The Great Sterling collapse is coming....

[The_Big_Fellow]

Euro is also over valued. Both GBP and Eur will drop vs USD. This is a good thing for Euro and GBP exports to the US.

Sterling has dropped by about 25% over the last two years, yet it has had little impact on their exports.

I hope the Euro devalues further against the dollar, but a falling sterling will significantly damage the Tourism, agricultural and SME exporting sector.

Another worrying thing is that Britain are hoping to export their way out of recession, we are hoping to export out way out of a technical depression, and all of Europe is exporting to sustain growth. Everyone is planning to export their way to growth.

[Cassandra Syndrome]

Yeah Jim Rogers apparently said this a month ago (then apparently denied it, great hedge playing). This is what Quantitative Easing ultimately leads to. The UK economy is still shrinking and lending is still contracting so QE2 needs to be launched. Bye bye Sterling. Bennie boy in the States is running out of time as his April Fool's day prank of running out of the 1.25 Trillion US Dollars of MBS approaches.

Fiat currencies ultimately fail.

[rockofcashel]

Fair point and Ireland does export a proprtionally huge amount of GDP to non eurozone countries in comparison to similar countries, eg Finland.

But both Germany and GB have huge trade relations with the US. Yes they will lose buying power, as will we, buy they could be offset by an increase in exports.

Ireland would benefit more than most, but I take your point about the double edged sword.

We would also have the problem of a falling Euro value increasing import prices of oil and gas on Ireland's balance of trade

[Supermanpolitician]

Sterling has dropped by about 25% over the last two years, yet it has had little impact on their exports.

I hope the Euro devalues further against the dollar, but a falling sterling will significantly damage the Tourism, agricultural and SME exporting sector.

Another worrying thing is that Britain are hoping to export their way out of recession, we are hoping to export out way out of a technical depression, and all of Europe is exporting to sustain growth. Everyone is planning to export their way to growth.

All valid points, but if we boil it down it should mean that the euro drops further than sterling. UK exporters are on the pigs back at present towards the euro but struggling vis a vis USD.

If the euro drops more against the USD than sterling does, then that will restore the equilibrium somewhat.

What everybody seems to agree on is that both will drop against the USD, but the debate about how they go against each other is the key.

[Cassandra Syndrome]

We would also have the problem of a falling Euro value increasing import prices of oil and gas on Ireland's balance of trade

Yep and Food Commodities.

[The_Big_Fellow]

Fair point and Ireland does export a proprtionally huge amount of GDP to non eurozone countries in comparison to similar countries, eg Finland.

But both Germany and GB have huge trade relations with the US. Yes they will lose buying power, as will we, buy they could be offset by an increase in exports.

Ireland would benefit more than most, but I take your point about the double edged sword.

Remember that devaluing the currency can also import inflation, while we would love to beat down our debts with inflation. The Germans have a pathological hatred of it. They are not going to like it, but will they able to stop the Euro becoming the new Lira is another matter.

[rockofcashel]

Sterling has dropped by about 25% over the last two years, yet it has had little impact on their exports.

I hope the Euro devalues further against the dollar, but a falling sterling will significantly damage the Tourism, agricultural and SME exporting sector.

Another worrying thing is that Britain are hoping to export their way out of recession, we are hoping to export out way out of a technical depression, and all of Europe is exporting to sustain growth. Everyone is planning to export their way to growth.

We can just swap stuff around to each other.. and hey presto, the depression will disappear.. yeah ?

[The_Big_Fellow]

All valid points, but if we boil it down it should mean that the euro drops further than sterling. UK exporters are on the pigs back at present towards the euro but struggling vis a vis USD.

If the euro drops more against the USD than sterling does, then that will restore the equilibrium somewhat.

What everybody seems to agree on is that both will drop against the USD, but the debate about how they go against each other is the key.

True.

All the major currencies have good arguments against them at the moment.

[Supermanpolitician]

We would also have the problem of a falling Euro value increasing import prices of oil and gas on Ireland's balance of trade

Yes but on the greater scheme of things we can stand to pay more for oil vs USD if we reap the benefits at the other end.

(I am impressed that this is a thread without Cassanadra's "We're all doomed" hysteria.)

Also if both GBP and Eur drop, the price of oil in USD may drop. Ultimate demand for oil comes in part from Eur and GBP, so even though oil is priced in USD, a weakness in these currencies could contribute (though not soley cause) a drop in price. Any such drop in price would of course be offset by the currency fluctuations...hopefully leaving a minimal net price increase (or in a very unlikely scenario a decrease) when converted back to Euro or GBP.

[Supermanpolitician]

We can just swap stuff around to each other.. and hey presto, the depression will disappear.. yeah ?

Hate to break it to you but more trade = more wealth creation. Not a panacea but definitely a help.

Look at how protectionist policies worked (or didn't work) in the past.