Cape Blue

Is the £ low or is it just heading to where it should be? The Big Mac Index giving a PPP comparison of currency seem to indicate (against the US$) that the AUS$ is undervalued by 38% whilst the UK £ is undervalued by 7%.

This would seem to indicate that the Aus$ is going to strengthen more against the £ and it will get even harder to move to Aus with British £'s.

http://www.economist.com/markets/ind...ry_id=13055650

the plumber

The Americans are doing the same thing , the countries broke so they,ve decided to print lots of money.
When things start to normalize watch the dollar drop like a stone.....its way over valued because of government intervention....fear etc.

iamthecreaturefromuranus

As someone who is already in Oz, but will probably one day return to the UK, I would be more than happy to see parity between the pound and the dollar.... sorry folks.

suggs

Printing Money Quantitive Easing

If you want the scary, conspiratorial explanation for quantitative easing (QE), it's this:

The current proposed purchases by the BoE under QE will create £125bn of new central bank reserves (narrow money) within the banking system. The banks can then leverage these reserves and buy government debt. They will be able to buy much more than the base £125bn that has been injected into the system through QE.

Why would the banks buy government bonds though? Well, they're going to be forced to under the new Liquidity Asset Buffer requirements that the FSA is putting in place (I believe these are due to come into effect from October, but banks will probably start buying gilts and other govt bonds before then). In Chapter 6 of December's consultation paper the FSA suggested what assets would qualify for inclusion in the buffer:


QUOTE
--- highly liquid, high-quality government debt instruments as follows: gilts, plus bonds rated at least Aa3 issued by the countries of the European Economic Area (EEA), Canada, Japan, Switzerland and the United States; and

--- reserves held with the Bank of England’s reserve scheme and with the central banks of the US, the EEA, Switzerland, Canada and Japan.


Since other banking regimes around the world will likely be introducing similar liquidity requirements, this all works out rather nicely. UK banks buy gilts but they also buy foreign govt bonds to cover non-domestic liabilities, and foreign banks around the world buy UK gilts to cover sterling liabilities. It would certainly qualify as being labelled a giant Ponzi scheme, and with the commercial banks in the market the DMO will have considerably less problem in selling its gilts.

[I wonder which banks will end up buying the most gilts...RBS and Lloyds perchance? That would also mean that the government is effectively paying interest to itself, and the cost of funding public borrowing wouldn't be as high as it looks on paper.]

The timing of QE fits in perfectly with the introduction of the new FSA liquidity regime. It's building reserves up just in time for the banks to start leveraging them into gilts and foreign government bonds.

But hey, those poor bankers have had a hard time recently. It's only right that we rebuild their profits and get the bonuses going again.

the plumber

got news for ya suggy..........theyre making more profit now than they were before the so called recession......and thats a fact!


all the best plumb.....


ps Robbing bar-stewards.........

Hutch

Money's important, of course it is, but if the prospect of having a 3 bedder on 700sqm instead of a four bedder on 800sqm is what's putting you off - then you should never have considered emigrating in the first place. From what I've read on these forums, it seems to be the fully-wedged who return to blighty the quickest.

the plumber

I understand bringing as much money as you can is important,but believe me when you get here, the most important thing is being able to make a living.

and i dare anyone already here to say different...!

What ever the rate is.... it is.....no good beating yourself up over it, life is too short. I'm not a doom and gloom merchant like some here, i say go for it. I've lost plenty of money over the 5yrs of being here.....but one thing i know its all been worth it,because at the end of the day money or not... i still love it here , and thats more important to me than money any day of the week!

all the best and good luck to everyone.....plumb....

ps also made a bit mind!

suggs

Good luck my friend!