Currency
It's hard to decide where the dollar will be relative to the pound. This meaningful to me as I hold Euros, Stirling and bucks, which I convert from time to time here. My thinking has been something like this: the US government has borrowed its way to 13-14% of GDP, which is as high as it has ever been since the last World War. There is a lot of money that has been, and to be created by the Fed to honor its obligations - surely government's target is inflation, which takes care of a few problems like house prices and foreign debt. The Europeans watch aghast, by the way, having seen inflation's destruction. The increased money supply will weaken the green-back against foreign currencies but it is all relative, as Einstein notes, and some countries create more money then others. Britain, for instance. My Oxford genius friend Edwin points out that Britain has done a fabulous job creating jobs where none needed - establishing a rather inefficient workforce dependent on the public sector (Sonnet's V&A most assuredly a well run entity, dear reader). Britain's main economic drivers - North Sea oil and the City - have dried up. Our unfunded pensions massive against this size of the economy, which is about £2.1 trillion yet contracting 4.5% this year, according to PWC. According to Edwin, we simply don't have the industrial scale or diversification to claw our way out of Super Gee's deficit spending and so .. Stirling will take it on the chin. Property values are also questionable - I think they will continue to decline here for another three or four years after the economy recovers. The delay due to Britain's 2.4 million unemployed (and rising) who must be redeployed and accrue savings before they can buy .. this what happened in the last real recession of 1989-92: US and British housing prices reached their nadir in 1995 while Los Angeles in 1996. Still, real estate a scarce commodity and London ever popular. Edwin notes that a lot of money made in bad places ends up here legally or otherwise: "it is always London" he says. Long term this is good for us Londoners, ROW be damned.
