Economics

Близок ли фунт к переломному моменту?

Sep 16, 2022 Gene Frieda

ЛОНДОН – Тридцать лет назад, 16 сентября 1992 года, валютные спекулянты вынудили британское правительство отказаться от использования фунта стерлинга в рамках Европейского механизма обменных курсов. В дни, последовавшие за “Черной средой”, фунт стерлингов впоследствии потерял 15% своей стоимости. К началу 1993 года он потерял почти треть своей стоимости.

Недавнее ослабление фунта – на прошлой неделе он упал до самого низкого уровня по отношению к доллару США с 1985 года – по понятным причинам вызвало воспоминания об этом более раннем эпизоде, заставив некоторых сравнить фунт с валютой развивающихся рынков. Но это сравнение неточное и, возможно, ошибочное. Какими бы ни были нынешние экономические трудности, Соединенное Королевство сохраняет сильные институты, процветающую демократию и разумные показатели достойного роста и низкой инфляции.

Итак, что именно пошло не так, и действительно ли фунт подвергается риску из-за общей потери доверия к британским активам?

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0 Comments on this paragraph, 19 Comments on this article

Joe Ryan Sep 21, 2022

For about 100 years from 1870 to 1970 there was a general consensus on the benefits of keeping currencies integrated so that currency exchange rates would not disrupt commerce. The post-1970 rebellion from that consensus led by the USG and the UK (with Milton Friedman as cheerleader) has largely to do with how much money traders in big New York City and London banks make off churn in exchange rates. A very small percentage of USD 6 trillion daily FX market turnover is good money. It's an aspect of the financialization of industrial economies.

The real economy of the UK et al. is whipsawed in the process, but that will be difficult to fix when fixing it picks the pocket of leading countries' wealthiest, most concentrated interest group.
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douglas ungredda Sep 21, 2022

The Brits are known for being flexible when needed and have a sense of what should/must be corrected in just such a case. This, especially at post Brexit time when external financial stability comes above all.
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vic lai Sep 19, 2022

Even though the current energy prices in Britain are already sky-high, and will possibly persist for quite some time in the foreseeable future, Britain's newly elected Prime Minister, Liz Truss, is still so pro-US and anti-Russia-cum-China, simply because of the fact that Russia, and potentially China as well, may pose serious threats to the future military security of Britain herself.
---
The US has been very successfully fully utilizing Britain's such fear in particular, and the same fear of Russia-nonfriendly EU countries in general, to persistently maintain her military troops in NATO, and to keep selling expensive weapons to both Britain and the NATO countries in the past decades.
Afterall, according to Thomas Hobbes, “Covenants, without the sword, are but words and of no strength to secure a man at all.”
That's why the US has been so influential geopolitically over the past decades, because so many countries in Europe and Asia have been relying on the US's military presence and weapons to protect them from the potential military invasions of Russia-cum-China.
And this dependency relationship between the US and her protected countries is said by a Taiwan commentator to be one of the only two most reliable international relationships under the sun.
---
The other most reliable international relationship is mutually beneficial economic exchange.
While the ongoing US-instigated deglobalization trend will weaken the US's trading relationships with her non-friendly countries in the future, China's been actively strengthening her economic relationships with many other Eurasian countries especially those along the routes of the OBOR Initiative.
Which means, the respective strength of the US and China concerning each of the two most reliable international relationships under the sun will further strengthen the coming Thucydides' Trap between the two countries.
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- vic lai Sep 19, 2022
  
