6 ms·

For those interested in a potentially more relevant number, here is the link to the FTSE 100 priced in USD: http://markets.ft.com/research/Markets/Tearsheets/Su

by lhl 10y ago

For those interested in a potentially more relevant number, here is the link to the FTSE 100 priced in USD: http://markets.ft.com/research/Markets/Tearsheets/Summary?s=UKXUSD%2B:FSI http://markets.ft.com/research/Markets/Tearsheets/Summary?s=... It is -10.92% this week, and -22.26% for the year. You can add in a comparison to the FTSE 100 in GBP. Note: the GBPUSD hit a 31 year low today. The GBPUSD is down about 13% for the year: http://markets.ft.com/research/Markets/Tearsheets/Summary?s=GBPUSD http://markets.ft.com/research/Markets/Tearsheets/Summary?s=...

partiallypro 10y ago
Europe as a whole has been on a similar track, Europe's economy is a hot mess. Really, you could argue that the UK was the healthiest economy in the EU (or at least, the most diverse.) Germany is a powerhouse, but really if the Euro were to strengthen it would crush their exports, which is really where they thrive. The Euro is the best thing that has happened to Germany. It artificially lowers their currency valuation because of poorer member states, and the EU itself gives Germany immense power over other member states because they have deeper pockets. Then to top it off, Germany makes the ECB policy just tight enough (from being a stronger economy) to strangle off the economy of everyone else. There's a reason many of the other countries want to leave, not having their own central bank that can loosen credit or even keep their interest rates at the market level is murdering their economies. There are other reasons, like dumb laws and regulations, but a struggling economy and a massive welfare state is a perfect combination for angst. Especially if you throw in an immigration crisis caused by external conflicts. The UK not adopting the Euro imo is one of the best decisions they had ever made economically. I don't think Brexit is going to sting the UK as much as it's going to potentially sting Germany if other member states start to think about exiting.
- jacobolus 10y ago
  All of which was hardly unpredictable: http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all...
- airesQ 10y ago
  You don't need to share a currency in order to devalue it. Germany could have done it with the deutschmark. But I do agree with the overall point that the monetary policy is made for the whole, without fitting anyone particularly well.
  - kalleboo 10y ago
    It can be difficult though - Japan has been trying hard to devalue but as a safe-haven they keep getting thwarted by criseses happening around them causing people to pour in more investment.
- lhl 10y ago
  It's fair to argue about the European economy being a mess and all the crazy fiscal policy issues (personally, I think the only sane choice for Greece last year would have been to leave the EU), but I think the UK has misjudged what a great deal it had (since they already had control of their own currency/fiscal policy while still getting all the other benefits from the EU). I do think it's worth pointing out that while GBPUSD is down almost 14% over the 1yr https://goo.gl/TuqgEJ https://goo.gl/TuqgEJ EURUSD is down only 2% https://goo.gl/xge4LR https://goo.gl/xge4LR The UK has a 46B USD trade deficit w/ Germany (9/10 of UK's trade deficits are w/ EU nations, only 1 of its surpluses is with an EU nation) [1] so I'm not sure if the UK is going to come out so well economically (not to mention that considering that Scotland and Northern Ireland were both strongly for remaining in the EU, it's not clear that the UK will come out at all). [1] http://www.worldstopexports.com/united-kingdoms-top-import-partners/ http://www.worldstopexports.com/united-kingdoms-top-import-p...
  - disordinary 10y ago
    How could Greece leave the EU if they owe 20 Billion to the European Bank and a couple of hundred Billion to individual European countries? They are stuck there because of the debt, if they left the EU they would have gone bankrupt.
    - lhl 10y ago
