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Exchange rates

Posted: Tue Aug 22, 2017 1:55 pm
by BST
Just booked a couple of Ryanair flights and exchange rates are down to £1 to 1.02 euros. The official BOE rate is 1.09 so to be expected! Beginning to seriously think the pound might drop below the euro soon as trade talks etc aren't going well! Living in the UK might become much cheaper but not as pleasant as living in Crete. Any thoughts???

Re: Exchange rates

Posted: Tue Aug 22, 2017 2:27 pm
by Kilkis
Everything is relative in currency space. You are always comparing currency pairs and it is impossible to say if one currency is getting weaker or the other is getting stronger. A lot of analysts see the weakening £-€ exchange rate as being due more to a strengthening of the Euro. With the far right being much less successful in France, Austria and Holland than was feared and some indications that life will probably go on as normal after the German elections there is less fear about the future of the EU and the Euro and so people who got out of the Euro when fear was high are now getting back in.

Under normal economic conditions you would expect the strength of a currency to reflect the strength of the underlying economy but in today's upside down economic world it is difficult to judge. Since all the developed economies are completely bankrupt and are simply being propped up by money printing I have no idea how you can analyse the value of any currency versus any other.

Being realistic, the recent changes in the £-€ exchange rate, while unpleasant to those of us with income in £ and expenditure in €, are relatively small in the broader context of currency movements over time. The £ has fallen 40 % against the US$ in the last ten years alone and has varied between €1.7 = £1 and almost €1.0 = £1 over the last 7 years.

Warwick

Re: Exchange rates

Posted: Tue Aug 22, 2017 4:31 pm
by Phild
I guess for some people this may make a major difference in their ability to live comfortably in Crete. But, of course, they would have to factor in the expenses of moving back to the UK, plus the increased living expenses of UK living. Certainly, for us, unless the economic, social and medical benefits of moving back to the UK majorly outweigh those for staying here, we won't be going.

But we have been to this near-parity currency level before, back at the beginning of 2009, when the financial crisis hit the UK hard, and the £/€ was something like €1.02 per £1.

Here is a graph of the £ Vs. the € since January 2008 to the present - and you can see that the £ has been climbing slowly since 2009 until in 2015 it started it's current drop in value, which the vote for Brexit accelerated later on.

My own personal thoughts are that the sooner we introduce Modern Monetary Theory into economic practise the better. If we couple that with Universal Basic Income, we can then use that as a transitory stage to getting rid of money altogether.

Re: Exchange rates

Posted: Tue Aug 22, 2017 7:26 pm
by filippos
If you get rid of money altogether what do you replace it with? Some means of exchange will be needed.

Re: Exchange rates

Posted: Tue Aug 22, 2017 8:16 pm
by Jeffstclair
filippos wrote:If you get rid of money altogether what do you replace it with? Some means of exchange will be needed.

Here you could use cheese pies and buckets of tomatoes ....

Re: Exchange rates

Posted: Tue Aug 22, 2017 9:48 pm
by Kilkis
Money is simply a token to represent real capital, i.e "stuff", to facilitate exchange where the parties to the exchange do not necessarily want to exchange directly, i.e. A wants the "stuff" that B has but B doesn't want the "stuff" that A has. A and B exchange their "stuff" with C, D, E, etc for money and then exchange the money with X, Y, Z for the "stuff" they want. A critical feature of such an exchange system is that the currency also has to act as a store of value, in case you don't want to exchange immediately, and to achieve that the supply of money in such a system has to reflect the amount of "stuff" in the system. The supply of money will and should increase over time to reflect the greater amount of "stuff" available. In 1971 the world abandoned any attempt to link the supply of money to the supply of "stuff". For thousands of years of history as soon as a government frees itself of the burden of linking its currency to "stuff" it always succumbs to increasing the supply of money well beyond the supply of "stuff". That is always, no exceptions. Every time that results in the currency becoming worthless and being abandoned. We stand on the brink of that today. Typical fiat currencies have lost about 98 % of their purchasing power since 1971. Some sort of reset is well overdue.

When the Bretton Woods agreement ended and the gold standard was finally abandoned, the USA did a deal with Saudi Arabia, the country with the world's biggest oil reserves, that they would only sell their oil for US$. The US$ became the world's reserve currency. Every war fought in the middle east and the destabilisation of many other countries have immediately followed the government of those countries attempting to trade oil in something other than US$. If the US$ ceases to be the world currency it effectively becomes worthless. America will not let that happen and they have the military might to ensure it doesn't...until it does.

If you look at wars from an economic standpoint, typically they start with a currency war, that develops into a trade war and that escalates into a hot war. QE is a currency war weapon. It has been used by most developed countries since the economic crash in 2007 and by Japan for a couple of decades before that. Now read some of Donald Trump's comments on trade and work out for yourself where we are in the sequence.

Anything can act as money provided the parties wishing to exchange accept it. The only additional feature fiat, i.e. government authorised, currency has over anything else is the concept of legal tender, i.e. you have to use it to pay your taxes.

Warwick

Re: Exchange rates

Posted: Wed Aug 23, 2017 7:53 am
by Phild
Good analysis, Warwick!

I'd just like to add the following:

Kilkis wrote:Anything can act as money


...or, in fact, 'nothing'.

