Posted by Allison on 6 October 2009, 10:46
It almost seems like the only news we have had in the last eighteen months or so has been the existence of the weak pound. It’s been a long time since we could eye up a holiday in America, knowing that every pound we exchanged brought us two US dollars in return. Of course if you expect to see a figure anything like that on your currency converter nowadays, you will be bitterly disappointed.
But is it all doom and gloom? Are we stuck in the middle of a recession with a poorly performing pound, job losses and falling house prices all around us?
We are in a sense, but a poor pound may not be as bad as we make it out to be. There was an article on the website of the Telegraph recently which pointed this out. You can read more here.
Apparently a poor pound is actually in our favour when it comes to people from other countries buying goods from ours. You see, as the pound falls in value, it actually becomes more attractive to everyone else. We may not see a lot for it when we try to swap it for another currency, but that exchange obviously benefits the other person.
For example, on New Year’s Day 2008 someone from America could exchange a US dollar for just 0.4981 British pounds. Fast forward to the 11th September 2009 though, and that figure is up to 0.5988. And in fact on the 25th January this year it went as high as 0.7336 British pounds to the US dollar. You can see how enticing this is to people from the US wanting to spend their money in this country.
And it applies just as readily to trade sales as well. But this is great for Britain as it helps us move back into a position of strength. It is part and parcel of recessions and falling currencies – and it is part of the cycle of life when it comes to currencies and how they rise and fall. And more specifically, how they affect the fortunes of the countries they belong to.
So how will things develop from here? As the article in the Telegraph reports, our country might not be able to depend on a weak pound alone to pull its socks up and get back on track. Other factors come into play as well, and to sit back and relax and let the currency do all the hard work does indeed seem to be a little naïve in some ways.
We shall have to see how the situation develops of course. The pound is in a stronger position than it was at the beginning of the year, but there is no guarantee that it will stay that way. Businesses are doing their best to keep going in difficult circumstances, and while we are all desperate to see the end of the recession and all that goes with it, it may be some time yet before this occurs.
So will we regain a stronger pound eventually? The chances are that we probably will, but we should hope that a weaker one will indeed help business to bounce back in the meantime. If it doesn’t, then we could be in for a long wait for the recession to end.