This is earning me no interest.

As the £ is falling against the euro should I now convert a large proportion of these euros to Sterling and place the money in my high interest Sterling account?

Reply: Under the law I am not allowed to offer investment advice from this site.

All those assets, homes, buisness, cars etc, all created out of thin air.

http://www.youtube.com/watch?v=XRLPG_HplrA

I want to return to the original blog, if I may.

APL says, quite rightly, “Why not simply allow the market to evaluate the performance of an economy and assign a value to the currency of that economic zone accordingly. Currencies will float or sink according to the performance of the economy.”

The government ought to be working full tilt to achieve this objective in this hour of “sterling crisis”. It’s the economy, stupid.
They ought to be doing, urgently, things that put the economy together again.
Like cutting waste on silly quangos. Like changing bureaucrats into people who are making the economy stronger instead of weaker. Like getting people back to work even if it means cutting the welfare. Like cutting taxes for people who are getting us the money from abroad. Like encouraging production and foreign earnings. Like giving the MBE to people who win us production abroad. There are a lot of things that a competent government could be aiming at achieving.

Instead they are answering the original question of whether this is a Sterling Crisis in the Sunny Jim Callaghan way:
“Sterling Crisis? What Crisis?”

So long as we have competing currencies there is some incentive to stability & if the US can’t get a premium from having reliable money the Swiss & Chinese will.

We could back it with something other than gold (I have suggested a kwh of electricity delivered by space satellite anywhere in the world) but without some backing it is just a conjuring trick.

A structured system built on a world currency and a world central bank is not socialistic or capitalistic but pramatic and necessary in the modern world. Any such world bank would have its membership composed out of member states, which in turn would provide experts in the field of banking who are afforded operational independence. A global banking system would be able to respond to any world financial crisis and would have the ability to cast out any nation that tries to circumvent the modus operandi of the world central bank.

The thing that led to the bust under the last Tory government is the tranzi ‘one world’ faction of the Tory party, trying to fix the value of sterling so that it could become part of the Euro. That is, just the sort of thing you advocate.

The thing that led to boom and bust under this current administration was the idea that there should really be no constraint on public spending, including but not limited to:

1. The government can raise taxes on the productive sector of the economy and spend it in the public sector. On some pretty stupid and unnecessary schemes – the NHS ’spine’ or super computer when the internet is avaliable, or the ID database, when it is clear that most people can manage their own ‘identity’ perfectly well without the government. In fact the government is incompetant in that area too.

2. The government can deliberately cause economic drag (impede economic growth) with its hair brained environ – mentalism.

3. When it thinks that perhaps it is taking too much tax in 1. for the productive sector to bear, it raises more tax by borrowing. Government borrowing is always a tax on future generations, we will all be poorer in the future because of government waste today.

Tony Makara: “If currency differentials can eventually be equalized the market will work better for everyone and not just be tilted towards those who trade in commodities,”

They can never be equalized, there will always be differentials in the performance of the underlying economies. Do you really think that an economy like Zimbabwe, and an economy like France could have a fixed exchange rate for more than three minutes?

Tony Makara: “and not just be tilted towards those who trade in commodities, the people who always use the failure of fiat money to blackmail the world with higher prices.”

Ah! the nasty capitalistic internationalist financiers holding us all to ransom. Who do you think will populate the board of the World Bank? Tom from down the pub? I don’t think so.

The ’tilt’ you describe is a recent phenomena, there was no such ’tilt’ in the ’80s or ’90s in fact commodities were pretty cheap. It is only in the last seven or eight years that commodoties have been ‘booming’.

But you do just touch on the reality, our fiat money system, is the root of our problems. It has allowed Greenspan and now his successor to expand the US$ money supply seemingly with no relationship to the underlying health of the US economy.

A world central bank would have to make international trade exclusive to its members and nations who choose not to join or deliberately decide not to accept its fiscal policy would be excluded from trading with nations who are members. This would serve as the credibility of the issue.

Firstly, you would be asking the world markets to accept a currency issued, and backed up by a large, corrupt, unaccountable and completely unproductive centralised “world” organization. Short of being a stabilizing influence, with fundamentals like that, this “world currency” would have trouble maintaining its own value!

Secondly, assuming it did work, world currencies would encourage the world’s less palatable regimes to default on their loans. After all, why would they bother to repay debts when someone else will pick up the tab? The Zimbabwean regime is the perfect example. It has no intention of repaying its debts (and indeed, no way of doing so) so it’s currently paying what’s left of its workforce with worthless scraps of paper.

Currencies collapse for a reason. Usually, it’s because of the dire economic and fiscal policies of corrupt and incompetent governments, as in Zimbabwe. But the world currency would unhelpfully maintain its value, backed up by the rest of the world, so the rest of the world would in effect be subsidising the continuation of Mugabe’s murderous regime.

That would be the job of a world central bank, there must be no political imput.

” Who has better knowledge of the value of a currency than the market? ”

The market isn’t one unified entity pulling in the same direction, its lots of vested interests pulling in different directions. What is needed is a financial system that allows the market to operate with as little turbulence as possible, the starting point must be global financial stability.

” Currencies will float or sink according to the performance of the economy ”

This is exactly the sort of thing that leads to boom and bust and must be avoided. If currency differentials can eventually be equalized the market will work better for everyone and not just be tilted towards those who trade in commodities, the people who always use the failure of fiat money to blackmail the world with higher prices.

You mean the US Federal Reserve. The US$ is currently the world currency, although for how much longer remains to be seen.

Tony Makara: “.. with fixed exchange rates but periodic currency upgrades awarded depending on need and performance, would eventually be able to pull all the worlds currencies and thereby each nations purchasing power into sync.”

Ah, a sort of currency peg board.

Who is to evaluate the world currency, to determine exactly what it is worth in US$, UK£, French Franks, Zimbawbian (whatever)?

Who has better knowledge of the value of a currency than the market, and how do they know better than the market?

Why not simply allow the market to evaluate the performance of an economy and assign a value to the currency of that economic zone accordingly. Currencies will float or sink according to the performance of the economy.

No need for another SupraNational organisation with their own SUPER John Lewis List, we can save ourselves a great deal of money, by simply using the system we have at the moment.

The UK £ is dropping because of the reckless behaviour of the British government. Simple as that!

house prices i am afraid need to crash in this country, its a necessary part of the economic cycle, and the country is uncompetitive with prices this high, prices are out of all proportion to sense

of course planning rules need freeing up so that builders can actually build the houses folk want to buy, eg with parking, as opposed to far too many flats

Since most people aren’t going to study such things they are bound to get a lot of their economic “information” from the BBC. It is grossly improper & damaging of the state broadcaster to report purely in such irresponsible, dishonest & economically illiterate terms.