Pound falls to 37-year low against dollar as mini-budget puts markets in spin

[Mista]

Inflation is the more pressing issue right now, not the budget. In the middle of double digit inflation, the UK decides borrow massively to boost demand though tax cuts.
Interest rates will rise and UK will likely have to sell dollars to defend the pound. This will put UK even further into debt.

Do you learn accounting? Selling the dollars won't put them in debt, a budget deficit will. I doubt they have much much dollars in the first place since they run current account deficits every year. Check their forex reserves.

To deal with inflation they should adopt both contractionary fiscal and monetary policy in tandem to destroy demand. GDP will have to tank. Moreover a contractionary fiscal policy will improve both budget and current account deficits, holding the pound steady. Adopting a contractionary monetary policy while adopting an expansionary monetary policy is counterproductive; inflation will worsen and deficit will widen. I have no idea what they are doing.

 

[Communism]

Either they think they have or think they can easily get dollar swap lines.


Because if they do not manage to get dollar swap lines from the fed, the UK is likely going into hyperinflation with their current policies.

 

[casual]

Do you learn accounting? Selling the dollars won't put them in debt, a budget deficit will. I doubt they have much much dollars in the first place since they run current account deficits every year. Check their forex reserves.

To deal with inflation they should adopt both contractionary fiscal and monetary policy in tandem to destroy demand. GDP will have to tank. Moreover a contractionary fiscal policy will improve both budget and current account deficits, holding the pound steady. Adopting a contractionary monetary policy while adopting an expansionary monetary policy is counterproductive; inflation will worsen and deficit will widen. I have no idea what they are doing.

They don't have much forex which means they will have to borrow for dollars.

 

[Mista]

They don't have much forex which means they will have to borrow for dollars.

Err no, that's not how it works. You don't borrow forex to defend the currency. If it gets to that point, traders can easily short your currency which makes the whole exercise futile. Who will then lend you knowing that you can't repay your international obligations?

Also, selling the dollars and buying pounds is not an expense. It's just a conversion of assets and thus do not incur debt ceteris paribus.

 

[casual]

Err no, that's not how it works. You don't borrow forex to defend the currency. If it gets to that point, traders can easily short your currency which makes the whole exercise futile. Who will then lend you knowing that you can't repay your international obligations?

Also, selling the dollars and buying pounds is not an expense. It's just a conversion of assets and thus do not incur debt ceteris paribus.

Thanks for clarifying. However, what if they run out of dollars to sell and no one wants to buy pounds at the rate that want to defend?

 

[Mista]

Thanks for clarifying. However, what if they run out of dollars to sell and no one wants to buy pounds at the rate that want to defend?

They can raise interest rates to attract foreign capital, but it would be pointless if foreign investors don't believe that you can repay your international obligations and they won't buy your bonds. Like Argentina, their latest interest rate is like what, 75%? I doubt it will get to that point for the UK.

But If it does gets to that stage then the pound will tank like what we have seen happen many times before to developing countries. Eg; Some Asian currencies during the 1997AFC.

1997 Asian financial crisis - Wikipedia

en.wikipedia.org

 

[MH.Yang]

Following Erdogan, Liz Truss is another person who challenges modern economics.

Under the current circumstances, 220 billion pounds of tax cuts and subsidies will be invested.

 

[hembo]

The drop in the pound is sending UK rate expectations to 6% in 2023 - and that means a spike of 73% for some mortgage payments, economist says​

 

[DF41]

https://****/azmilitary11/22226

**** = t dot me



Liz Truss might go from the position of Prime Minister sooner than expected...

https://****/azmilitary11/22222

**** = t dot me




Azmilitary1🛰:
Liz Truss might have quick end as Prime Minister...

The UK Parliament is taking steps to pass a vote of no confidence in Prime Minister Liz Truss. This is reported by the Sky News channel, referring to its source in the government.

It is reported that the public is not satisfied with the policy undertaken by Truss. It seems as if ministers are playing with people's lives, the source emphasizes.

"She and (the Minister of Entrepreneurship, Energy and Industrial Strategy. — Editor's note) Quasi-Quarteng <...> play with the economy at the highest level with people's lives. You cannot have conflicting monetary policy and fiscal policy," he said.

There are more and more videos showing how Russian columns of military equipment are moving into the zone of the Special Military Operation, huge forces are accumulating to De-Nulandise Ukraine...

 

[Beast]

https://****/azmilitary11/22226

**** = t dot me



Liz Truss might go from the position of Prime Minister sooner than expected...

https://****/azmilitary11/22222

**** = t dot me




Azmilitary1🛰:
Liz Truss might have quick end as Prime Minister...

The UK Parliament is taking steps to pass a vote of no confidence in Prime Minister Liz Truss. This is reported by the Sky News channel, referring to its source in the government.

It is reported that the public is not satisfied with the policy undertaken by Truss. It seems as if ministers are playing with people's lives, the source emphasizes.

"She and (the Minister of Entrepreneurship, Energy and Industrial Strategy. — Editor's note) Quasi-Quarteng <...> play with the economy at the highest level with people's lives. You cannot have conflicting monetary policy and fiscal policy," he said.

There are more and more videos showing how Russian columns of military equipment are moving into the zone of the Special Military Operation, huge forces are accumulating to De-Nulandise Ukraine...

Don't worry, the stupid women solution will be more anti China as she believes Russia and China are the reason for UK massive inflation. That is only their solution.