Most people must have thought this was inevitable, as surely the only way was up for the world’s economies, given the extent of the pull back we had seen in production and sales.
But it is important to remember that the governments of the western world had thrown everything at their economies – including the kitchen sink – in an effort to kick start them. Also, it has to be remembered many companies destocked at the start of the crisis and some of the growth.
Here in the UK, the level of government debt grew significantly and our budget deficit spiralled out of control as they battled to save a number of banks and pump money into the economy. But this can’t go on for ever and the new coalition government has made it clear that government costs have to be slashed and the books balanced as soon as possible.
Similar actions are being made elsewhere. The embattled southern states of the euro zone; Spain, Greece, Italy and Portugal, are implementing their own cuts in government spending and as such, we see businesses suffer and unemployment rising.
In the US, we saw the withdrawal of various incentives used to encourage people to consume when the “cash for clunkers” and the homebuyers tax credit were both withdrawn. The slump in house sales that followed the withdrawal of the homebuyers tax credit resulted in its reintroduction for a further 6 months – but the effect this time round is proving to be somewhat muted, with exiting house sales for July 2010 hitting a 15 year low.
And where has all this money that has been pumped into the banks ended up? Mainly in their balance sheets rather than being lent to their customers. There are a number of reasons for this.
The banks themselves have to rebuild their balance sheets to cover their losses, both actual and possible and they are also being forced to increase capital levels under new legislation. And the final reason is that their clients are borrowing less because their working capital requirements are reduced given the lower level of activity.
So, we are now beginning to see most western economies beginning to falter and this is worrying their respective governments as it raises the spectre of deflation.
Pimco, one of the worlds biggest fund managers, have carried out two detailed analyses in the last 12 months on the state of the US economy with the aim of working out how likely the US is to suffer from deflation.
First time round they calculated the chances at 10%. This time around they have calculated the chances at 25%. Quite an increase.
So why are the “powers that be” so scared of deflation?
There are a number of reasons, but the one that stands out in my mind is an almost self reinforcing economic cycle that ends up in a deflation spiral.
Consumers start saving because times are tough. This reduces consumption. Prices then come down as sellers try to stimulate demand. But consumers decide to hold off buying as they believe the goods will be cheaper next month. Sellers reduce prices further and consumers decide to delay buying yet again. So on it goes.
Okay, this is a very simplified economic model, but in many ways, it mirrors what has happened in Japan for the last two decades. It is also has a huge affect on employment which falls away as the sellers are unable to sell their goods and have to lay people off.
Japan has its lost generation of unemployed and a banking system that is still full of bad debts that should have been written off a long time ago.
So a lot to be frightened of if deflation comes to the economies of the western world, but how likely is this?
As per the Pimco’s analysis, I think the likelihood of deflation is higher than people think.
Consumers are scared. Clearly low interest rates are helping those with debts, but if economies aren’t growing and people’s jobs aren’t safe, all they will do is pay off those debts and start saving for a rainy day.
Governments have much less ammunition in their armoury than they did 12 months ago and will be unable to try and fund growth in the same aggressive way – and banks are rebuilding their broken balance sheets rather than lending.
So the alternatives seem fairly simple.
A one in four chance of deflation – or a three in four chance of growth – albeit somewhat muted for the next few years.]]>
There are a few currency specialists operating in Cyprus, yet Smart has successfully assisted 1,000’s of clients since 2004 and is now assisting many more to set up regular transfers from the UK to Cyprus for mortgage or pension payments. And a few clients have had to repatriate back to the UK and thus Smart has been able to help them with better-than-bank exchange rates when moving the money back.
Firstly, Smart’s accounts are all held in the Bank of Ireland allowing their clients absolute peace of mind that their funds are safe. As opposed to the UK government who guarantees the first £50,000 held by a bank, the Irish government guarantees 100%. Although money often comes in, is exchanged and then transferred out quickly, you don’t want to be in a position where a bank develops issues. For example, when the Icelandic Bank went bust there was no formal guarantee and therefore some of the funds are still ‘missing.’
