Thursday, January 10, 2019

Ruined currency makes UK less attractive

The UK has a long history of our crooked politicians using currency devaluations as means to keep on spending excessive amounts of tax-payers' money whilst still making it an attractive place to invest, the ruined currency makes assets and investments cheap unless you are British and have all your dosh in Sterling.

Normally, this would be accompanied by high rates of inflation but this time around there is no price elasticity, companies put their prices up and find sales dive. Often they have to offer steeper discounts than before, the end result for the careful shopper is actual price deflation (you can often get discounts on discounts if you play the system).

High ticket items like cars and motorcycles, we have more crookedness with dodgy leasing deals trying to bolster high retail prices but the consumer is not so easily duped into never owning the purchase and having to roll over the finance to infinity, often with absurdly high interest rates. Falling sales the result, with knock-on effects for the big producers of job losses and perhaps closures - my money is on Honda's Swindon plant to be the first to close if no-deal Brexit happens. If you shop around you can find 15-20 percent off the retail prices!

Meanwhile, exporters into the UK find their margins hammered with the result that they start looking for more profitable markets elsewhere; even before Brexit the supply chain begins to be disrupted by lack of supply that has not yet fed though to higher prices because the market won't take any increases.

Where all this ends up is anyone's guess...

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