News

The British Pound Plummets to a Record Low – Consequences?

The Pound has held a downward trajectory since Britain’s historical exit from the European Union was declared. However, it hit a record low against the American dollar on Monday. So, that news is already stale, but the discussions, speculations, and predictions about the consequences of the devaluation of the Pound have just begun.

The American economist and former secretary of the treasury, Lawrence. H. Summers took to Twitter to express his angst against the British leadership which in many opinions has caused this potential economic breakdown.

“I was very pessimistic about the consequences of utterly irresponsible UK policy on Friday. But, I did not expect markets to get so bad so fast. 

A strong tendency for long rates to go up as the currency goes down is a hallmark of situations where credibility has been lost.”

The British Pound was equivalent to $1.03 on Monday which is 22% lower than what it was six months ago. It pulled up a little bit to stabilize at around the $1.08 mark yesterday.

What may have caused this decline? 

Well, Britain was already facing its steepest inflation in the last 40 years while also reeling from the demise of its longest-reigning monarch. 

The new prime minister Liz Truss has declared a strange financial strategy where she wants to increase government borrowing, cut taxes for businesses, and somehow hopes to instigate more economic activity to generate more revenue. It is as confusing as it sounds even to the investors. 

John Cassidy of The New Yorker writes, “Having just buried Queen Elizabeth II, their last remaining link to a time when their schoolbook maps showed great swaths of the earth’s surface colored imperial red, they now face a humiliating currency crisis.”  

Consequences can be grave for Britain. They imported 46% of their food in 2020. Since most international trade uses the dollar, food prices will soar. So will the energy prices. At the same time, the solid financial services industry in London will suffer a blow as investors are likely to pull funds owing to the volatility of the dollar.

The US dollar has been soaring due to the country’s policies like increasing interest rates to fight inflation. A lot of currencies have fallen drastically against it including the South Korean Won and the Indian Rupee. Recovery is going to be difficult.

Kristi Lopez

Kristi Lopez is working as a professional news editor at The Next Hint, Inc. She is accustomed to finding daily reports. Therefore, this keen working and addiction towards her work, it helps her to find good news.

Recent Posts

How To Use Email Validation To Clean Your Marketing Email List

Introduction If you're a small business owner, you know that cleaning up your marketing email list is crucial. It will… Read More

2 hours ago

Making A Great First Impression At A Job Interview: A Guide

Did you know that most people make a decision about whether they like someone or not within a matter of… Read More

3 hours ago

5 Ways to Save More Money This Year

Do you have big financial goals? How will you reach them? It can be difficult to start saving money if… Read More

20 hours ago

Is Apple Killing the iPod?

It’s official; after 20 long years, Apple has decided to discontinue one of its most loved gadgets, the popular iPod,… Read More

21 hours ago

You Will Want To Go Over These Things Before Your Golf Game

When you are planning on going out to play golf, there are a few things that you will want to… Read More

22 hours ago

Pros & Cons of Relocating to Slovakia: Should You Move Here?

In July 2022, the average price of an apartment in Bratislava was €3802 per m2. It means that for a… Read More

22 hours ago

This website uses cookies.