Secondly, Smart is one of the only currency organisations where the currency traders are not paid on commission. When the directors set up the company, they knew that the industry was rife with the "greedy individual" rather than team approach. In an effort to ensure that clients not only get a great service, but to actually receive the best possible rates, the owners set up a business model that enables team work – and the greatest good for the client. When contacting Smart, there will never be any pressure to transact or chances that the rate you receive has been increased to account for the trader’s pay packet!
Thirdly, Smart offers a huge amount of educational information that can be received through the post, in email or communicated over the phone. A special 10 page guide outlines the common mistakes that are made and how to avoid them. There is a currency worksheet that allows overseas property buyers to budget and even plan how to hedge for risks when it comes to stage payments. Daily and weekly currency exchange rates and reports are sent regularly along with special announcements when something has made a large impact on exchange rates. And representatives are always on hand to answer questions, outline market information and take each client step by step through the international payment process. Smart can even be followed on Twitter now!
Forthly, many currency organisations have minimum amounts that they’ll transfer. Some won’t move anything under £5,000 or £3,000 unless it’s a regular payment. At Smart, no transfer is too small for their clients. The organisation is very focused and rather than offer insurance or mortgages or other products, Smart works hard at continuously improving and providing an easy stream-lined, money saving service.
Finally, Smart’s systems allow for an extremely fast registration process. Completed entirely over the internet, a new client can have a trading facility up and running within 1 hour of applying online. Many organisations take days to open an account or even return a phone call, for that matter. Buried down by burdensome antiquated processes and procedures, larger institutions are no longer able to serve the client. At Smart, the client always comes first.
Charles Purdy is a Director at Smart Currency Exchange Limited – the only international payment specialists in the UK who work specifically to help people save money on regular transactions such as mortgage or pension payments. So, to move money overseas, including funds for property purchases and also the repatriation of funds back to the UK, why not go to www.SmartCurrencyExchange.com for further information – and obtain your FREE educational reports.
Or if you prefer, just telephone us locally on (00 357) 26030213.]]>
He went on to add: "They all seem the same…they seem to offer the same benefits when I speak to them about transferring money abroad. How do I know which one to choose?"
Actually, the people at Smart Currency Exchange are often asked this…and their reply is that there are enormous differences between Smart Currency Exchange and any other exchange company, differences that could make a world of difference to you.
Firstly, Smart Currency Exchange is the only currency company in the UK that does not pay their traders commission – they get a regular salary. That fact alone will allow you peace of mind that you’re not in the hands of someone who is trying to make the most money they possibly can out of you.
Secondly, they do not spend thousands of pounds on marketing. Generally, the word is spread via the Internet and by word of mouth, from one contented client to their friends and relations. This means that Smart is able to save vast sums on advertising and this is reflected in the exchange rates they are able to pass on to you, the client.
Thirdly, Smart is totally dedicated to personal service, a rare thing in this day and age. I don’t know about you, but if there is one thing that absolutely MADDENS me it is when I phone somewhere – be it my bank, water or currency exchange company – and I spend the next half an hour pressing buttons and listening to ridiculous messages like ‘Your call is important to us’ – quite clearly it isn’t, otherwise they would actually be talking to me!!
When you phone Smart Currency Exchange, you will actually speak to REAL PEOPLE – people who can explain the whys and wherefores of transferring currency abroad and all about currency exchange rates. So please, don’t hesitate to pick up that phone and ask questions about this – Smart’s currency experts will have heard them all before and will be delighted to help you. You will immediately speak to someone who can clearly and concisely explain the whole process to you.
If you would like to contact Smart Currency, please phone our local office on (00 357) 26030213 or go to: http://www.smartCurrencyExchange.com/smartsquotation.htm
To read the latest on Sterling and the Euro go to: http://www.OverseasBuyingGuide.com/Currency270809.htm
Smart sometimes feel that they have ‘friends’ rather than clients…and Ken Smith is a case in point. This is what he had to say:
"I would like this opportunity to offer my thanks to Smart Currency Exchange. I have been dealing with you for some time now, as I am having a property built abroad. I obviously use your services to transfer funds overseas. Your facilities being much quicker, easier and vastly cheaper than using my own bank. In fact I have recommended a couple of friends that have also used Smart Currency Exchange (names available if required), and likewise are extremely pleased with your services.
