The pound dropped significantly over the past three years, which provides an explanation of why inflation in Britain than in most European countries. As Mervyn King said in his speech this week, real wages are falling, but it is a necessary condition for the British economy for the balance from consumption to production. Most unlikely to get pleasure from such a process. It is easy to forget that the devaluation of the projected decrease in living standards of the country, imports become more expensive. You bet on the fact that exporters benefit (domestic producers will get a market share of imports) more than the consumers lose.Historically, the devaluation is seen as a foolish strategy, which only leads to inflation, nullifies the temporary economic benefits for the corporate sector. Associated with banana republics, and in strong economies - a stable currency. Euro combines the rigidity of fixed exchange rates without the rigor required to prevent imbalances. Some countries think that eating free cheese, linking its expenses on loans from German, and now they are paying. Lowering the Japanese credit rating S & P from AA to AA-rating of the country but returned back in 2007. Do not forget that the AA-still a very good credit rating with a very low probability of default. And of course, Japan has a long history of trade surplus, with much of the debt, which is owned by citizens of the country.
Nevertheless, there is still a problem of distribution, people who own the debt and the people who pay taxes - this is not the same thing. Resembles the game of who the first coward. " Total debt to GDP ratio in Japan is high, but rates are low, making debt service is currently available. However, if the lenders will begin to think that the government may declare a default (or inflyuirovat debt), they will demand higher yields, so that the debt burden will become less acceptable. This will increase the temptation to declare a default and give the crisis the way forward.
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