."

Is probably why the guy's being called a nutter. What the government's doing is a bit dim, and I have little faith in politicians, but deliberately destroying the economy? That's more than a little out there.

[Darth Tanner]

Has anyone actually looked at the value of the pound lately, its already collapsing. I doubt it'll be long before we reach a £1 = 1 Euro

but deliberately destroying the economy? That's more than a little out there.

Brown has been paying for massive increases in public spending with massive debt, going to incredible lengths to conceal such debt from appearing on his balance sheets through various accounting rules and generous PFI contracts that ultimately cost double what it would have to do within the state system.

Brown can not even consider cutting his 'investment' in public services without committing electoral suicide, thus he must continue to borrow, borrow and borrow, essentially digging the hole we are in much deeper. Although he isn't destroying the British economy on purpose, he isn't exactly doing it by accident.

especially when they built the foundations of the current rubbish economy back in the 1980s.

Yes it must be the Tories fault. They have been secretly running the economy and deregulating the banking system for the last 11 years after all.

Well, it's going to collapse now. Thank you very much, Mr Osborne.

Head, meet sand. Despite what New Labour policy suggests, most problems cannot be avoided by throwing borrowed money at them or ignoring them.

Should he instead just stay silent while the current government builds up the problem further through greater debt? Kind of defeats the point of having an opposition.

[Colonel Olrik]

Holy shit. This week it did fall like crazy. Will someone more knowledgeable explain to me what this means in the wider context of the EU free zone? The pressure for inflation in the UK must be enormous. Right now, I'd save 80 Euro just by ordering an ipod, 30 euro in an xbox game, etc. I actually have a shopping bag ready at amazon UK and I'm just waiting for the pound to stop its dive for a couple days.

[The Guid]

I'm unfamiliar with British politics, however, from the tone of the replies I gather Mr. Osborne is regarded as a certifiable loon.

Unfortunately, he's right.
.

Not really, J. Everyone who has posted in this thread are well known Lib Dem/Labour activists. It is their mandate to try and put down the Tories.

I'm a WELL KNOWN Lib Dem activist? Famous! Famed! Infamous! I walk down the street and feared normal people flee before me! And it is Orange and others' mandate to put them down? Brilliant! We met last week at the secret conspiracy hall to discuss this.

Osborne is going to be one hell of a Chancellor,

Emphasis on the Hell.

although he is going to struggle at first inheriting Labour's trashed economy.

That I will agree with. Though he will continue to struggle. Do you know why? Because the Conservative Party has proven itself to be incredibly and foolishly incompetent in regards to the economy. Do you remember the last crash? It was called Black Wednesday and it came off the back of over a decade of Tory rule, and it was actually more localised in Britain unlike this global one.

It's simple economics that if you borrow money that you don't have then your currency will be devalued. Any 14 year old who studies the Weimar Republic can tell you this. Why can't the people who run our country adhere to simple fundamentals?

I am well aware that borrowing is often a bad idea. I would like to refer you to this:

"There then followed what can be seen as a veryprolonged – if faltering – period of deficit reduction, culminating in the surpluses of 1988 and 1989. Finally, the 1990s saw the most violent swings in this measure of the fiscal stance in the entire post-war era. The decade started with an extremely rapid rise in borrowing, so that in just a few years the surpluses of the late 1980s had turned into a deficit of unprecedented peacetime proportions – in 1993, the PSNB reached 7.8 per cent of GDP. The subsequent tightening of the fiscal stance was almost equally dramatic – borrowing dropped every year until, in 1998, a surplus was once again recorded, and by 2000 the surplus reached almost 2 per cent of GDP, a level not even approached since the close of the 1940s."

From here: http://64.233.183.104/search?q=cache:77 ... =clnk&cd=6

So in the early 1990s when these Tory lovely boys were in charge you had borrowing of, and I quote, "unprecedented peacetime proportions". So please excuse me if I don't think that George Osbourne will herald the dawn of sensible economics, tied as he is to the party that set off borrowing right to the top. It took a Labour government to bring us back to surplus.

Brown is recklessly endangering our currency acting the "strong man". His ego is going to be responsible for years of pain for Britons.

I think Brown alone couldn't cause chaos on this scale, even if he wanted to. There are plenty of causes for the pain that I agree is likely on its way.

Can I be clear: I am not saying Brown is doing anything right. I agree with J. What I am saying is that the Conservative Party are the worst sort of people to support at this time; the party has many deregulators, and has in it those responsible for a lot of the problems of yesterday, and indeed today.

[Punarbhava]

What's a "shadow chancellor"? Is he like a hidden leader no one is supposed to know about?

[Bounty]

What's a "shadow chancellor"? Is he like a hidden leader no one is supposed to know about?