      Considering their 8+ years of negative GDP growth, there's not a lot to point out that they won't go bankrupt or will be able to service their debt when they have to start paying again (2022) anyway. From the most recent IMF projections (May 2016 [1]), without debt restructuring: "Gross financing needs cross the 15 percent-of-GDP threshold already by 2024 and the 20 percent threshold by 2029, reaching around 30 percent by 2040 and close to 60 percent of GDP by 2060." [1] https://www.imf.org/external/pubs/ft/scr/2016/cr16130.pdf https://www.imf.org/external/pubs/ft/scr/2016/cr16130.pdf
    - iofj 10y ago
      And for a sovereign state, bankruptcy means ... nothing. Yes they couldn't borrow for a while (judging by the Cyprus experience ... about 6 months), but they can't borrow right now either. A lot of banks would close off financial channels for a while, as a bargaining chip to get their own finances in order. This would be bad for rich Greek citizens, but would be fine for normal people who don't deal with non-Greek companies directly. And of course, the ECB would have to write off a massive amount of debt (about 1.5% of Eurozone total debt), which would devalue the Euro. A lot of Euro banks that bought Greece's debt because it was backed by the Eurozone and still had high interest rates (in a sort of carry trade) would go bankrupt. Because that's the big secret, of course. A Greek bankruptcy would be far worse for other countries, especially Eurozone countries, then it would be for Greece [1]. As an American you should appreciate the situation Greece is in. Greece's economy is destroyed, because of externally imposed taxes that cannot possibly work. I am saying, maybe Greece should have a little Tea Party. I am scared to think of how badly Europe is currently being perceived in any of the PIIGS countries, but in Greece it's probably by far the worst. [1] https://www.youtube.com/watch?v=mxXKDaIKkhk https://www.youtube.com/watch?v=mxXKDaIKkhk (worth watching, even if you don't care about the reference itself)
- mtanski 10y ago
  Without a central bank you can use inflation a means of shedding your debt burden. And the Germans (a nation of savers) hate inflation. Getting out of crushing debt burden (if the debt is denominated in local currency) by inflation is not really a great solution. But in many cases it the best of bad solutions. Everybody locally suffers from inflation equally (proportionally). ... With the exception of foreign lenders who lent money in local currency suffer the most (wrong side of FX). But again that might be the least bad option. It's the same idea as high hotel and travel taxes (parking, car rentals, cabs from airport)... Because the best tax is the one you don't have to pay yourself, instead it's the tax that people who don't live here pay. And, that's because they don't vote here. Also, I'm not talking about runaway inflation. But higer the the gold standard of ~ 2%. if you look at Greece. They would probably be a good candidate for the servicing debt via inflation as the least bad option. Except they don't have that option anymore. Instead the lender countries are going to keep pretending for the next 10 years that they will see all their money back. And they'll do that but lending more money to Greece and making it poorer at the same time. You know, ze Germans.
  - ohthehugemanate 10y ago
    So, what's the difference here between Greece and, say, Hawaii? HI is a debt ridden state with no control over a central bank to help it address the problem.
imron 10y ago
> Note: the GBPUSD hit a 31 year low today Alternatively, it's approximately the same value today as it was in February this year. Yes, it briefly hit that low, but bounced back above it almost immediately. The drop in the GBP also isn't as precipitous as some are making out when you realise that half of the value of the drop was added in the 10 days leading up the vote. So yeah, it's not great, but it's nowhere near the levels of doom and gloom that some people are making it out to be. Edit: and if you look at the FTSE 100 priced in USD over the last month, it paints a slightly saner story also. Much of the fall "caused by a vote to leave" was just correcting buildup that happened in the last 10 days or so.
SixSigma 10y ago
Is the FTSE a good barometer? Many companies are EU owned.

