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British pound hits record low against the dollar

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Re: British pound hits record low against the dollar

#351

Post by RickJWagner »

kodah wrote: post #342
kypro wrote: post #252

So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…

I'm pretty sure this would be called an Adjustable Rate Mortgage (ARM) in the US. You aren't stupid; ARMs are sold heavily during "good times" and to be frank, to my knowledge, most of your country uses what we call ARMs without issue. Having lived through, and lost all my shit, in the last financial crisis as a young man I'd also like to say something more directly to you. You did not let your family down. You thoug…

"The governments of the world will have to step in." No, they won't. It's irresponsible to think the government is going to bail you out of some predicament. It's not stupid or foolish to be caught in some financial trap, but it should not happen twice and it should not happen to those you care about in latter years. Financial literacy is a precious skill, and one that we should all work on constantly.

I don't mean for that to seem harsh, but it's just wrong to expect government help all the time. Especially for a readership on Hacker News, we should be pitching financial literacy.

Re: British pound hits record low against the dollar

#352

Post by QuarterReptile »

rich_sasha wrote: post #130
random_kris wrote: post #127

Earlier quoted context omitted.

Well the northern European will blame southern for not being frugal enough. But this is the same as drug dealer saying their dead customer was not responsible enough. Yeah it true, but some people just are not responsible for their own actions and the dealer was happily benefiting all the time from him

When dealing with the public, sure I agree. But not at all when dealing with (supposedly) professional bodies such as national governments, I don't buy it. I'm not pointing the "overspending" finger either, just saying, countries should take responsibility for their actions, not complain at the enablers.

I don't know much about Italian government, but unless there's some fundamental difference between them and the US, I don't see any chance of a government showing restraint and staying in power, when the other guys could deliver prosperity without the bill coming due for 10+ years.

What am I missing?

Re: British pound hits record low against the dollar

#353

Post by rdtwo »

kypro wrote: post #332
theGnuMe wrote: post #271

Earlier quoted context omitted.

The UK has longer fixed rate mortgages right? Can you refinance now?

I'll speak with my lender this week. I don't think I can refinance for another few months without fees and at this point there's a significant risk in taking out a longer-term fix anyway because this move could be temporary and a fix would be locking in the higher rate. There's really no good options. The right answer would have been to try to find a 10 year fix when I took out the mortgage but as I've explained in a…

If you lock in a high rate you can always refi down later

Re: British pound hits record low against the dollar

#354

Post by lottin »

wonnor wrote: post #337
lottin wrote: post #269

Earlier quoted context omitted.

Do you read your own quotes? Where does it support your claim that a weakened currency does not affect the price of exports? It says the exact opposite. Exports increase because they become less expensive: > A weak currency may help a country's exports gain market share when its goods are less expensive compared to goods priced in stronger currencies. The increase in sales may boost economic growth and jobs while inc…

The person you are arguing with said this: >But then you can invest that extra profit in decreasing your foreign currency price, thus becoming more competitive.

Yeah, which is baffling. It's not possible to invest in decreasing your foreign currency price. Price is an exogenous variable in a competitive market. You can invest in the production process so that production becomes more cost-effective and this allows you to lower prices, but that has nothing to do with devaluations, and certainly is not the mechanism through which exports prices fall when a currency depreciates.

Re: British pound hits record low against the dollar

#355

Post by seibelj »

fzeroracer wrote: post #81
seibelj wrote: post #72

Earlier quoted context omitted.

You mean what they enacted in the last week? I don't think a few days of slightly-reduced taxes is going to move the needle

No, what they've been enacting over the past few decades with the continued move towards privatization and destruction of public services. Like they've been doing what you've suggested for decades now. The 'downward spiral' you call out is because they're following your plans to a T. Cutting taxes and regulation, privatizing industries etc. So to reiterate my question: At what point would you have to call that off an…

The NHS is a disaster and the reason isn't because of "privatization" - it's because on average people don't want to work a job where they need to be a saint. Highly skilled doctors and nurses get paid more, get respected more, and have more agency working outside of government-run agencies. Average people who enjoy cushy, do-nothing government jobs love it when government expands, but unfortunately the work product produced is shoddy, net-negative to the economy, and lights money on fire.

The solution is more privatization, not less. The UK needs to do everything it possibly can to help entrepreneurs - let all the Hong Kong exiles in to start new businesses and move their capital in. Free trade agreements with the US but ultimately as many countries as possible.

You can look to Venezuela and Argentina for the alternative.

Re: British pound hits record low against the dollar

#356

Post by fulafel »

candybar wrote: post #330
fulafel wrote: post #138

Earlier quoted context omitted.

Do you mean as a columnist/tweeter or in his work as a profesisonal economist in academia, textbooks etc? Judged by peers he's still quite valued eg by this ranking: https://ideas.repec.org/top/top.person.all.html (rank 36/3255) - but of course in academic research you don't necessarily aim to be right as often as possible, it's a search and exploration of ideas and testing what works.