I have found all the numerous staff that I have personally dealt with to be polite, helpful and full of good advice, a service not very often seen these days but nonetheless extremely welcome.
I would particularly like to give my thanks to James who I deal with on a regular basis. I have always found him to be particularly friendly and efficient dealing with any issues I have with prompt attention.
Once again thanks to all
My response tends to be conditional. I think most people would agree that sterling is too low against the euro and, even though we may never return to a rate of over €1.50/£1, most consider a rate of €1.20+/£1 feasible.
So what is stopping us getting to this rate? Uncertainty on two fronts. Firstly, we need to see a period of financial stability and a period in which we can see the world economies moving forward not backwards. This is a matter of time and is likely to be measured in months and perhaps even years. Also we need to be sure that the UK does not need to go to the IMF cap in hand for a bailout, given the huge debts and problems we have. Timescales for this scenario are shorter but if it happens then sterling will lose value very quickly and we may look at the current value of sterling as the halcyon days when £1 was worth more than €1.
That is why I always ask clients to have a clear and realistic exchange rate in mind when they are looking to buy currency. Because trying to guess what is going to happen tends to be a fools game with exchange rates doing the exact opposite of what you hope or expect. When this happens great uncertainty arises, leading to increased stress levels as you need to find further money or have less than you expected. Not a great outcome and something that could be avoided or at least minimised by have a partner such as ourselves working with you.
Charles Purdy is a Director at Smart Currency Exchange Limited – the only international payment specialists in the UK that work specifically to help people moving money for property purchases or for regular payments such as mortgage or pension payments. To move money to Cyprus or repatriate back to the UK go to www.SmartCurrencyExchange.com for further information.]]>
Regardless as to whether money is coming or going, when making an international payment, funds need to be exchanged from one currency to another and then transferred to the onward destination. Whether you use a bank or a currency specialist the actual products and overall process are pretty much the same across the board. The difference, however, is in the level of service that you ultimately receive.
But before service…when choosing a currency and international payment specialist, it’s paramount that you pick one that is regulated by HM Customs and Excise along with being registered with Companies House (both verifiable over the Internet). You’ll want to ensure that you’re working with a legitimate organisation – one that is safe and has a record of happy customers.
Another often overlooked, yet massively important aspect is to verify that the funds you’re sending are 100% covered by the bank or institution that they’re going through. Most currency organisations have accounts with UK banks that only guarantee up to £50,000 (if things go bad) whereas some have accounts in Ireland where the funds are 100% backed by the Irish government.
The motive of your currency organisation representative is also a key component to consider. Most currency specialist organisations pay their Traders a commission on the margin achieved during each individual transaction. Similar to a car salesperson, when you work with a currency trader working on a commission business model, you may get a hard sale, have to listen to scare tactics and overall get a less than great exchange rate. If you’d like to avoid this approach there are a few organisations that do not pay traders on commission and are in business to serve rather than to ‘get what they can take’.
Finally, but probably most importantly it’s often best to go with your gut instinct. If you’re communicating with an organisation and they’re talking jargon or spouting out information that makes you feel inferior, they’re not the right people to do business with. You want to feel they’re offering good information in the form of comprehensive client literature, educational reports and solid communication.
Picking the best international payment provider comes down to doing a bit of background research and then testing the waters. Once you know they are legitimate, give them a call and find out which one provides the highest level of service for you.
Charles Purdy is a Director at Smart Currency Exchange Limited – the only international payment specialists in the UK who work specifically to help people save money on regular transactions such as mortgage or pension payments. What’s more, Smart are the only international payment specialists in the UK where traders are NOT paid on commission – ensuring you get the best exchange rates every time!
