Hi Guys,
Mau tanya pendapat rekan rekan tentang article ini, in particular bagaimana
pendapat rekan rekan tentang Sterling. Saya juga ingin tau kira kira dampak apa
terhadap Rupiah and economy Indonesia jika prediksi Rogers tepat. I appreciate
any input or advice, thanks
Wassalam
M.Zulkifli
Jim Rogers: 'Sell any sterling you might have. It's finished'
Investment guru issues grim warning as sharp fall in inflation hits pound
By Sean O'Grady, Economics Editor, Wednesday, 21 January 2009
One of the world's leading investors voiced the markets' concerns. Jim Rogers,
of the Singapore-based Rogers Holdings and co-founder of the Quantum fund with
George Soros, told Bloomberg Television: "I would urge you to sell any sterling
you might have. It's finished. I hate to say it, but I would not put any money
in the UK."
Mr Rogers added that the pound will fall below its record low of $1.0520
reached in February 1985. Given near parity with the euro, it raises the
intriguing possibility that the pound/dollar/euro exchange rate could yield a
"triple parity".
At the same time, the Office for National Statistics released the latest
inflation figures, down sharply to 3.1 per cent in December, from 4.1 per cent
in November. Investors took this as a sign of the weakness of demand in the UK
economy, rather than of its fundamental strength. Before the official growth
figures for the last three months of 2008, to be published on Friday, the
Governor of the Bank of England, Mervyn King, warned that the world economy had
"fallen off a cliff" and that, for the UK, "total output in the fourth quarter
is expected to have fallen sharply. In the first half of this year, the rate of
contraction is likely to continue to be marked". Some economists believe that
the figure will be -1.5 per cent, one of the sharpest downturns since the
Second World War.
Mr King also acknowledged the "risk" that inflation would drop below the target
rate of 2 per cent in coming months, and confirmed that the Bank would embrace
"unconventional measures" – also known as quantitative easing, or printing
money – to stimulate the economy. Most economists believe that inflation will
come close to zero before the end of the summer, and, on the RPI measure, will
actually turn negative.
The Bank and the Treasury have so far remained relatively relaxed about the
decline in sterling, believing that a boost to exports and manufacturing would
help "rebalance" the economy, but that may change as the depreciation shows
signs of turning into a rout, because of a lack of confidence in the British
authorities to manage the situation. Worries about the scale of government
borrowings, the cost of bailing out the commercial banks and that the slump in
sterling will become self-reinforcing helped to push the pound to an eight-year
low against the dollar, an all-time low against the yen and back towards parity
with the euro. In trading, the pound crashed as much as 4 per cent to lows of
around $1.386, in its biggest one-day slide against the dollar since Britain
fell out of the European Exchange Rate Mechanism in 1992.
Neil MacKinnon, director and chief economist at ECU Group, said: "There's a
real danger of the decline in sterling becoming a full-blown crisis. The
Government and the Bank of England have to change their tune on the pound
pretty quickly."
However, John Higgins, of Capital Economics, said: "It is perhaps not
surprising that investors are getting increasingly nervous about the health of
the UK's public finances. The 5-year credit default swap for the UK government
has widened by 25bp since early January. 'Printing press' headlines make for
uncomfortable reading. But there is little reason to think that the adoption of
quantitative easing should be negative for the pound, any more than for the
dollar."
Unlike the dollar and the euro, though, sterling does not enjoy the backing of
a large economic area, nor the status of a "reserve currency", its banking
sector is unusually large in relation to national GDP (400 to 450 per cent),
and the UK economy is forecast, by the IMF and others, to be due for the
biggest contraction of any major advanced economy in 2009.
Even weaker demand and output than previously thought is helping to push
inflation down by the fastest pace since the recession of the early 1990s. The
Government's VAT reduction and heavy pre-Christmas discounting on the high
street drove the December CPI down to 3.1 per cent. The RPI, which includes
housing costs, plunged from 3 per cent to 0.9 per cent, helped down by lower
interest rates. Reductions in clothing and fuel prices were the other
significant factors; that the falls were not even bigger may be due to the
precipitous fall in sterling. Some economists believe the RPI could decline to
as much as –5 per cent for a time in the summer, with the CPI hovering around
zero, all of which will keep up the pressure for bank rate moving down from its
current level of 1.5 per cent.
Colin Ellis of Daiwa Securities said: "The prospect of inflation getting below
zero and staying there is the key reason the Monetary Policy Committee has been
cutting bank rate aggressively – and was also arguing behind the scenes for the
pot of money the Government gave it to fund security purchases. This
asset-buying facility is not strict quantitative easing yet – it will be funded
by T-bills, not by creating money – but it sets up a framework for how the MPC
will try to reflate the economy once rates get down near zero. That is
increasingly only looking like a matter of time."
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