The British Pound (GBP) is trading at a record low against the dollar (USD) for the first time since 1985. After nearly touching 1.03 USD on Monday morning in Asia trade, it is now standing at 1.08 USD. It has raised loud alarms in financial markets as Britains are already struggling with soaring inflation and cost-of-living crisis. The pound slump is likely to make it much worse.
Investors have lost interest in GBP following a controversial tax cuts package by new Prime Minister Liz Truss. The emergency budget presented by the conservative government was aimed at kick-starting the UK economy. However, it backfired, and the currency took a massive hit. The impact can be assessed from the fact that the UK pound fell by 23% year-to-date, which is worse than the falling currency of most third-world countries.
There has been a significant reaction to this development as Britains fear for the once thriving UK economy. Some of it might be too harsh, but many chose a funny way to express their feelings.
British Pound Suffers From Political Decisions
The immediate reaction to news about the British Pound was laughter. Many came up with hysterical jokes and memes to make fun of what the UK has done to itself in a matter of few years. Before the financial crisis started in 2007, GBP was for 2 USD. When Brexit talks started, they came down and lingered between 1.70 USD and 1.40 USD. To go all the way down to 1.03 USD is too much for Britains to handle. They had the Tory government to blame, which has failed to manage the crisis despite being in power since 2010. As Truss represented the Tories, she became the perfect subject of these memes. Most did not have to create a meme from scratch, as some of her real-life actions were an ideal template.
Losing Value against USD
Nothing hurts British pride more than having less value than anything from the US. As the British pound drops, USD reaches an all-time high. All commodities priced in dollars (including oil and gas) will be far more costly than before. It could exacerbate inflation in the UK, which is already at a historical rate in decades. This also means Britians would have to pay a lot more for thier vacation in Las Vegas than Americans who would enjoy thier holidays in the UK with financial ease. Besides energy, imported technological goods like iPhones and machine parts will likely get more expensive. However, it’s not only GBP which is suffocating under the pressure of the USD; other currencies, including the euro, have also been falling against the mighty dollar. Considering how once the great currency is on the verge of falling below dollar, someone joked that rapper 50 Cent might get a new name.
A Great Fall
Many famous personalities also joined the fun and shared thier take on the fall of the British Pound. Several social media users shared funny videos of people and things falling in a hilarious manner and associated them with pound fall. Here is one video of a water slide diver perfectly representing GBP’s graph for the last 4 days. The Pound dropped rapidly but picked up for a while before splashing into oblivion.
Pressure on Tory Government
As pressure mounts, economists have predicted that the Bank of England (BoE) might be compelled to further increase interest rates in an attempt to curb the decline of the British Pound and reduce inflation. BoE recently increased the rates to 2.25% and warned that it would “not hesitate” to raise it further to control inflation.
Meanwhile, some silent chaos is also brewing inside the conservative government. Some Tories are not confident of the economic approach adopted by Prime Minister Liz Truss and Chancellor Kwasi Kwarteng in the circumstances. However, they have avoided reacting because it could further harm the party’s reputation.
The government has promised to soon come up with more plans to boost economic growth, including financial services regulation, planning rules, and immigration policy. However, the critics of the UK government have shown little faith and would love the see change in power dynamics in the House of Commons.
British experts warned about the policies of Liz Truss when she officially replaced Boris Johnson as the Tory leader on September 6 and became UK PM. The same fears have now come to life within a month.