So to move money overseas, including funds for pensions, property purchases and also the repatriation of funds back to the UK, why not go to www.SmartCurrencyExchange.com for further information, or if you prefer, just telephone us locally on (00 357) 26030213.]]>
When 2009 started, there seemed to be no light at the end of the tunnel as UK banks had to be bailed out en masse. There were concerns that the UK, and perhaps the world, were heading for a rerun of the Great Depression. The government threw a large amount of [our] money at the problem and disaster has been [hopefully] avoided. Additionally, the finance sector took a major knock causing the UK economy and Sterling further problems.
Since the start of the year there has been steady progress for sterling against the € and the US$. There seems to have been two reasons for this – an element of confidence has returned to the finance sector and there has been an appreciation in risk appetite. An increase in confidence has been viewed as positive for Sterling given its close tie to the UK economy. As for the appreciation in risk appetite – this means that people are willing to place their money in riskier assets, such as Sterling, and riskier places, such as the UK.
The UK is not alone in having very significant problems. The US can be viewed as having just as severe problems as the UK and even though a lot of the Euro zone avoided the banking crisis it still had major heartache as exports fell significantly. However, the US$ and the € have major advantages that sterling does not have.
The US$ is viewed as the world’s reserve currency and as such it is viewed as a safe haven in a crisis. It is difficult at first to understand how this could be the case given the problems in the US. The simple reality is that the whole world has huge amounts of US debt and as such can’t afford for the US$ to fail as their assets would become worthless. So it’s a standoff with the whole world not wanting the US$ to loss value.
With regards to the €, the situation is slightly different and comes down to the sheer size of the Euro zone which by default, makes the € a very important currency worldwide. Also the firepower of the € is incredible, especially when compared to Sterling. Just in the last month the Euro zone made available €440 billion as liquidity to cash strapped banks; an amount that dwarfs anything that has been done in the UK.
As noted earlier, since the start of the year we have seen steady progress for Sterling, but one major problem lurking out there is the level of UK debt. We seem to have a government who seems unable to fully understand the extent of the debt problem [or perhaps they just don’t want to admit to the extent of the problem]. This makes it possible that as we don’t recognise or acknowledge these problems and we fail to take the appropriate steps to sort out the mess, we find sterling at the mercy of the markets and in a downward spiral. If this happened we could find sterling back to the same value as the € and close to US$1.40£1 against the US$.
Bearing this worse case scenario, I see sterling holding its own over the next year or so. I don’t think anyone should assume we will see a rate of €1.30/£1 any time soon or perhaps even €1.25/£1. If sterling can stay around €1.15-1.20/£1 for the next few months it will mean stability and some belief in sterling has returned – which makes the downside ever less likely as the UK economy begins to recover.
As to the future value of any currency, no one can predict where the markets are going. At best any prediction would be an educated guess! As such, it’s impossible to determine how low the pound could actually go, but I think there is some comfort in the recent stability that we’re currently experiencing.
Charles Purdy is a Director at Smart Currency Exchange Limited – the international payment specialists. To obtain your FREE reports, move money overseas, including funds for property purchases and also the repatriation of funds back to the UK go to www.SmartCurrencyExchange.com for further information. Or if you prefer, simply telephone us locally on (00 357) 26 030 213.]]>
Many expats abroad unknowingly lose money when receiving their monthly pension payment. Often a pension is paid in sterling at a UK (or off-shore) bank, exchanged into the local currency required, and then sent to the pension holder’s overseas bank account. Alternatively, pensions are paid into a Sterling account in their overseas bank account, and then exchanged into local currency.
By using the standard banking system, money saving options are often overlooked, unnecessary charges can be made and poor currency conversion rates applied. Charles Purdy states "On average, a pension holder loses around £30-£50 unnecessarily on every transfer – this amounts to actually giving away £600 a year – and in some cases, much more!" So what is the solution? It’s simple – use an international payment specialist, not a bank.