  Some of Britain's navy-soldiers just had the great honor of guarding and sending the Queen's coffin to Westminster Abbey.
  The British Empire with a Sun that never set owed a lot to all her navy-soldiers fighting bravely for their country in the past centuries, and their sea-battles were guarded by 2 notable set principles.
  (i) Durng a sea-battle with the enemy warships, all the royal sailing warships had to be in a formed procession, so that each of them was no longer allowed to fight individually and randomly with the enemy warships.
  Those royal warships which cowardly retreated from the sea-battlefield could therefore easily be spotted and hence subsequently punished heavily.
  (ii) While the royal navy-soldiers were firing bombs toward their enemy warships on one side of their royal sailing warships, wind was always blowing toward the other side of the royal warship, and so the wind was tending to tilt their firing bombs downward toward the sea.
  This "strange regulation" was set so that
  (a) the royal warships couldn't easily escape from the sea-battlefield, since when they escaped in the opposite direction the royal warships were facing headwind, and so the royal warships couldn't retreat easily and therefore the royal navy-soldiers on board were forced to fight bravely against their enemies, and
  (b) their enemy warships, on the contrary, were "encouraged" to escape by sailing away from the sea-battlefield using tailwind.
  ---
  Together with a very secure and plentiful supply of food and other necessary fighting materials relative to their enemies, thanks to the "precarious" issuance of lots of sterling-denominated government bonds to help raise enough funds to support their sea battles, the royal navies had been able to win many crucial sea-battles in the past centuries, thereby helping creating Pax Britannica as we know it today.
  ---
  - vic lai Sep 29, 2022
    
    According to Paul Krugman, Britain's coming tax reduction policies, put forward by the new Prime Minister Liz Truss, isn't a best one, due to the prevalent lack of confidence of Britain's private sector concerning their own economy, and so the country's households may not spend a lot of their saved untaxed money as new consumptions in the domestic British economy, but will rather save more of them for their uncertain future.
    Similarly for many of Britain's private corporations, which may not increase their real investments in their own country as a result of the tax reductions, because of their lack of confidence in the performance of the British economy in the future years.
    ---
    In short, the overall balance sheet of Britain's private sector has recently been seriously hurt by the Ukraine War's subsequent adverse consequences on Britain herself, like the ongoing sky-high energy prices and massive capital flights there, thereby potentially plunging the whole macroeconomy of Britain into a prolonged Balance-Sheet-Recession-like economic recession in the next few years.
    So, the Truss government's newly-proposed increased deficit spending, which will help repair the overall balance sheet of the country's private sector, should not be in the form of massive tax reductions, but rather (also) in the form of much increased government deficit spending on the domestic real economy in the next few years.
    The deficit spending can be financed by the British government's new issuance of very-long-term bonds, like 100-year-long centennial bonds (CBs), or Consols. CBs had recently been issued by the Austrian government to cope with the aftermath of the pandemic in Austria.
    The new funds so raised by the British government can be spent on projects like the renovation of the country's obsolescent infrastructure and other facilities, the further development of nuclear and other new energies, or more subsidization of the country's ICT industries to further promote the use of 5G/6G/AI, and so on.
    ---
    With a relatively strong coming domestic economy, Britain will find that over time her Pound will become stronger and stronger relative to most other currencies of the foreign countries.
    ---
    - vic lai Sep 29, 2022
      
      In WWII, the ships sent by the US to Britain in the Atlantic Ocean to replenish Britain's quickly depleted war materials of all sorts there, were constantly attacked by Nazi Germany's U-boat submarines.
      In the coming months, there may be similar attacks by Russia's submarines at the US's LNG-liners sent to Europe in the Atlantic Ocean.
      This kind of perhaps torpedo attacks may be attempted by Russia in retaliation for the latest US-controlled bombing of the undersea Nordstream I and II pipelines in the Baltic Sea, if it can be clearly confirmed by Russia that the US was the main culprit behind the bombing scene.
      ---
      Also, the recent debut of the brand-new undersea gas pipeline connecting Norway and Poland in the Baltic Sea may first be bombed by today's Russia, and so another battlefield in Europe may soon crop up in the Baltic Sea, in addition to that in today's Ukraine.
      ---
      - vic lai Sep 30, 2022
        
        Only the American LNG producers keenly want to keep selling expensive LNG to Europe after the explosion of the Nordstream pipelines, for obvious reason, but the major aim of the US government, if she's really the main culprit of the explosion, is to stop once and for all the long gas-transaction relationship between Germany and Russia which had long been cultivated by Angela Merkel in the past decade.
        The main idea of the US is to divide and rule getting-closer-and-closer Germany and Russia.
        ---
        It's said that, in the aftermath of the pipeline explosion, Russia could find evidence and deliberately lay the blame on Britain, and try hard to divide and rule Britain and the EU in return.
        Doing so will further aggravate the ongoing animosity between Britain and the EU, increase the adverse effects of Brexit on Britain, and may also prompt both Scotland and Northern Ireland to further seek political independence from Britain in the coming years.
        ---
        
