Saturday, 23 February 2013

Britain’s AAA rating lost and Pound falls

Britain’s AAA rating lost and Pound falls

The news that Britain has lost its AAA rating was expected, so no surprise here. What most people are blatantly unaware of is the fact that the Pound has lost 60 per cent of its value. The value of the Pound has been almost pegged to the value of the US Dollar. The US Dollar has lost about 60 per cent of its value in Latin America. In countries like Uruguay were the Dollar was valued at 50 Pesos per Dollar, the Dollar now stands at 18 Pesos per Dollar.

When we talk about inflation – especially when it comes to food stuff sold in supermarkets across the United Kingdom – most people would notice sudden price rises. Markets fluctuate and this could be part of the normal up and downs of any market. However, the loss of value of the Pound has meant that prices have been going up rather than going down as this has become a trend.

When it comes to energy sources, despite the fact that due to lower economic activity the prices of oil and gas tend to go down, the cost of energy in the United Kingdom has been going up and this is due to the fact that more Pounds are needed to buy the same amount of oil and gas. Most people would blame utility companies for putting up prices but part of the blame rests with the fact that a weaker Pound means having to spend more Pounds to get the same amount of energy.

So-called yearly savings declared by the Coalition government have therefore been less than expected because we are talking about a depreciated currency. Recent U-Turns regarding Inheritance Tax are no more than the actions of a desperate government that grossly overestimated the amount of income it was expecting to get from taxation.   

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