The economic consequences of Brexit

[pim]

So as I understand it if the pound has less value prices will go up in the UK from inported goods.

Unless profit margins are dropped and will they?

[Digga]

Ghibli said:

loafer123 said:

Indeed, but you are selling more volume.

Your assumption is that you can afford less, but in fact you do 12 units instead of 10 because it is cheaper for the end user. Yes, the margin is less, but the volume is greater and cashflow is king.

That's assuming they want to buy 12

If I was selling a Uk product and not importing from Taiwan it would be different story. And I would still make 100% profit.

IME if prices go down, due to exchange rate changes, many foreign buyers are more than capable of spotting this arbitrage, so you often find more buyers looking to a country that has recently devalued. Foreigners are not thick.

Secondly, the discussion is slightly flawed insomuch as foreign deals are very often denominated in a foreign currency, in which case, this is a win, win situation for thevUK based supplier of the product.

Prices do move though - other competition might creep in. As for UK firms who import to sell in the UK, whether prices rise is dependant on the margin and price elasticity of the product and other factors.

[don4l]

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

[youngsyr]

don4l said:

I've given you an absolutely crystal clear example of why a weak Pound is really good for British industry.

You do not seem to be able to understand it.

Give us an example of a situation where a weak Pound damages Britain.

Oh... you cannot.

I wonder why.

So now you're asking me questions and then answering them for me? More spin!

If I may answer the question for myself, the weak Pound damages Britain because we import more than we export, therefore it's very straight forward logic that our cost of living gets more expensive if the pound is weak.

As I keep pointing out, that doesn't mean that every single person or business is worse off from a weak Pound, but overall, the country is.

[Pan Pan Pan]

youngsyr said:

don4l said:

I've given you an absolutely crystal clear example of why a weak Pound is really good for British industry.

You do not seem to be able to understand it.

Give us an example of a situation where a weak Pound damages Britain.

Oh... you cannot.

I wonder why.

So now you're asking me questions and then answering them for me? More spin!

If I may answer the question for myself, the weak Pound damages Britain because we import more than we export, therefore it's very straight forward logic that our cost of living gets more expensive if the pound is weak.

As I keep pointing out, that doesn't mean that every single person or business is worse off from a weak Pound, but overall, the country is.

Exactly. Overall the UK has run a billions of pound a year trade deficit with the EU (over 24 billion pounds for this year alone) for almost the entire 40 years since the UK joined the EEC, and has been paying a further 10.8 billion pounds net on top each year, for the privilege of doing so. How is that good for the UK overall?

[London424]

Looks like the jobs market is still going strong.

http://www.mailonsunday.co.uk/money/news/article-3...

[anonymous-user]

don4l said:

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

He didn't. Sale price per unit in both examples is £20.

[anonymous-user]

don4l said:

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

I dropped the price the second time because I can only buy nine units for my £100.

If the pound loses 10%

I buy ten units from Tiawan for £110 then sell to Spain for £200 I make £90

You are welcome to use the same simple formula and show me where I am going wrong.

[youngsyr]

Pan Pan Pan said:

don4l said:

I've given you an absolutely crystal clear example of why a weak Pound is really good for British industry.

You do not seem to be able to understand it.

Give us an example of a situation where a weak Pound damages Britain.

Oh... you cannot.

I wonder why.

Exactly. Overall the UK has run a billions of pound a year trade deficit with the EU (over 24 billion pounds for this year alone) for almost the entire 40 years since the UK joined the EEC, and has been paying a further 10.8 billion pounds net on top each year, for the privilege of doing so. How is that good for the UK overall?

Forget the EU, the weaker Pound makes all our imports worldwide more expensive.

So now you're asking me questions and then answering them for me? More spin!

If I may answer the question for myself, the weak Pound damages Britain because we import more than we export, therefore it's very straight forward logic that our cost of living gets more expensive if the pound is weak.

As I keep pointing out, that doesn't mean that every single person or business is worse off from a weak Pound, but overall, the country is.

Edited by youngsyr on Sunday 28th August 11:45

[davepoth]

Greg66 said:

don4l said:

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

He didn't. Sale price per unit in both examples is £20.

So he'd buy 10 units for £110 and sell them for £200, making £90. However, the price to the customer in Spain has dropped by 10%, some might say unnecessarily. If you were selling to Spain in Euros the price would stay the same but you'd get 10% more Euros back, more than covering the original purchase cost.

[ATG]

Pan Pan Pan said:

Exactly. Overall the UK has run a billions of pound a year trade deficit with the EU (over 24 billion pounds for this year alone) for almost the entire 40 years since the UK joined the EEC, and has been paying a further 10.8 billion pounds net on top each year, for the privilege of doing so. How is that good for the UK overall?

You're at risk of mixing different things up. Do you think EU membership increased or decreased our total volume of trade? Do you think EU membership worsened our trade balance with the EU?

[///ajd]

ATG said:

Pan Pan Pan said:

Exactly. Overall the UK has run a billions of pound a year trade deficit with the EU (over 24 billion pounds for this year alone) for almost the entire 40 years since the UK joined the EEC, and has been paying a further 10.8 billion pounds net on top each year, for the privilege of doing so. How is that good for the UK overall?

