In Search of Sterling Part 2

Since November 2012, Yen has devalued by over 20% versus The US Dollar. The Pound has closely followed Yen, reaching 7 month lows versus Dollar. Lowering medium term growth prospects have necessitated a lowering in Moodys' UK credit rating. The Pound  is at its trade weighted lowest, since September 2011. Medium term borrowing rates face upward pressure, if UK does not realise real short- term economic growth. Short-term investors currently buoying up Pound could easily drive up borrowing costs, thereby forcing more Pound decline. Only the strength of London as a historical financial hub keeps the country's capital account intact.
Policy makers are in a catch 22. If they borrow to increase 'capital spending' this could send wrong signals to bondholders and lead to a dumping of bonds. On the other hand, if they persist with austerity they have no way of generating medium term growth. Currency speculators have their eye on Pound, thereby ensuring vulnerability and instability . Devaluation, historically, has never generated export-driven growth as evidenced in 1949(30% devaluation), 1967 and 1992. Thus, unlike Yen, Pound devaluations have never improved  industrial sector performance. With empire diminished, Pound has no long-term reserve credibility. If the economy does not improve, they will be more downgrades and devaluations in pursuit Sterling.

In Search of Sterling

When money was gold, Empire Britannia was strong.

Pound was best, making Britain- Great.

With Second War came debt.

'Pay up!' said Uncle Sam, real quick!

In '49, 30% devaluation came next.

60's, lets devalue.

70's, lets devalue....

Economy had no growth, Empire collapsed.

No more gold, just fiat and The City had passed.

Eurasia to Arabia, we love London finance.

Asia to Africa, LIBOR romance.

Oz and South America, Sqaure Mile-Interbank£$£

Close the mines, City service futures.

It is best service for forward-options-spots.

Lets free up City-Iron Lady this is Big Bang!

20-08 saw the first test.

Lets devalue-lets devalue-like Yen we can outdo the rest.

Forget Ol' Empire, when Britannia Sterling Gold was best.

Currency war-myth and reality

Japan continues to drive down the value of Yen. Given Asian economies rely on exports, competitive devaluations continue in the region. Asian currency devaluations are accompaning continual devaluations of British Pound,  American Dollar and Euro. These devaluations are not only an attempt to conjure export led growth, in an attempt to beat recession,but also to reduce overall government debt overload. Watching currency movements it seems Central Banks are rotating currency devaluation. This musical chair devaluation defeats the main objective of competitive devaluation.
Long term currency debasement is supported downward as all fiat loses value in the long term. This is the reality of fiat money systems. This tragedy is worsened by the myth of 'competitive devaluation'.