The Shadow Cabinet is a sort of mirror-universe government run by the opposition. Their job is to monitor the real ministers and point out what they're doing wrong and how the opposition would've handled the situation.

If Great Britain were a car, the Shadow Cabinet would be the backseat driver telling the government it forgot to use its indicators.

[Bluewolf]

A Shadow Chancellor is who would be the Chancellor; if the opposing party were in power. The opposation picks its own cabinet of who would be those roles if their party was in power, thus the term Shadow.

[Punarbhava]

So.. he doesn't have any power, but he gets to point out everything the opposition is doing wrong?

Sounds like a pundit with a fancy title. Kinda cool though. You Brits seem to have a lot more open infighting and criticism in your government than ours, but that's a good thing I think. Sometimes I wish congressmen would start screaming at each other and having excited debate like on SDnet. It'd be a lot more entertaining and useful.

[The Guid]

Its because the government is run from a chamber of representatives rather than from a Presidency. Its like if the leader of the House was also the head of government, the person who is the minority leader is like a "what if" kind of leader and would appoint who they would appoint into the positions of power around them. Its also because in the UK we have less of a sense of seniority being important in parties, more of being "in" with the current party leaders.

[TC Pilot]

No offense to all you Brits out there but....

GOOD.

I'm about to spend six months in Britain, and it would be nice for the conversion rate to fall in my favor.

[Fingolfin_Noldor]

No offense to all you Brits out there but....

GOOD.

I'm about to spend six months in Britain, and it would be nice for the conversion rate to fall in my favor.

Assuming the inflation doesn't kill you.

[Hillary]

I'm unfamiliar with British politics, however, from the tone of the replies I gather Mr. Osborne is regarded as a certifiable loon.

Unfortunately, he's right.

Borrowing money you don't have, and will likely never have is a great way to devalue the country's currency. The US being the reserve currency of the world can get away with it for a time, the UK cannot, and has a much smaller margin of error.

Arguably, the current economic crisis hit the UK well before the US last year with the failure & nationalization of Northern Rock. It was our first real warning that things weren't going well, and a preview of things to come. The problem is the UK is even more vulnerable to the current crunch than the US, properties & housing over there are even more overvalued with repect to income, and the banks were leveraged up just as much as they are on this side of the ocean. The crash potential of the country is every bit as great, if not more, and you don't have the luxury of being the world's reserve currency so other nations & parties aren't as compelled to buy your nation's currency issues and keep the value up. Unlike the US dollar, the Pound can crash and become worthless without killing everyone else with its death.

If other nations & investors feel the UK is going into too much debt, they can and will stop buying treasury bonds issued by the British government and begin liquidating their Pound holdings, and if it gets wings the UK will go the way of Iceland.

So what would be the best thing for us Brits to do with our savings? I quit the equity markets a while back, but it seems as if holding in cash is not necessarily a great option either.

[The Kernel]

So what would be the best thing for us Brits to do with our savings? I quit the equity markets a while back, but it seems as if holding in cash is not necessarily a great option either.

Buy US Treasury Bonds.

[Phantasee]

So what would be the best thing for us Brits to do with our savings? I quit the equity markets a while back, but it seems as if holding in cash is not necessarily a great option either.

Buy US Treasury Bonds.

Jesus. I hope you're joking.

Isn't gold the last refuge for people too uncertain to invest in anything else?

[Fingolfin_Noldor]

Jesus. I hope you're joking.

Isn't gold the last refuge for people too uncertain to invest in anything else?

If US Treasury Bonds go down the chute, then even Gold won't save you. Who is going to buy an expensive brick?

[Big Phil]

Perhaps it would be helpful if an economist, someone who actually knows something about financial markets (instead of self-taught amateurs ), could offer their take what's happening to the British pound and what to do about it. Are there any on the board other than Master of Ossus?

[Darth Tanner]

Golds lost about $250 /oz since March, I don't think that looks like much of an investment.

Buy US Treasury Bonds.

Thanks! People moving their money out of the UK is going to make things much better.

[The Kernel]

Perhaps it would be helpful if an economist, someone who actually knows something about financial markets (instead of self-taught amateurs ), could offer their take what's happening to the British pound and what to do about it. Are there any on the board other than Master of Ossus?

Just where the hell do you think we are right now? Do you honestly think that economist have the first clue about where the world economy is heading? This is completely uncharted territory and although you might be able to hear some interesting theories, it would be like trying to model the effects of climate change accurately. In other words, there are a million possible things that could happen and nobody has a clue what the end result is going to be.

Economics is a fine "science" for telling you why something is happening or has happened, but it isn't going to predict the future. Don't believe me? Then maybe you can explain why 85% of mutual funds underperform the indexes despite being helmed by economics experts from first rate schools like Harvard and Yale?