We just all have to agree to do some work - this can be much more flexible than the current system of work - we will all be able to change jobs whenever we like, do something that is our passion rather than the drudge work that many have to do to get through life. With increasing mechanisation, the drudge work will be done by machines, overlooked by people who actually like building, maintaining and overlooking machines.

Plus, work will consume less of our time, generally speaking, as we will not be required to 'over-produce' in order to inflate the pay-packets of bosses, shareholders, etc.

It's a win-win situation.

There are some caveats, of course, like with everything. Super-yacht builders will have to gift their yachts by the day, rather than selling them; and the waiting list for a day on a super-yacht will be loooong (and will include cleaning and re-stocking, etc - so it's not all going to be fun). Just as it will for people wanting what we now call high-value or 'luxury' items. We will not be able to own 'luxury' items, unless the producer gifts them to us (which is unlikely), but we will have access to them occasionally - where the level of 'luxury item' starts and ends depends largely on the technology of production, which incentivises people to boost technology and efficient production.

If you want to look into this concept further just google "moneyless society"

Re: Exchange rates

Posted: Wed Aug 23, 2017 8:29 am
by Kilkis
Phild wrote:...We just all have to agree to do some work -...


I didn't mention that money also acts as a unit of account. Because of massive money printing it is no longer a very useful unit of account but even under the moneyless system, Phil, I believe some unit of account would be needed for the work done. While I disagree with classical economists that everybody acts in their own self interest the fact that such a theory exists and is so pervasive means that there must be some element of truth behind it. Despite the increase in automation I believe there will always* be jobs that require people but why would anybody do those jobs if there was no actual need to.

Phild wrote:...Plus, work will consume less of our time, generally speaking, as we will not be required to 'over-produce' in order to inflate the pay-packets of bosses, shareholders, etc...


I've just finished reading "The Skeptical Economist" by Jonathan Aldred in which he argues that people would be happier if increases in productivity were directed towards people working less rather than acquiring more "stuff". I tend to agree with him but doubt that it will happen.

Warwick

* "Always" should be interpreted "as long as their are humans".

Re: Exchange rates

Posted: Wed Aug 23, 2017 2:21 pm
by Peter W
Post by Phild » Wed Aug 23, 2017 7:53 am

Good analysis, Warwick!

I'd just like to add the following:

Kilkis wrote:
Anything can act as money


...or, in fact, 'nothing'.

We just all have to agree to do some work - this can be much more flexible than the current system of work - we will all be able to change jobs whenever we like, do something that is our passion rather than the drudge work that many have to do to get through life. With increasing mechanisation, the drudge work will be done by machines, overlooked by people who actually like building, maintaining and overlooking machines.

Plus, work will consume less of our time, generally speaking, as we will not be required to 'over-produce' in order to inflate the pay-packets of bosses, shareholders, etc.

It's a win-win situation.

There are some caveats, of course, like with everything. Super-yacht builders will have to gift their yachts by the day, rather than selling them; and the waiting list for a day on a super-yacht will be loooong (and will include cleaning and re-stocking, etc - so it's not all going to be fun). Just as it will for people wanting what we now call high-value or 'luxury' items. We will not be able to own 'luxury' items, unless the producer gifts them to us (which is unlikely), but we will have access to them occasionally - where the level of 'luxury item' starts and ends depends largely on the technology of production, which incentivises people to boost technology and efficient production.

If you want to look into this concept further just google "moneyless society"


..........and then I woke up from this amazing dream.

Re: Exchange rates

Posted: Wed Aug 23, 2017 2:40 pm
by moved 2 crete
All I know is that in 2006 when we bought here and moved in the Pound was 1.6 to the Euro and we were comfortably off, now we watch pennies and count... :(

Re: Exchange rates

Posted: Wed Aug 23, 2017 3:22 pm
by Phild
Peter W wrote:..........and then I woke up from this amazing dream.


There's no harm in trying it.

It can always be tinkered with, as and when required, just as past economic systems have been.

No-one is saying that it will be a success from day one, as Warwick says, he thinks that there will still have to be some unit of accounting for work done, although, personally, I think that with the right attitudes in place, people will willingly work given the social structures that will emerge out of this economic system - plus, of course, there will be social pressure on individuals who don't seem to be pulling their weight.

Let's give it a try - it can't be worse than what we've got right now, can it?

Re: Exchange rates

Posted: Wed Aug 23, 2017 6:50 pm
by SatCure
Kilkis wrote: "Always" should be interpreted "as long as their are humans".

Or perhaps "as long as their babies are humans". :wink:

BTW there is a bartering association on Crete, which largely uses a "points" system.
http://archive.haniotika-nea.gr/xef/

Εναλλακτική Αποκορώνoυ / Alternative Apokoronas
https://www.community-exchange.org

Re: Exchange rates

Posted: Thu Aug 24, 2017 8:21 am
by filippos
Kilkis wrote:Everything is relative in currency space. You are always comparing currency pairs and it is impossible to say if one currency is getting weaker or the other is getting stronger. A lot of analysts see the weakening £-€ exchange rate as being due more to a strengthening of the Euro.
That's confirmed by the action of those currencies against the price of gold. The Euro price per kilo has been relatively static with very minor ups/downs while the kilo priced in pounds has been increasing overall and the USD price has been increasing even faster. Whether that's because the € is strengthening or the other two are weakening is anyone's guess and, maybe, all three are rising or falling together against a fourth currency.