Re: £ Could Collapse in Weeks!!
 

Think of money as a substitute for gold.

Gold has a value because of its scarcity (if we overlook its aesthetic appeal, non degrading properties and certain technical advantages e.g. electrical conductivity).

If alchemists has been right, and you could make gold from common metals, then the value of gold would have fallen. It would no longer be a scarce, hard to win commodity.

Money only has a value because of this scarcity. An example, if a mars bar costs a pound, and there are a billion pound notes in circulation, then if we suddenly print another billion pound note, than the owner of the mars bar must charge 2 pounds to keep the same value.

Printing money has some unfortunate effects. People with money in the bank - savings, investments etc, find they become worth less. In the case of the mars bar example, a person’s savings would be halved in real value.

Another effect is imports and exports. If you print more notes, then people selling goods into the UK want more of the notes. So the cost of imports goes up. Conversely, selling goods overseas for the same price makes them cheaper.

This sounds good for a balance of payments, but history has shown that its only short term. People still need/want imports, so they demand more money - leading to inflation. This then makes the manufactured goods more expensive, and so the price of the exports goes up. Typical cycle to regain parity is about 5 years. In other words you prop up the economy fro about a five year period.

Another adverse effect is things are cheaper in the Uk, leading to overseas investors arriving and buying all the good stuff up . I don’t mean hats and coats, I mean industries and businesses.

Printing money isn’t a good idea at all, and it’s a mark of desperation.

GB didn’t even print more money, he just added numbers to computers to suggest that the money COULD be printed if it was required in circulation. that’s a cheap trick – it even avoids the cost of printing!

Re: £ Could Collapse in Weeks!!
 

Please stop talking about gold, at least until I've bought some more, "nothing to see here, please move along" ;)

Re: £ Could Collapse in Weeks!!
 

I think of it the other way around. Gold (like paper notes and numbers in a computer) brings money into the real world. The problem with thinking of money as gold is that there is not enough gold in the world to represent all the money.


Although there are others, I think the primary cause (value?) of money is work. It is a store of work. You get paid for working and you can pay to get someone to work. Even without gold in the world money would exist. Money comes into existence as soon as someone trades their work with someone else (e.g. 1 pig = 3 shovels).

Re: £ Could Collapse in Weeks!!
 

Good point, and the real reason why you can’t just print money – you haven’t done the work to earn it.

Re: £ Could Collapse in Weeks!!
 

Exactly.

Re: £ Could Collapse in Weeks!!
 

Printing money didn't work well for Zimbabwe, eventually the currency becomes worthless or near worthless many of the people are eating grass to survive.:ohmy:

Re: £ Could Collapse in Weeks!!
 

The whole concept of money, revolves around the idea that it holds some kind of "value". People want money not because of the physical paper itself, but because of this "value" that is contains.

Governments all around the world expand and contract their money supplies, affecting the value of their currencies, for various reasons.

The fundamental problem with simply printing more money to get yourself out of a hole, is that you are diluting the value of each existing unit of currency. Therefore every person and entity who holds any amount of that money, straight away becomes poorer.

Re: £ Could Collapse in Weeks!!
 

The pound took a bettering last night, apparently because of the strong prospect of a hung government of labour being re-elected.

Another worrying thing I hadn’t thought of is the Greece impact. If France and Germany save Greece, the next most risky country in Europe is the UK. The UK budget deficit this year is forecast to be 12.8 per cent of gross domestic product, comparable to Greece’s.

With Greece and the Euro off the hook, all eyes will be on the UK.

Re: £ Could Collapse in Weeks!!
 

And economically the UK is so much bigger than than Greece. So a much bigger problem. France and Germany can easily carry Greece. They'd have difficulties carrying the UK. However, the UK is much more willing (than Greece) to sell of assets.

Re: £ Could Collapse in Weeks!!
 

Not so, it would be Spain or Portugal - followed by Italy.

UK is in a mess but is not in the same league of messiness as club med.

Re: £ Could Collapse in Weeks!!
 

True, but if Greece is saved it shows a willingness of F&G to rescue its Eurozone “no-hopers”. I suspect that the assumption would be that the other litter of PIGS would be safe.

And next cab on the rank is…

Re: £ Could Collapse in Weeks!!
 

STUPID is the current flavour of the month acronym in use for the economies with the most unwieldy defecits.
Spain, Turkey, UK, Portugal, Italy, Dubai

http://www.guardian.co.uk/business/2...d-eu-countries

Re: £ Could Collapse in Weeks!!
 

:lol:

in fact :(

but :lol:

Re: £ Could Collapse in Weeks!!
 

UK is doing precisely that too by its Quantitative Easing program, and we are seeing the results.

Re: £ Could Collapse in Weeks!!
 

That's exactly what happened to Spain when the conquistadors brought so much booty over from South America, it caused the value of their gold and silver coins to drop dramatically.