Twin pronged attack from the UK is there panic in Brussels

[Suff]

At the Tory conference we were told that the UK is not making any bad deals, followed by the Chancellor telling us that the government will do whatever is needed to protect UK businesses from any EU intransigence.

Part 2, the UK economy is growing faster than the EU, again, and is strong. Stronger than it's been since 2013.

Brussels now knows that the UK is not going to be fawning for business and is not going to be scared into making poor deals for the UK which translate to license to abuse by the EU.

There must be some pretty stark discussions going on in Brussels right now. Hopefully I won't have to have a closer view (the only opportunity looking close at the moment is back in Brussels).

As France descends into deflation, again and Germany's economy shrinks, Deutsche Bank is looking to be in trouble and the politics of the EU swing further and further to the right over immigration, there can be no good news for the EU in a strong UK who's economy is ignoring the harsh words and who's government is taking the stance of "just try me and you'll see what we're made of".

Not happy campers at Schuman I'm betting.

[Workingman]

The economy grew?

That would be the GDP economy 'economy' where what we spend within the UK is somehow a worthy measure. Shame that a lot of what we spend is funded by debt.

However, when we look at a real measure, the balance of trade payments, we are in deep doo-doo. We have traded in the red since 1995 and 2013 was one of the worst years in that regard, even worse than 2008.

Meanwhile the £ tanked, but Betfred using other people's money, sorry, the FTSE is up.

The chancellor also told us that austerity is not over. Mind you his main job for quite some time will be the £ and its fluctuations. He has also axed plans to balance the books by 2020 in order to ride out what he describes as the 'Brexit Roller-coaster', ooh err. The EU worried? I think not as much as some would hope.

[Suff]

Actually the latest results are in our export sector where they are making big advantage of the lowered value of the £ to export to the US and to Asia. Real economy, Real money, real goods.

Also the EU might want to remember that they have a €60bn trade surplus to the UK. Something that our exports to the rest of the world offset down to about £15bn. The best balance of trade we can do is to get out of the EU and start trading with the rest of the world where the goods are cheaper and they are more likely to buy ours.

Worried? I expect the change in attitude from bending over and being abused to standing up and telling them where to get off is causing near apoplexy in certain corners of the EU.

[Workingman]

Yes, we are selling more products and services to the US, Canada and Asia, but with a weak pound we are getting less for them. On the other side of the coin we are paying more for our imports, and we import a lot. It is a double whammy for the real economy and our balance of trade deficit.

It is not something for us to be celebrating.

Getting out of the year-on-year £bn trade deficits is going to be tough work, regardless of what the EU, Asia or Timbuktu do, until and unless we start producing the widgets and thungumybobs the world wants to buy.

[Suff]

The £ went down 10%, not 30% as in 2008. Enough to boost exports significantly but not reduce, radically, the value that we get from them. It just made us more competitive.

Although if the "experts" continue to devalue the £ on good news, the resulting backlash when the BOE holds rates and starts making wimbling noises about how the economy is stronger than anticipated... climb down, climb down, then the £ is going to bounce really hard and that's going to hurt exports and the economy and it will ALL be down to the BOE.

[Workingman]

The £ just hit a new 31 year low against the $ trading at $1.28 to the £.

In 2015 there were $1.51 to the £. The drop to today is 16%

In 2008 there were $1.77 to the £. The raw figure from that time is a drop to today of 28%. Take inflation into consideration and the % drop goes into the 35% region. However, for the period 2008 - 2016 the average has been $1.57 to the £. Today's figure is a 19% drop from that average.

During the period from 1995 to today, when our balance of payments have always in the red, the average exchange rate was $1.65 to the £. The raw figure for the drop to today's rate is 23%.

An economy can only benefit from exchange rates when its currency lies within a limited range above and below the long or medium term average, and is stable. I would argue that today's exchange rate is not beneficial, viz-a-viz imports to exports, and that the value of the £ has to rise. Where to?

That would depend on what the BoE thinks is manageable over the long/medium term. Whatever that figure comes to, today's $1.28 to the £ is way too low.

[Workingman]

And so reality sets in.

FTSE drops 49.1 points as the Spivs make their money and run. No surprise really, FTSE 100 companies trade in $s but report profits in £s. A weak £ makes them look strong. Nothing has physically changed. The companies still work as they did yesterday, but the skewed money markets can make them look strong, or weak, as desired.

We also have the £ at its lowest level against he € for five years....... the Brexit effect?

The £ at $1.27, and €1.13 tonight is good for the economy and the EU running scared, don't make me laugh.

It has gone all quiet on the Brexit front, I wonder why?

[Suff]

Slowly but surely the BOE members are down talking further action to cut rates. In fact they have almost gone as far as to say they took too much action too soon.

When the market finally gets the messages and stops eating it's own dog food, the £ is going to bounce, hard. That's not good for the economy either.

In 2009 the £ almost hit parity with the €. It was still strong against the $ because the $ was suffering too. Right now the £ is still being punished as a European currency against the recovering $. That will change as time goes on and the € will continue to be punished for failing to recover.

This is far from over and the change from talking the economy down to talking it up will be slow and subtle. But it will be there.

[Workingman]

the £ is going to bounce, hard. That's not good for the economy either.

Which is what the likes of J M Keynes, J K Galbraith and Will Hutton would have said - It is the lack of stability.

Another problem, caused by the 2008 crisis, is that the BoE has very little room to manoeuvre. It can talk things up, down or sideways, but it is short on practical steps it can take.

The third problem for free market economies is the spivs, or the algorithms they use. If there is a cent to be made buying, selling and buying again, millions of shares, or vice-versa, then sod any economic collateral damage. Laissez-faire economics only works when people play the game responsibly. When they do not the only real option is to turn to controlled economies.

Individual or a small group of countries could band together to do it, but unless it is adopted by the G7 or G20 groupings it will not work - and they will never agree. So the £, $, €, Yen and chocolate pennies will keep on going every which way with regards to each other. Why?

Because there is lots of money to be made using the free market model and, as we all know, making lots and lots of money is the crowning glory - think of the bonuses. Luvly jubbly.