Sunday, 27 January 2013

The consequences of pound devaluation



"The pound was devalued by 20% in 2008 and exports have risen 0.1% since then."

Correct, the pound depreciating has lead to higher inflation and hasn't lead to higher exports. I  haven't heard of this Max Keiser chap before but he seems to have his head screwed on.

From a NZ point of view, the converse is true. The NZD has appreciated massively over the last five years against all major currencies yet this has had no adverse impact on exports. Couple of charts to prove this:




If you believe the value of your currency has any influence on your exporting ability, you are mental. Make things people want and they will buy them. Failure to protect the value of Sterling is one of the Bank of England's greatest faults under Mervyn King.