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vic lai Sep 17, 2022

Superficially, it's recently been a pound or currency problem for Britain, but this actually has resulted from a decades-long economic transitions facing both Britain and the US --- the quickly growing tide of financialization of their Main-Street industries and corporations in the virtual economy, which has been misguided by over-enthusiastic but inappropriate privatizations and neoliberalism, which in turn have probably been a legacy of the "End of History" resulting from the dissolution of the Soviet Union in the early 1990s.
So, it's not surprising to us that even the Euro and the British pound, together with the Japanese Yen, have all unexpectedly joined the usual currency-quickly-depreciating club of the EM countries during the latest US-dollar strengthening cycle.
---
For one thing,
(i) Britain seems to have lost a major part of her most important financial hinterland that is the domestic financial markets of the EU continental countries, thanks to the populist vote-passing of very-costly Brexit,
(ii) the continental EU countries have also lost their most important and taken-for-granted resource hinterland that is Russia (to China and India, among others), thanks to the latest Ukraine War.
Hence the non-trivial depreciations of both the Euro and the British pound against the US dollar in recent months.
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- vic lai Sep 17, 2022
  
  The NATO's and EU's over-ambitious and over-confident eastern expansion in recent years, which has truly threatened Russia's geopolitical safety, has led to
  (i) Russia's counter-EU energy sanctions in recent months, and hence
  (ii) the ongoing energy crises in both Britain and other EU continental countries today.
  It can be argued that the NATO's persistent eastern expansion has similarly been caused by an anachronistic over-confident reaction by the NATO countries to the legacy of the "End of History" resulting from the dissolution of the Soviet Union in the early 1990s.
  ---
  One major economic problem of the West, perhaps the most important one, has been that the sanctity of their highly-revered traditional neoclassical free-market economic arguments has ceased to impress the rest of the catching-up world, particularly in the latest 15 years following the breakout of the North Atlantic Financial Crisis of 2007-09, not to mention the ongoing further debasement of the globally dominant US dollar in the aftermath of the sudden breakout of the global pandemic.
  But many of today's US, British, and EU political leaders still tend to think, quite anachronistically and naively, that they could still keep propagating this Christian-God-like anachronistic or obsolescent neoliberal economic idea to the rest of the world.
  Hence the NATO's incessant eastern expansion in recent years, Russia's counter-offensive military movement in Ukraine, and the resulting ongoing energy crises in both the EU and Britain.
  ---
  - vic lai Sep 17, 2022
    
    In the long run, the German and French political leaders must admit that the EU countries must expensively form their own military troops to replace the current American troops stationed in the EU countries, by discarding NATO once and for all.
    The EU countries must also expensively start developing state-of-the-art most-advanced military weapons of their own.
    Without their own armies and their own military weapons, the EU countries led by Germany and France will find it hard to propel their Euro to the current globally dominanat status as strong as the current US dollar, and the future US-dollar-Chinese-yuan-Euro global currency tripod will never be a stable one.
    ---
    The ambitiousness of the EU countries should quickly be redirected from the NATO's and the EU's eastern territorial expansion to the outright cancellation of NATO.
    Without a powerful military force of their own, and a truly independent and competent currency for that matter, the EU countries as a whole will continue to act only as a vassal state or subsidiary of the current or future global dominant military power.
    Just ask the Japanese.
    ---
    - Adrian Wu Sep 17, 2022
      
