Monday September 26, the Sterling book fell to its lowest level against the dollar. This new fall is one more step in the long decline of currency, since the beginning of the 20th century.
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The financial markets came to recall a primary truth in the United Kingdom, Monday, September 26: even developed countries do not benefit from a white check to finance themselves. In the early morning, while only the Asian markets had opened after the weekend, the warning fell: the pound sterling dropped just below 1.04 for a dollar, simply at the lowest in its multi-year-old history, Before slightly straightening during the day.
Faced with the euro, itself very low, the fall is less marked, but real: – 7 % since the beginning of August. As for the British state obligations, they suddenly were tense: a loan at ten years went from 3.5 %, Friday morning, to 4.3 %, Monday evening. The United Kingdom is now financed almost at the same price as Italy, which is 4.5 %, despite the electoral victory of a postfascist party and a much heavier debt.
It is not yet a major financial crisis, but the warning is serious. In question: the budget presented Friday, September 23. This vast recovery plan freezes the energy prices and has offered the highest drop in taxes for fifty years, without any effort being made to try to find a source of funding.
Strange Debate
“The markets seem to have doubts about the credibility of the long-term budgetary plan of the United Kingdom,” said Andrew Goodwin, from Oxford Economics. “This is exactly how we should not organize and present a budgetary expansion, adds on Twitter Olivier Blanchard, the former chief economist of the International Monetary Fund. While we were worried about Italy, it is the United Kingdom Who invited himself. We are lucky that he is not in the euro … “
A strange debate has started with economists for a few months: the United Kingdom, the fifth world economy, has become a kind of emerging country? “It is not with regard to its income per capita and its riches, but it has enormous twin deficits [of the current balance and the budget] which make the discussion of whether it acts as a emerging country Valid, “says Kaspar Hense, portfolio manager in Bluebay, an asset manager. And to say that a century ago the country was the world’s leading power, holder of reserve currency …
XIX e century. The sun never sets on the British Empire. The third of world trade is with the United Kingdom and the Sterling book is the queen of global currencies, used as a reserve around the world. “Having reserve currency means [that a country] can pay for this [he wants] by issuing checks that no one ever asks to cash. People see these checks as a reserve of value or a source of liquidity . That means that you can spend much more than all the others, “explained Avinash Persaud, professor emeritus at Gresham College, during an exciting conference, in 2011 . At the time, the pound sterling is worth 5 dollars, five times more than today.
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