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LadyEllen -> time for the Euro (12/5/2008 4:08:18 AM)
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It is now time to ditch all sentimental attachment to the past with regard to keeping Sterling. This morning the pound has already lost another cent against the Euro and this decline is expected to get worse when the ECB cuts interest rates later today.
We're now at one pound = one euro fourteen. Not so long ago we were at 1.40 back in the good old days, then it went to 1.30 and that was bad enough, then it went to 1.25 and then it dropped to 1.20. There is a very good prospect of 1.10 by Christmas and parity sometime in the early part of 2009.
That the same decline of 25% has been experienced against the dollar is why the matter is now so urgent. The UK is an importer nation, a consumer nation reliant on imports of everything including the basics of life such as energy and food. Our European imports are expressed in Euros, and much of the rest of our imports worldwide are expressed in USD.
As Sterling falls in value, all these imports become more expensive - and where contracts are expressed in Sterling the importers are facing demands from overseas exporters to change them to one of those two other currencies - who after all wants to be paid with a currency worth less day by day? Whilst our few remaining exporters are doing well, their increased prosperity is a drop in the ocean next to the additional costs and losses being incurred on imports.
The problems on the international trade front with regard to our imports because of the decline of Sterling mean that goods in the shops will have to rise in price to offset the increased cost of them in whole or in part as imports - including food. Except that with the market as it is, retailers are having to offer huge discounts to try to stimulate sales - and that isnt working as things are. Retailers' margins are reducing, their general turnover is reducing - many will go bust, unloading more people into a reducing jobs market and adding to the burdens on the economy.
And if things continue as they are, there will come a day when no ships and no trucks and no freight planes will arrive any more. The disparities between Sterling and preferred currencies for international trade will mean that goods can no longer be sold here that are not produced here. Since we rely on imports to feed the nation, we will truly be in the mire. Given that much of our electricity supply is owned by foreign companies, uses imports of coal and gas and some of our power comes from France, we could see the UK disappear from night time satellite images.
And as this progresses, the value of Sterling will only fall further as confidence in our nation declines, adding to the problem.
We need the Euro now. Or we must resign ourselves to a lifestyle alike with Romania.
E
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