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Its not clear ( from USA news ), looks like the Italians and British
ahve puled out of the EMS ( currency). It maybe to try and scare some
countries that are planning on voting NO to MAASTRICHT ( sp) - ie
France vote next Tuesday.
If its not that, then maybe its because they see a lot of NO votes and
thus an end to the EEC as we know ( knew) it.
Just my view ......
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| We are US citizens that passed through England to visit Ireland last
month (August). We strongly felt that both currencies were overpriced
at that time. Based on the goods we were buying (Room, Food, Beer), I
though the Pound and Punt should have been priced around $1.40 to
$1.50. Instead they were around $1.90.
In one day 9/16/92, the Brits actions caused their pound to drop about
7 cents +/-, from $1.85 to $1.78 per pound. My advice, if you too have
US Dollars, *wait*. I suspect the Brit pound will drop further, and
drag the Punt with it. Good for US, bad for those East of the puddle.
-- Jim
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Of course, it's not necessarily bad for the value of a currency to
fall. If a country's currency is overvalued it cannot sell its
exports, it cannot convince tourists to visit, and its consumers will
tend to prefer cheap imports over home produced - none of which is
good for the economy.
Liam
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| <<< BEAGLE::$1$DUA802:[NOTES$LIBRARY]VALBONNE.NOTE;1 >>>
-< It's not just a job, it's an adventure >-
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Note 3489.0 Sterling & The ERM - summary for those interested No replies
AZUR::KING "I feel better than James Brown !" 50 lines 18-SEP-1992 14:17
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Winners and Losers in the Medium Term
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From two possible Government policies.
1. Defending the Pound
2. Letting the Pound Go
1. Defending the Pound.
ASSUMPTION: Pound stays in ERM at current parity or with small
devaluation, interest rates stay high.
IMPLICATIONS: Economy shrinks further, house prices fall,
financial system under strain, inflation rate falls rapidly
towards zero, share prices tumble.
WINNERS: Savers, companies with strong balance sheets, businesses
with low dependence on UK economy, house renters, insolvency
practitioners, those planning foreign holidays.
LOSERS: Debtors, house-owners, companies in interest-rate
sensitive industries such as those in building and retailing,
share-owners.
2. Letting Sterling Go.
ASSUMPTION: Pound floats downwards sharply or devalues substantially
within ERM, interest rates fall back.
IMPLICATIONS: Inflationary expectations rekindle, economy continues
slow move out of recession, exports revive, eventually house prices
recover.
WINNERS: Companies with big overseas earnings, exporters, debtors
companies that gain from stronger housing market such as builders,
estate agents, furniture suppliers.
LOSERS: People on fixed incomes, savers, those planning foreign
holidays, companies owing money overseas, long-termists and...
Norman Lamont.
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Reprinted without permission: Financial Times - Thursday Sept 17th 1992
Copyright: Financial Times 1992
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