by lhl 10y ago

partiallypro 10y ago

Europe as a whole has been on a similar track, Europe's economy is a hot mess. Really, you could argue that the UK was the healthiest economy in the EU (or at least, the most diverse.) Germany is a powerhouse, but really if the Euro were to strengthen it would crush their exports, which is really where they thrive. The Euro is the best thing that has happened to Germany. It artificially lowers their currency valuation because of poorer member states, and the EU itself gives Germany immense power over other member states because they have deeper pockets. Then to top it off, Germany makes the ECB policy just tight enough (from being a stronger economy) to strangle off the economy of everyone else. There's a reason many of the other countries want to leave, not having their own central bank that can loosen credit or even keep their interest rates at the market level is murdering their economies. There are other reasons, like dumb laws and regulations, but a struggling economy and a massive welfare state is a perfect combination for angst. Especially if you throw in an immigration crisis caused by external conflicts. The UK not adopting the Euro imo is one of the best decisions they had ever made economically. I don't think Brexit is going to sting the UK as much as it's going to potentially sting Germany if other member states start to think about exiting.

jacobolus 10y ago
All of which was hardly unpredictable: http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all...
airesQ 10y ago
You don't need to share a currency in order to devalue it. Germany could have done it with the deutschmark. But I do agree with the overall point that the monetary policy is made for the whole, without fitting anyone particularly well.
- kalleboo 10y ago
  It can be difficult though - Japan has been trying hard to devalue but as a safe-haven they keep getting thwarted by criseses happening around them causing people to pour in more investment.
lhl 10y ago
It's fair to argue about the European economy being a mess and all the crazy fiscal policy issues (personally, I think the only sane choice for Greece last year would have been to leave the EU), but I think the UK has misjudged what a great deal it had (since they already had control of their own currency/fiscal policy while still getting all the other benefits from the EU). I do think it's worth pointing out that while GBPUSD is down almost 14% over the 1yr https://goo.gl/TuqgEJ https://goo.gl/TuqgEJ EURUSD is down only 2% https://goo.gl/xge4LR https://goo.gl/xge4LR The UK has a 46B USD trade deficit w/ Germany (9/10 of UK's trade deficits are w/ EU nations, only 1 of its surpluses is with an EU nation) [1] so I'm not sure if the UK is going to come out so well economically (not to mention that considering that Scotland and Northern Ireland were both strongly for remaining in the EU, it's not clear that the UK will come out at all). [1] http://www.worldstopexports.com/united-kingdoms-top-import-partners/ http://www.worldstopexports.com/united-kingdoms-top-import-p...
- disordinary 10y ago
  How could Greece leave the EU if they owe 20 Billion to the European Bank and a couple of hundred Billion to individual European countries? They are stuck there because of the debt, if they left the EU they would have gone bankrupt.
  - lhl 10y ago
    Considering their 8+ years of negative GDP growth, there's not a lot to point out that they won't go bankrupt or will be able to service their debt when they have to start paying again (2022) anyway. From the most recent IMF projections (May 2016 [1]), without debt restructuring: "Gross financing needs cross the 15 percent-of-GDP threshold already by 2024 and the 20 percent threshold by 2029, reaching around 30 percent by 2040 and close to 60 percent of GDP by 2060." [1] https://www.imf.org/external/pubs/ft/scr/2016/cr16130.pdf https://www.imf.org/external/pubs/ft/scr/2016/cr16130.pdf
  - iofj 10y ago
    And for a sovereign state, bankruptcy means ... nothing. Yes they couldn't borrow for a while (judging by the Cyprus experience ... about 6 months), but they can't borrow right now either. A lot of banks would close off financial channels for a while, as a bargaining chip to get their own finances in order. This would be bad for rich Greek citizens, but would be fine for normal people who don't deal with non-Greek companies directly. And of course, the ECB would have to write off a massive amount of debt (about 1.5% of Eurozone total debt), which would devalue the Euro. A lot of Euro banks that bought Greece's debt because it was backed by the Eurozone and still had high interest rates (in a sort of carry trade) would go bankrupt. Because that's the big secret, of course. A Greek bankruptcy would be far worse for other countries, especially Eurozone countries, then it would be for Greece [1]. As an American you should appreciate the situation Greece is in. Greece's economy is destroyed, because of externally imposed taxes that cannot possibly work. I am saying, maybe Greece should have a little Tea Party. I am scared to think of how badly Europe is currently being perceived in any of the PIIGS countries, but in Greece it's probably by far the worst. [1] https://www.youtube.com/watch?v=mxXKDaIKkhk https://www.youtube.com/watch?v=mxXKDaIKkhk (worth watching, even if you don't care about the reference itself)
mtanski 10y ago
Without a central bank you can use inflation a means of shedding your debt burden. And the Germans (a nation of savers) hate inflation. Getting out of crushing debt burden (if the debt is denominated in local currency) by inflation is not really a great solution. But in many cases it the best of bad solutions. Everybody locally suffers from inflation equally (proportionally). ... With the exception of foreign lenders who lent money in local currency suffer the most (wrong side of FX). But again that might be the least bad option. It's the same idea as high hotel and travel taxes (parking, car rentals, cabs from airport)... Because the best tax is the one you don't have to pay yourself, instead it's the tax that people who don't live here pay. And, that's because they don't vote here. Also, I'm not talking about runaway inflation. But higer the the gold standard of ~ 2%. if you look at Greece. They would probably be a good candidate for the servicing debt via inflation as the least bad option. Except they don't have that option anymore. Instead the lender countries are going to keep pretending for the next 10 years that they will see all their money back. And they'll do that but lending more money to Greece and making it poorer at the same time. You know, ze Germans.
- ohthehugemanate 10y ago
  So, what's the difference here between Greece and, say, Hawaii? HI is a debt ridden state with no control over a central bank to help it address the problem.

imron 10y ago

> Note: the GBPUSD hit a 31 year low today Alternatively, it's approximately the same value today as it was in February this year. Yes, it briefly hit that low, but bounced back above it almost immediately. The drop in the GBP also isn't as precipitous as some are making out when you realise that half of the value of the drop was added in the 10 days leading up the vote. So yeah, it's not great, but it's nowhere near the levels of doom and gloom that some people are making it out to be. Edit: and if you look at the FTSE 100 priced in USD over the last month, it paints a slightly saner story also. Much of the fall "caused by a vote to leave" was just correcting buildup that happened in the last 10 days or so.

SixSigma 10y ago

Is the FTSE a good barometer? Many companies are EU owned.