The goods trade shortfall with countries outside the European Union countries also hit a record, widening to £5.3bn from £4.4bn. Total goods exported slumped 6% in November, reflecting the general weakness of the world economy but imports only fell by 2%. The drop in exports was particularly sharp to non-EU countries, especially the United States.
The Bank of England and Treasury had been hoping that the weaker pound would support British exports during the global downturn and rebalance the economy away from its dependence on domestic consumption.
There are six reasons why this is unlikely to happen
1 Demand for UK exports is falling, export markets are weak, world trade is slowing and most countries are entering recession.
2 Many exporters “price to market” in local currency, opting to hold prices and boost profit margins. There is no automatic pricing gain from a falling pound.
3 The value of exports is a function of volume x price. Elasticities are such there is no guarantee that a reduction in unit price will lead to a volume increase sufficient to generate an increase in the overall value of exports. A Sterling fall of 25% would have to generate a 33% increase in volume to offset the average price fall. It just doesn’t happen.
4 Much of UK exports are “import dependent”. Car exports have a high reliance on imports of motor components. As export volumes increase, so too do import volumes.
5 Import volumes may fall as the economy deteriorates but the value of imports is exacerbated by the fall in Sterling. Volumes may fall but average prices increase offset the volume impact. If Sterling falls by 25%, import volumes will have to fall pro rata to offset the total import value.
6 But much of the import mix is relatively price inelastic, food, beverages, tobacco, fuels, oil, essential materials and metals and components cannot be switch sourced within the UK. So too with wood, paper, pulp and oil derivatives including fertilisers.
The balance of trade in goods in the final quarter is likely to be around £24bn suggesting a total deficit for the year as a whole of around £95bn. In 2009, the deficit may ease slightly by around £5bn or even £10bn but it is just a cyclical adjustment. The structural weakness is implicit in the data over the last ten years.
Chairman Ben S. Bernanke, Let's Abolish Credit.
All of Our Economic Problems Find They Root in the Existence of Credit.
A Credit Free, Free Market Economy Is Possible.
Both Dynamic on the Short Run & Stable on the Long Run.
I Propose, Hence, to Lead for You an Exit Out of Credit:
Let me outline for you my proposed strategy:
✔ Introduction.
✔ The Numbered Account.
✔ The Credit Free Money: The Dinar Shekel AKA The DaSh, Symbol: - .
✔ Asset Transfer: The Right Grant Operation.
✔ A Specific Application of Employment Interest and Money.
[Intended For my Fellows Economists].
If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless?
Since credit based currencies are managed by setting interest rates,
on which all control has been lost, Are they managed anymore?
We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.
In This Age of Turbulence The People Want an Exit Out of Credit:
An Adventure in a New World Economic Order.
The other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.
It will be either awfully deadly or dramatically long.
A price none of us can afford to pay.
“The current crisis can be overcome only by developing a sense of common purpose.
The alternative to a new international order is chaos.”
- Henry A. Kissinger
Let me provide you with a link to my press release for my open letter to you:
Chairman Ben S. Bernanke, Quantitative Easing Can't Work!
I am, Mr Chairman, Yours Sincerely,
Shalom P. Hamou AKA 'MC Shalom'
Chief Economist - Master Conductor
1 7 7 6 - Annuit Cœptis
Tel: +972 54 441-7640
http://edsk.org/
Posted by: MC Shalom | January 14, 2009 at 09:42 PM