You're at risk of mixing different things up. Do you think EU membership increased or decreased our total volume of trade? Do you think EU membership worsened our trade balance with the EU?

Pan pan pan has never recognised the trade benefits of the SM, hence he just sees our £8bn net contribution as "wasted"

Some of our politicians obviously failed to explain SM benefits in terms that can be recognised by e.g. pan pan pan. Some politicians may have implied it doesn't really matter - that rather depends on your point of view.

[Jockman]

youngsyr said:

The current situation may be great for your business, Jockman's and Digga's, doesn't mean it's great for the UK as a whole.

I can't recall ever saying that. The vote has made no real difference.

My point related to Chinese competition.

[anonymous-user]

davepoth said:

Greg66 said:

don4l said:

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

He didn't. Sale price per unit in both examples is £20.

So he'd buy 10 units for £110 and sell them for £200, making £90. However, the price to the customer in Spain has dropped by 10%, some might say unnecessarily. If you were selling to Spain in Euros the price would stay the same but you'd get 10% more Euros back, more than covering the original purchase cost.

In the example, you're not.

[CaptainSlow]

Greg66 said:

davepoth said:

Greg66 said:

don4l said:

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

He didn't. Sale price per unit in both examples is £20.

So he'd buy 10 units for £110 and sell them for £200, making £90. However, the price to the customer in Spain has dropped by 10%, some might say unnecessarily. If you were selling to Spain in Euros the price would stay the same but you'd get 10% more Euros back, more than covering the original purchase cost.

In the example, you're not.

In that case a lower price leads to a volume increase so you earn lower margins but increase the volume.

[don4l]

Ghibli said:

don4l said:

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

No.


Think it through.

Why did you drop your price the second time?

I dropped the price the second time because I can only buy nine units for my £100.

If the pound loses 10%

I buy ten units from Tiawan for £110 then sell to Spain for £200 I make £90

You are welcome to use the same simple formula and show me where I am going wrong.

Nothing could be simpler.

If the exchange rate is £1.00= €1.30, then your Spanish customer is paying €26.00 per item. You make £90.00

The rate drops to £1.00 = €1.10.

€26.00 is now worth £23.63. Your income is now 9*£23.63 = £212.72.

You have made £112.72.

That is £22.72 more than you made when the Pound was worth €1.30.

I know that we are largely anonymous on here, but shouldn't you do the most basic of checks before asking such ridiculuous questions?

[anonymous-user]

don4l said:

Nothing could be simpler.

If the exchange rate is £1.00= €1.30, then your Spanish customer is paying €26.00 per item. You make £90.00

The rate drops to £1.00 = €1.10.

€26.00 is now worth £23.63. Your income is now 9*£23.63 = £212.72.

You have made £112.72.

That is £22.72 more than you made when the Pound was worth €1.30.

I know that we are largely anonymous on here, but shouldn't you do the most basic of checks before asking such ridiculuous questions?

How does this work if my customer is paying me in sterling ?

I haven't mentioned being paid in euros.

[RYH64E]

don4l said:

Nothing could be simpler.

If the exchange rate is £1.00= €1.30, then your Spanish customer is paying €26.00 per item. You make £90.00

The rate drops to £1.00 = €1.10.

€26.00 is now worth £23.63. Your income is now 9*£23.63 = £212.72.

You have made £112.72.

That is £22.72 more than you made when the Pound was worth €1.30.

I know that we are largely anonymous on here, but shouldn't you do the most basic of checks before asking such ridiculuous questions?

I thought the weaker pound was meant to boost exports by making them more competitive? There's no competitive advantage in your scenario, that only comes about if you're pricing in GBP, and the money you get is worth less in the domestic and international market.

[Dr Jekyll]

Ghibli said:

don4l said:

Nothing could be simpler.

If the exchange rate is £1.00= €1.30, then your Spanish customer is paying €26.00 per item. You make £90.00

The rate drops to £1.00 = €1.10.

€26.00 is now worth £23.63. Your income is now 9*£23.63 = £212.72.

You have made £112.72.

That is £22.72 more than you made when the Pound was worth €1.30.

I know that we are largely anonymous on here, but shouldn't you do the most basic of checks before asking such ridiculuous questions?

How does this work if my customer is paying me in sterling ?

I haven't mentioned being paid in euros.

Then you can raise the sterling price knowing that it's the same price for the customers point of view because sterling is cheaper than before.

[Dr Jekyll]

RYH64E said:

don4l said:

Nothing could be simpler.

If the exchange rate is £1.00= €1.30, then your Spanish customer is paying €26.00 per item. You make £90.00

The rate drops to £1.00 = €1.10.

€26.00 is now worth £23.63. Your income is now 9*£23.63 = £212.72.

You have made £112.72.

That is £22.72 more than you made when the Pound was worth €1.30.

I know that we are largely anonymous on here, but shouldn't you do the most basic of checks before asking such ridiculuous questions?

I thought the weaker pound was meant to boost exports by making them more competitive? There's no competitive advantage in your scenario, that only comes about if you're pricing in GBP, and the money you get is worth less in the domestic and international market.

There is because you can choose to reduce the Euro price a bit and still make say £11.36 more profit per item than when the pound was worth 1.10.