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| Britain | |
| 'Dutch Disease' could shake the pound [sterling] | |
| 2007-07-20 | |
| Excerpt: Don't be fooled by the surge in sterling to a 16-year high of $2.05 against the dollar. We have not become the planet's Ãœber-rich, nor have we stumbled upon the secret of perpetual wealth. The pound is no higher against the euro or Canada's loonie than it was three years ago. It has fallen against India's rupee, the Philippine peso, Poland's zloty, Romania's leu, Chile's peso, and the Aussie and Kiwi dollars. Brazil's real has been the strongest currency in the world for a couple of years. This is a global dollar slide, the long-deferred consequence of America's monetary misrule. At least at first sight.... For now, China is refusing to play its proper role in the emerging order, causing ructions for everybody else. It is holding down the yuan against the dollar by political intervention - in the process flooding the world with some $1.2 trillion in liquidity, and driving up the prices of London houses, premier cru Bordeaux, Monet landscapes, and gold. By default, much of the dollar exodus is ending up in Europe, even though an ageing, hidebound continent with unfunded pensions is no place to put money... Countless countries have been through versions of this boom-bust saga: 19th-century Brazil with rubber, or 1970s Norway with oil, or imperial Spain with metals. The currency rises too far, warping the economy. The underlying commodity crashes. | |
| Posted by:mrp |