      Well said. The financialization of the economies of the liberal West is reflected by the relentlessly widening gap between the capitalization of Western financial institutions and "new economy" enterprises such as social media, fintech etc., and that of "old economy" enterprises such as commodity producers and manufacturing during the last 40 years. In a world that was awash in manufactured goods and natural resources, it did look like a prudent development. However, the decades long commodity cycle has turned. Natural resources have become scarce and manufacturing has become constrained. People suddenly find that Amazon, Facebook, Google and cryptocurrencies are no longer relevant when they cannot buy food, fuel and manufactured goods needed to sustain their livelihood. But who has been investing in developing resources and manufacturing during all this time ? The West has always relied on coercion for their energy security. Britain and France controlled much of the oil resources in the Middle East until the early part of the last century. After decolonisation, artificially divided states ruled by tribes friendly to the West continued to ensure the supply of cheap fuel to the West. France tried to hold on to Algeria by engaging in their "special military operation" but failed. Invasion, torture, summary executions, sound familiar ? The Pentagon was busy preparing for an invasion into the Arabian peninsula while Kissinger was trying to convince the Saudis to go along with the petrodollar scheme, in case he fails. The US fomented a coup in Iran, the second largest oil producer, and installed their puppet the Shah Pahlavi but this backfired spectacularly. They had to resort to sanctions. Iraq also needed to be brought to heel militarily. The Saudis are becoming less friendly, judging by the reception Biden experienced there recently. It is interesting to note how much fossil fuel resources are currently under the control of the Western alliance (I would hesitate to call this the "Western democracies" as they like to call themselves) to know what the future portends for them. The UK and Europe face an uncertain winter, but these will only be the first dominoes to fall.
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    - vic lai Sep 17, 2022
      
      It's widely claimed that the US wants the ongoing Ukraine War to drag on for many years so that Russia will be further weakened both economically and militarily in the coming years, but it may also be in the interest of Russia herself to prolong the war in Ukraine, so that, with the cooperation of the OPEC+ countries in the coming years, the resulting persistently-supported high global prices of both oil and gas, together with that of food and commodities, will enable Russia to more than finance her expensive war in Ukraine for a few more years at least.
      The only big losers will then be Ukraine and those Russia-unfriendly EU countries themselves.
      ---
      So, part of the current ambitiousness of the EU should also be redirected to the quick and reliable raising of sufficient funds to help cope with the years-long lingering war in Ukraine.
      This can be done
      (a) in Britain by the ruling government's new issuance of very-long-term pound-denominated bonds, which, resembling QT, should mostly be bought by the private sector instead of by the Bank of England, to help suppress the runaway domestic inflation in today's Britain,
      (b) in the EU by the eventual formation of a new and formal Fiscal Union, which will
      (i) resemble the highest central government of all the EU countries, with all the necessary and appropriate fiscal transfer payments among all the EU countries in the future years,
      (ii) start to issue lots and lots of long-term Euro-denominated EU bonds in the coming years.
      ---
      Depending on the prevailing level of inflation in the EU, part of the newly-issued EU treasuries can suitably be financed (or re-financed) by the ECB's new money-printing QEs in the coming years, and if they are well managed they will be able to challenge the current global dominance of the US treasuries in the global financial stage.
      ---
      If so, one more global financial safety asset, as a global public good, will start to be supplied by the EU to the rest of the world, and the subsequent recycling of the Euroeuros back to the domestic EU bond market will help suppress the treasury yield curve there.
      As a result, even though the persistently high global energy prices will turn the EU as a whole into a net-importing trading block in the coming years, the concomitant big-enough deficit spendings of the new EU Fiscal Union will prevent the whole of the EU from falling into painful economic recessions.
      ---
      - vic lai Sep 18, 2022
        
        The vital importance of the thesis of free and undisturbed globalization in the past decades has recently been clearly shown by its very own anti-thesis ------ the start of US-instigated deglobalization (reshoring, or friend-shoring) in recent years which has mainly been targeted at the quick economic and geopolitical rise of China.
        This latest trend of deglobalization has of course been naturally associated with the change in political ideologies held by the western advanced countries which initiated the deglobalization anti-thesis.
        According to David Woo, the greatest threat to the world right now is the resurgence of ("new") political ideologies that are dividing nations and setting them on a collision course.
        ---
        The relative loss of self-confidence of the western advanced countries led by the US, following the North Atlantic Financial Crisis of 2007-09, especially concerning the anachronistic worship of their own superior capitalist economic ideologies following the "End of History" in the early 1990s, has further prompted the western advanced countries to constrict the future fast economic growth of socialist China.
        Even today's Britain, a country that is known for her traditional calm, cool and pragmatic attitudes toward global affairs, is no longer exempt from her entertaining of relatively feverish political ideologies against her unfriendly countries like Russia and China.
        ---
        In short, we are now all paying a heavy price for the ongoing deglobalization strive, in which the voluntarily-trading nations, while intending their own gains as usual, will no longer always rely on and benefit each other, but will even try to harm each other.
        ---
        