The money saving option – fix the currency exchange rate
Charles comments, "Take Mr Benson, who retired to Cyprus at the end of 2007. He needed to receive his Sterling pension in Euros. In January 2008, he explained that his monthly pension amounted to £1,134 and wanted to know which options were available. After a brief conversation, he decided to set up a regular payment with a fixed exchange rate of 1.33 for the next 24 months until the end of 2009. In January, he received €1,508.22 in his Cyprus bank account and will continue to do so every month until December 2009".
If Mr Benson had decided against fixing a currency exchange rate, his monthly amount would have decreased along with the weakening sterling rate – and by December 2008, his monthly transfer would have fallen to €1,190.70 – a 21% drop in value!
Charles continues, "Mr Benson, like many other expats, assumed he was getting the best possible deal from his bank – but sadly, banks often fail to offer or even mention the option of fixing a currency exchange rate for use in the future. They tend to offer customers lower exchange rates and usually charge commission and transfer fees, all of which can be reduced, if not eliminated altogether. There is absolutely no point paying fees you don’t have to, particularly in the current economic climate where every penny counts! And no matter where you are in the world, with the loss in value of sterling over the last 18 months, this scenario can apply".
Get good exchange rates
International payment specialists offer exchange rates that are guaranteed to beat the rates provided by the bank. Banks often set their buying and selling rates for currency first thing in the morning – when you visit a branch, you’ll see them hanging on the wall. Specialists, however, don’t set the rates in advance but call into the market floor to obtain the best rate possible at the time of the transaction.
Charles states, "For many expats, wherever they are in the world, watching the value of their Sterling pension depreciate over the last year must have been soul-destroying. When €1,508 is expected in the bank and only €1,190 arrives, the recipient clearly suffers great anxiety". Charles Purdy’s final comment is "Always remember, a short phone call could save you up to £600 a year!"
Charles Purdy is a Director at Smart Currency Exchange Limited – the only international payment specialists in the UK who work specifically to help people save money on regular transactions such as mortgage or pension payments. What’s more, we are the only international payment specialists in the UK where traders are NOT paid on commission – ensuring you get the best exchange rates every time!
So, to move money overseas, including funds for property purchases and also the repatriation of funds back to the UK, why not go to www.SmartCurrencyExchange.com for further information, or if you prefer, just telephone us locally (00 357) 26030213. And, to obtain your FREE pension report, simply go to www.UKPensionReport.com – it contains really useful information you may not know about!]]>
Up until the first world currency originating in Greek times, people operated mainly on a barter system. If you were a fisherman you could trade some of your fish in return for some vegetables from a farmer. The problem arose, however, when the farmer didn’t like fish – what was the fisherman to do? He would have to find someone else that wanted his fish in return for something the farmer would be interested in. The barter system works, however it was eventually deemed slow and inefficient.
Around 800 BCE, the Greeks developed the first money system that was eventually accepted around the world. Greek money has been found in China, India and northern Europe! The main currency in Greece was a silver coin called the Athenian drachma and during the time of Alexander the Great (300 BCE) it eventually became the monetary standard in all of Asia. Even as Greece declined and Rome came to power, the value of the drachma held its ground.
Paying the Greeks a massive complement, the Romans fashioned their own money, called the denarius, after the drachma to the exact specification. In an effort to expand from the Greek monetary system, the Romans created a gold coin for the army and emperors, a silver coin for international trades’ people and a copper coin for poor people. Eventually, however, the Roman currency system was eroded by removing the valuable precious metal and replacing it with a worthless base metal. After years of reducing the gold and silver content, the currency eventually became valueless and in 215 AD India stopped accepting it as a mode of payment. Soon after, the rest of the world followed.
In 325, as Rome was in serious decline, Constantine created a new monetary system which quickly became the world currency. The coins, called ‘bezants,’ have been found as far away as Scandinavia and Sri Lanka and as Western Europe fell into the Dark Ages, Constantine’s money was the only currency traded. By 1050 the bezant eventually lost its popularity and around 1204 the Byzantine Empire lost monetary supremacy.