You're being far too charitable here - the idea that Krugman has a history of being wrong has nothing to do with anyone trying to evaluate his track record in an objective manner, but everything to do with those who disagree with his political viewpoints trying to take him down a notch, especially to counter his stellar academic career. This is of course silly - Krugman is obviously highly knowledgeable about economi…

Clearly we need a predictions tracker for benchmarking popular forecasters. I wonder if there are any already in existence. There's things like https://www.focus-economics.com/about-us/best-economic-forec... but they don't count talking heads type stuff.

Re: British pound hits record low against the dollar

#357

Post by denton-scratch »

woodruffw wrote: post #304
denton-scratch wrote: post #290

Earlier quoted context omitted.

The UK has not cut itself out of the European market, any more than the US is excluded from trading in Europe.

I said common market. The UK is no longer in the EU common market[1], and is thus in the exact same position as the US. Unlike the US, however, the UK was previously in the EU common market. As a result, the global economy is now correcting for the UK's newly diminished trade efficiencies with the EU, whereas nothing has substantially changed for the US. [1]: https://en.wikipedia.org/wiki/European_single_market

Oh, OK. The "common market" is the name for an old form of the EU, that was really just a trade zone, without the "social" rules. We joined the Common Market, but we left the EU.

Re: British pound hits record low against the dollar

#358

Post by Nitrolo »

rr808 wrote: post #5

Crazy times it wasn't long ago that a pound bought over $2. The interesting thing this week is that the most fragile and indebted country that the EU has bailed out for 30 years straight (Italy) has elected a govt that doesn't like the EU. Good times ahead.

I'd just like to point out that Italy has been a net contributor to the EU budget for 20 years straight, and was the third biggest net contributor as of 2020.

If someone has more up-to-date numbers I'd like to read them, but I don't think describing Italy as getting "bailed out for 30 years straight" is accurate unless I'm missing something here.

Re: British pound hits record low against the dollar

#359

Post by spaceman_2020 »

candybar wrote: post #330
fulafel wrote: post #138

Earlier quoted context omitted.

Do you mean as a columnist/tweeter or in his work as a profesisonal economist in academia, textbooks etc? Judged by peers he's still quite valued eg by this ranking: https://ideas.repec.org/top/top.person.all.html (rank 36/3255) - but of course in academic research you don't necessarily aim to be right as often as possible, it's a search and exploration of ideas and testing what works.

You're being far too charitable here - the idea that Krugman has a history of being wrong has nothing to do with anyone trying to evaluate his track record in an objective manner, but everything to do with those who disagree with his political viewpoints trying to take him down a notch, especially to counter his stellar academic career. This is of course silly - Krugman is obviously highly knowledgeable about economi…

If Krugman doesn’t want people to judge him by his forecasts and predictions, maybe he should stop making them, especially on a widely read public platform?

That seems only fair to me. If he doesn’t want his predictions to be judged by lay people, he can do what most academics do and stick to writing for their peers.

Re: British pound hits record low against the dollar

#360

Post by kypro »

rdtwo wrote: post #350
kypro wrote: post #348

Earlier quoted context omitted.

Thanks. I can't tell you how much comments like this mean right now. It's nice knowing someone can relate. I'm sure you also had your fair share of people telling you how stupid you were for taking out an ARM. But yes, ARMs are basically the entire UK market. We don't have long-term fixes like in the US. The longest fix we have here is 10 years and they're quite rare. Overwhelmingly borrowers go with 2, 3 or 5 year f…

Can’t you just sell now before markets adjust or are you underwater already? The sooner you accept the loss and bail the more likely you are to come out in one piece.

It's something we're thinking about. It's difficult though because we're in the middle of redecorating so the house isn't really in a sellable state right now. Plus selling now out of fear that rates or house prices might continue to move against us and rebuying later would guarantee a loss that might not be necessary at this point.

Generally selling your home every time you fear that rates and house prices might move against you isn't a good idea. I mean you could have argued the same thing earlier this year when rates started to move up, so where you set the limit is hard to know. That's just the risk of homeownership I suppose. Unless you're in a very fortunate financial position for the first few years you just need to hope the market doesn't move against you enough that you become a forced seller.

I still think our best bet at this point is to just hope that this move in rates is temporary or that we'll just about manage through if they stay where they are right now. My plan at the moment is to see how things play out over the next couple of weeks. If rates continue to move higher over the next several days then, yes, I think we'll probably need to sell. But realistically it might already be too late. Given the panic right now realistically we may not be able to sell our house in this environment and in the state our house is currently in. Most lenders have withdrawn all mortgage deals because of what's happening in markets.

The thing people are not talking about yet is that it's not just mortgage borrowers at risk here, it would be very hard for rates to go much higher without it bankrupting the UK economy. Government borrowing costs are going through the roof right now so realistically higher rates would present a systemic economic threat when public debt is this high. The government themselves simply couldn't afford rates going to say 10%. The only way out if rates go much higher is massive currency devaluation which would be good thing for borrowers.

But that's just the rational part of my head thinking about this situation. The problem is this was caused by extremely naive fiscal policy that the markets are now punishing. Assuming the government is a rational actor isn't a bet I really want to take. Especially when the current tory leadership seems to be ideologically in favour of higher rates and lower taxes which simply can't work right now.

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