        vic lai Sep 18, 2022
        
        One lesson of the ongoing Ukraine War which seems to be gradually tilting in favor of smaller Ukraine against much bigger Russia, is that, so far as deglobalization is concerned, it's aready been enough for the western advanced countries to limit it to the field of global technological development alone, and not also to the commercial field of mutually-beneficial international trading of non-military goods and services.
        Doing so will obviously help mitigate the current runaway inflations in many advanced western countries, and the resulting less hawkish actions of the central banks of those countries means a much smaller chance of rate-hike-induced economic recessions or eventual popping of everything-asset-bubbles there.
        ---
        The Ukraine War has just shown the superiority of Ukraine's light weapons assisted by the West's information-age precision-targeting technologies relative to the traditional heavy steel weapons employed by today's Russia.
        It's similar to the military clashes between Britain and China in the 19th century, in which much smaller but highly-industrialized Britain had been strong enough to defeat much bigger and more populous non-industrialized China.
        ---
        Which means, so far as the West can continue to lead in the information-age high technology of one sort or another, countries like China or Russia can never defeat the western advanced countries in the coming regional military conflicts, if any.
        But the continued future development of state-of-the-art high weaponry technologies require mutual international cooperations and persistent interflows of knowledge and skills among the cooperating countries (think the Netherland's EUV, which can never be wholly manufactured by a single country alone).
        So, by simply isolating both Russia and China from the international exchanges of future global high technologies, skills, and information, the West can continue to lead the rest of the world before the end of this century.
        The US-instigated deglobalization should therefore be limited to the field of high technologies alone, even though sometimes the classification of internationally traded products and services, like so many different books in a library, can never be exactly clear.
        ---
        
        vic lai Sep 18, 2022
        
        The idea of "End of History" was put forward in 1992 by Francis Fukuyama, who was a former student of Samuel P. Huntington who published the world-famous book "The Clash of Civilizations" in 1996, which argued that the real clash hadn't really been the different ideologies embraced by the western capitalist and the eastern socialist camps, but rather that between the different civilizations.
        ---
        Huntington's book already presaged, 26 years ago, today's Ukraine War.
        Huntington's idea was that Europe's most important dividing line was probably the eastern border line of the western Christian regions in AD 1500, which cut today's Ukraine into 2 halves, with the western half representing the Catholic faith and the eastern half ruled by the Eastern Orthodox Church.
        Up until today, this line has not only been a dividing line for different civilizations (Protestants and Catholics to the west and North versus Orthodox Christians and Muslims to the West and South), but has also been a bloody regional battle line.
        ---
        
        vic lai Sep 19, 2022
        
        Thanks to the Himalayas and the Pamir Mountains, China is geographically well separated from both India and Central Asia, and so there has not been a bloody battle border line to the West of China which is similar to the one formed in the eastern part of Western Europe in AD 1500.
        ---
        Lately, Russia allowed China to further develop her OBOR Initiative in Central Asia, through China's coming construction of a new rail-line linking China, Kyrgyzstan, and Uzbekistan.
        Russia's idea is to
        (i) further win the friendship of China during her ongoing Ukraine War with the West, and
        (ii) prevent the US from instigating further color revolutions in Central Asia.
        ---
        
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        vic lai Sep 18, 2022
        
        Not even unhindered full globalization on steroids, in which different countries trade, communicate, migrate, learn from and interact freely with each other, can different civilizations (however defined) merge fully with each other, let alone today's rising deglobalization trend.
        ---
        Afterall, while it's quite easy for non-western-civilization people to accept the West's hamburgers and Starbucks, it's by no means easy for them to genuinely believe in the West's democratic Charter or to become Christians, but both the Charter and Christianity have been the linchpins of western civilization.
        Similarly, while it's easy for western-civilization people to accept the East's delicious food, drones and kungfu, it's never easy for them to appreciate the East's authoritarianism and Confucianism.
        ---
        The current various conflicts between the US and China can also be regarded as another important clash of different civilizations, in addition to the prevalent idea of Thucydides Trap.
        ---
        
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