During the 7th-12th centuries, the Islamic dinar also had high levels of circulation and remained quite stable. It wasn’t until paper money was introduced that the Islamic monetary system went into serious decline. Due to the ease of printing money, nothing stopped authorities from printing more of it with nothing to back it.
Throughout history, there was one constant that caused the demise of each currency. They all went into decline after the authorities removed the silver or gold and replaced it with a worthless base metal or paper. The devaluation of money has even been seen in today’s world currencies. In 1971, when America went off the gold standard the value of the US Dollar started to go down – it has actually depreciated by over 90% since the removal of the precious metal. If history is to repeat itself, American monetary supremacy may be on its way out!
Charles Purdy is a Director at Smart Currency Exchange Limited – the international payment and currency specialists www.SmartCurrencyExchange.com]]>
So why do companies continue to use their bank when it comes to paying or receiving foreign currency? The same logic should apply. Costs could be reduced considerably for the benefit of all stakeholders by using a specialist currency exchange company.
Specialists focus on international transfers only which allows them to maximise the benefits to their clients; better exchange rates, clear pricing, minimal add on costs [in fact in most instances specialists eliminate ‘extras’] and regular updates on the market. Cost savings can run into £10,000’s each year.
Currency exchange specialists develop relationships with clients and focus on developing an in-house expertise on their currency needs. They aim to focus discussions on what is happening to their key trading currencies and how they will affect their business. I’ve had many clients buy €’s and US$’s forward [this is where the organisation secures an agreed exchange rate for their currency requirements into the future] when sterling continued to flounder throughout 2008.
So a bit like those companies who are considering a more benign corporate tax regime with the aim of reducing excessive tax costs, a company with extensive foreign currency needs should be working out how to reduce their significant and often hidden exchange costs. The best way to do this is with a specialist currency company where they understand business and currency."
Charles Purdy is a director of Smart Currency Exchange Limited. Check out www.SmartCurrencyBusiness.com for more information.]]>
Making or Receiving Yacht Payments Internationally
Do you need to pay for a yacht in Euros or US Dollars? How about moving foreign funds from the sale of a yacht back to the UK? Regardless as to the reason for moving money – or where you need to move the funds to – it’s important to realise that for every £100,000 worth of money you move, you could pay around £4,000 unnecessarily if you use a bank. Banks around the world can add a margin of around 4% more than the margin used by international payment specialist. Using a bank rather than a specialist is like buying a yacht for £100,000 and then asking if you can pay an extra £4,000 for no reason.
Aside from saving money on the cost of buying currency, you can also ensure that the value of the money you’re moving doesn’t unexpectedly change. In other words, if you need to move a medium to large sum of money within the next month to a year and you’re happy with the current exchange rate, you can reserve that rate today yet pay for it at a later date.
For example, during the month of February 2008 Mr Braithwaite contacted an international payment specialist to discuss a payment for a yacht costing €180,000 due in April 2008. Mr Braithwaite was happy with the current rate of €1.334/£1 so he booked a contract for the full amount and simply paid a 5% deposit to secure the transaction. When April came, Mr Braithwaite sent the money due (less the 5% already paid). If however, he had waited until April to purchase the Euros, he would have had to accept a rate of €1.242/£1 and pay an extra £10,000 for the yacht.
Moving Smaller Sums or Amounts on a Regular Basis
Many yacht owners moor overseas and have to pay yearly mooring fees along with general maintenance and servicing costs. When moving small sums of money on a regular basis you can benefit greatly by fixing the currency exchange rate if and when the rate is at a good level. For example, in January 2008 many Brits moving regular payments overseas secured a rate of €1.31/£1 for bi-annual or quarterly payments for a year or two. That means that as Sterling weakened throughout the year, clients were unaffected by the rate change and received a rate of 1.31 each time they made a payment.
Charles Purdy is a Director at Smart Currency Exchange Limited – the international payment specialists. To save money moving money go to: www.SmartCurrencyExchange.com/marine.htm]]>