The Pound drops to a new low against the Euro!

Well, this is a headline I could use every day this week.

The Pound dropped to a new low against the Euro yesterday. The worst it got was £1 to €1.10800.

Oh dear.

Whilst Yvette Cooper (AKA Mrs Balls) can't quite see the significance of this as they target inflation... it does mean that all we buy from the Euro zone will become more expensive so pushing inflation up.

The Pound to slump to low against the Euro

Well, all last week the pound plummeted to new depths against the Euro, and will do so again this week. It finished the week at £1 to €1.11880 (In my last article on the subject I made a typo :( )

You have to wonder what low it will hit next week. People travelling abroad are already getting less that €1 to the pound (see this on the BBC). Will it hit as low as €1.05 or even parity?

So what would Gordon Brown say about it? Well, in 1995 he said:

A weak currency is the sign of a weak economy, which is the sign of a weak government

How true. (Hat tip to Iain Dale for the quote)

Of course Yvette Cooper, Chief secretary to the Treasury has said that this government does not watch what is happening to the currency and instead looks to keep inflation under control claiming that they have done well over the last 11 years.

The reality is that this government had kept the wrong measure of inflation "under control" and that was not in fact the government but the Monetary Policy Committee of the Bank of England. Had this government (or indeed the MPC) kept the right inflation under control we would not be in this mess.

The pound continues to slide against the Euro

The government were warned that the Pound would slide, and it continues to do so against the Euro hitting yet another record low today of 1.2330 Euro's to the Pound. Currency exchanges are already trading at parity and some say we will reach parity by the end of the year.

What this means is that there will be inflationary pressures around the corner. Far from cuttting interest rates further and making it harder for our banks to raise cash, we need to raise interest rates and reduce public spending.

The latest rate is available here on the BBC, and the BBC has this.

Pound continues to slide against the Euro.

Rather sadly I have been comentating and indeed watching the pound against the dollar, which, whilst it has during the last week hit another 52 week low, is trading between $1.44 to $1.50 to the pound. On the other hand the trend against the Euro is relentlessly down, reaching new depths on a regular basis. In fact it has hit as low as 1.14 Euros to the pound.

The reasons for this are simple. Gordon Brown wants to borrow hideous amounts of money to buy his way out of a recession and it appears that if that does not work he will try printing his way out. Similar ideas seem to abound in the US whereas Germany contrary to Labour and Gordon Brown's spin think this policy is nothing other than nuts.

You can see the rate against the Euro here (current £1 buys €1.15 Euros as opposed to a year ago when it brought €1.40). On the other hand it buys $1.48 dollars against a 52 week high of $2.05. Current price is here.

Let the presses roll!

I have been hearing many people talking about "quantitative easing" including on Newnight last night. It appears that the government and treasury are considering it and indeed modeling it.

Of course "quantitative easing" is a nice bit of jargon, but what it actually means is printing money. It is as simple as that. On the upside at least there will be no chance of deflation, on the downside, the value of the cash and savings you have will fall through the floor.

Well Guido has noticed an odd clause in the banking bill before parliament. It removes a clause from the 1844 Bank Charter act. That clause requires the Bank of England to tell government how much money it has printed, and also to publish that information. It makes the Bank of England transparent.

The only reason I can see for removing that clause is so that the Bank of England can let the presses roll and try to print our way out of this economic hole.

It won't work, it will be dire. What is more, the mere fact that that clause will be removed will damage confidence in the pound even if the Bank does not print any new notes.

Pound set to fall as government promises to borrow out of recession!

The pound will fall during the course of the day as the markets work out that this government is going to try to borrow its way out of recession.

Ignore the comments about all governments around the world doing the same, its tosh. The Chinese have stacks of cash so are not borrowing and no serious country is looking at budget deficits as big as ours.

Expect the pound to hit a 52 week low today, and for the record it would have to go below $1.45.5 to £1.

The BBC has this on the current rate of the pound.

Tax cuts should be for life, not just for Christmas!

It has to be said that is one hell of a soundbite, and indeed David Cameron has a point.

Here is the scenario:

You work, you get given a tax cut. It will last one year or maybe two. Taxes will rise after that. What would you do?

What is more what will the money markets do? They will know that there will be but a temporary boost to the economy and crucially they will know that nothing is yet being done to solve the debt bubble both private and public that there is in the UK economy.

In short the markets will tank. They are currently in headless chicken mode already.

The BBC has this on the debate.

So what is happening to the pound?

So what of George Osbourne's reckless undermining of the pound that Labour were so concerned about?

Well as Guido points out, the pound has rallied. When I wrote yesterday the pound was at $1.47, and had in the last few days hit a low of $1.45. Now it is currently trading at $1.50325 up some 3 cents since yesterday. (Current price is here)

Quite impressive and clear proof that Labour were talking rot in saying that George Osbourne's comments may damage the pound. In fact the way the reporting went over the weekend changed and started to highlight both the drop in the pound over three months and the level of the current budget deficit in such a way as to force to government to stop saying they will borrow and spend, replacing that with affordable borrowing. In many ways that tone change may have helped today's rally and would not have happened without George Osbourne's efforts.

What will sink or save the pound though is the pre budget report next Monday. Then we will see how the markets view the government.