Currencies & Exchange Rates

Currencies

I have always been sceptical of financial matters mentioned on TV, in the press and other media. Never having been trained in any sort of financial or accountancy skills my colleagues in the finance department used to laugh at my simplistic views on how their job should be done (or did we really need them at all!).

However, sometimes a view from outside gives a far better picture.

For example:-

Financial exchange rates between currencies are a measure of how those currencies are valued relative to each other - I don't think anyone will disagree with that.

Why then is there so much of a stir going on about the Euro and how it is finished as a currency and it is not worth a light? If everything we are told is true a pound should buy about 10 euros by now. When I moved to Spain in 2004 one pound would buy 1.5 euros. At one point between then and today it was down to 1 pound = 1 euro (and even less) and, at the time of writing it is about 1.25 euros to the pound. This compares with an exchange rate at the Euro inception of around 1.6 euros to the pound!

This, in my view, proves that the pound is now valued at much less than it was against the euro. So, if the euro is in trouble the pound is even worse!

This drift and weakening of the pound has been going on for years.

Back in the days before decimalisation the 'half crown' (now 12.5 pence) used to be know as 'half a dollar' - indicating that the pound was worth about 4 US dollars. OK this was a wartime thing, but in 1954 it was 2.8 USD to the pound. Today it will only buy 1.6 USD dollars. Again, this proves that the pound has steadily weakened against this currency also.

When I was in Australia back in 1998/99 you could buy almost 3 Australian Dollars for 1 pound - today you get less than 1.6!

You can research this against any major currency in the world and the pound comes off worst every time!

The British people have been hoodwinked into thinking that everything is great, when in fact everything is getting worse every day. Much of this comes from the British attitude that 'theirs is best'. They would not join the Euro when they had the chance (at 1.6!!!) - they insisted on keeping the pound at decimalisation time instead of basing the new currency on 10 shillings. (This act alone caused massive price increases and another general lowering of purchasing power for the British people).

Take a look at these examples:-

These examples use th following information.
Inflation rate 2004 to 2012 USA 17.71% UK 21.77% Euroland 17.77%
Exchange rates at 1st July 2004 GBP to EUR 1.493 GBP to USD 1.820 EUR to USD 1.219
Exchange rates at 30th June 2012 GBP to EUR 1.239 GBP to USD 1.569 EUR to USD 1.266

The following table illustrates an article made in the USA and sold there for 10 USD on 1st July 2004 and its cost at that time in Britain (GBP) and Europe (EUR). The second line is the cost on 30th June 2012 allowing for inflation in the USA and exchange rate differences. The third line shows the change in cost.

1st July 200410 USD5.49 GBP8.20 EUR
30th June 201211.77 USD9.50 GBP9.30 EUR
Difference17.70%73.04%13.41%

Isn't it amazing that the Brits end up paying (by far) the most!

The next is the same thing but for a British made item sold in the UK for £10 in 2004 and allowing for UK inflation and exchange rate differences to the end of June 2012.

1st July 200418.20 USD10 GBP14.93 EUR
30th June 201220.20 USD12.18 GBP15.09 EUR
Difference10.99%21.77%1.05%

So you see that it's still the same for these 'home made' items

And finally a European made item sold in 2004 for 10 EUR and allowing for Euroland inflation and exchange rate differences to the end of June 2012.

1st July 200412.19 USD6.70 GBP10 EUR
30th June 201214.91 USD9.51 GBP11.78 EUR
Difference22.34%41.94%17.77%

The figures speak for themsleves - and the Euro comes out top in every one!

Thursday 20th September 2012

More stories on TV and in the press today about trouble in Euroland. Still only get 1.25 Euros for a Pound though. Who are they trying to kid?

Saturday 22nd December 2012

Pound steadily getting worse - worth only 1.226 Euros today! (1.618 USD)

Thursday 17th January 2013

There has been a lot of speculation over the last few days about Britains continued membership of the EU, with talk of a referendum in 2018. The reaction to this has been yet another weakening of the pound. It fell to only 1.196 Euros today! (1.598 USD) and is still falling. When are the powers that be going to realise that they are on their own in insisting that their monetary policies are right. The rest of the world (especially Europe) know better.

Saturday 2nd February 2013

Today the pound will only buy 1.150 Euros or 1.571 USD

Over the past week or so there have been several (more) problems for the UK economy. The threat of a triple dip depression and the weird speech by the Prime Minister on the future of the UK membership of the EU. That speech was the trigger which has sealed the fate of the pound for a long time to come. Yes, there were many points in the speech which were truly valid. The terms of our membership probably do need reviewing but the threat of pulling out of Europe was a big mistake, particularly since it seems that the power to decide will be handed back to the a public referendum.

In a TV interview about the triple dip, the chancelor blamed several factors - one of which was "the collapse of the Euro". As can be seen from this article the Euro has remained stronger than the US Dollar and far far stronger than the Pound. So why do they persist in following this course of argument? I only wish I knew.