The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
Devaluation also effectively imposes an import duty on imports by adding 18% to their price in Sterling terms. So far the response of CPI to this has been muted - barely rising to 2.6% but presumably this will increase further as the rising cost of imported goods feeds through the supply chain.
Historically most economists regard devaluation as a useful short-term safety valve to reduce the impact of an economic crisis and to facilitate faster recovery. However longer term its benefits erode as increased import costs feed into inflation and output prices.
What is perhaps more remarkable is the degree to which the UK economy has failed to respond to the stimulating effects of such a large devaluation which indicates their are structural problems in the UK economy which devaluation is only masking for the time being.
The other surprising thing is that foreign investors and creditors aren't pulling their assets out of Sterling more rapidly in response to such a massive loss of value. I would expect a massive Sterling crisis when they start to do so to a much larger extent.
A breakdown in Brexit negotiations could be the trigger for such an event posing even greater difficulties for EU exporters to the UK.
Increasingly the end of the A50 period can't come quickly enough for EU industries if it means they will become less exposed to low cost UK competition enabled by Sterling devaluation.
Index of Frank's Diaries
by Frank Schnittger - Oct 3 18 comments
by IdiotSavant - Sep 15 16 comments
by IdiotSavant - Sep 16 12 comments
by Oui - Sep 24 36 comments
by gmoke - Sep 24 4 comments
by Cat - Sep 19 46 comments
by Oui - Sep 20 41 comments
by Oui - Oct 51 comment
by Oui - Oct 35 comments
by Frank Schnittger - Oct 318 comments
by gmoke - Oct 12 comments
by Oui - Oct 141 comments
by Oui - Sep 281 comment
by Oui - Sep 2848 comments
by Oui - Sep 2729 comments
by Oui - Sep 2436 comments
by gmoke - Sep 244 comments
by Oui - Sep 2350 comments
by Oui - Sep 22
by Oui - Sep 2041 comments
by Cat - Sep 1946 comments
by gmoke - Sep 19
by Oui - Sep 1815 comments
by Oui - Sep 1616 comments
by IdiotSavant - Sep 1612 comments
by Oui - Sep 1524 comments
by Oui - Sep 1516 comments