How to hedge against Government officially devaluing the Pound?

[ozboy]

I have a very  deep mistrust of Government and their innate ability to stiff the populace, which was probably borne when the Aussie Government devalued the Dollar by 17.5% overnight in 1976, just prior to me embarking for these fair shores.

I'd have thought the only way to hedge against official & sudden currency devaluation is to have foreign holdings, but wonder if there's something I'm missing and other course/s of action to pursue? 

I am aware of the additional risks in increasing foreign holdings, before anyone points it out, and shorting the Pound and similar activities are all a bit too sophisticated for moi. 

[fp]

Open a Euro / dollar denomination bank account

[ozboy]

Thanks "fp", by "Holdings" I should say I also meant Foreign Shares, Bonds and Property.  To my tiny mind Commodities are "Foreign" anyway, unless they're designated in Pounds?

[jo]

1) Get a Visa Debit card with Revolut. (I use it when I go abroad at cashpoints and restaurants, as there's no charges and they quote pretty close to market FX rates.).
2) Buy whichever currency you wish to hold as a hedge. Revolut opens a virtual bank account with its own IBAN number etc, and credits the currency to that.
3) When you're finished with the hedge, you sell the foreign currency back for sterling.

It's easy as pie and can all be done online on a phone. I have a euro and dollar account and use it for Mintos etc.

[ozboy]

Very good, thanks "jo" .  I also imagine physical gold is a good hedge. I know it's risky as an "investment" but as a hedge/insurance I would think it would still be worth the same after any UK devaluation.

[Troy]

I have a very  deep mistrust of Government and their innate ability to stiff the populace, which was probably borne when the Aussie Government devalued the Dollar by 17.5% overnight in 1976, just prior to me embarking for these fair shores.

I'd have thought the only way to hedge against official & sudden currency devaluation is to have foreign holdings, but wonder if there's something I'm missing and other course/s of action to pursue? 

I am aware of the additional risks in increasing foreign holdings, before anyone points it out, and shorting the Pound and similar activities are all a bit too sophisticated for moi. 

In the 1970s Governments were trying to maintain fixed exchange rates and because this was like to trying to keep the bath water level without being able to control the rate of inflow and outflow, they periodically had to change to a different level of bathwater.  Your devaluation was one such effort.  But we have had floating exchange rates for donkey's years now so the rate is responding to market forces all the time rather than waiting 5-10 years when the pressure for change becomes too great to resist.  My experience of exchange rates over nearly 50 years (£, AUD, USD, SFR, EUR, CZK, Sey Roops & others) is that they are not predictable and never a hedge against a depreciating currency - though with hindsight one can always see what currencies one should have held.  I have always held currencies for potential liabilities (that means these days holidays) while recognising there is a cost from holding them.  Sometime I make a gain, sometimes a loss.  Have to say I held Aussie investments for over 30 years just in the vain hope they might recover something of their original value - they never did.  My "Gold Fund" there disappeared without trace, and my property investment fund dragged on and on sometimes gaining 2-4 per cent, sometimes losing a similar amount, but always, always, the fund managers took their pound of flesh without fail. come hell or highwater.  I cut my losses after 30 years and got back what I put in in 1987 but I think the exchange rate into sterling was slightly more favourable for me.  The Sydney fatcats certainly must have had a quite a few champagne dinners and dancers out of me.

if you're returning to Oz, why not periodically send money back?  You'd get an average rate over time.  But you are doing this anyway, aren't you, via P2P investments over there?

[yorkshireman]

Open a Euro / dollar denomination bank account

By euro / dollar denomination bank account are you referring to an account offered by a UK bank such as the HSBC Currency Account and / or Lloyds International Bonus Saver Account (the latter is Isle of Man based) or something based completely outside of the UK / Channel Islands / Isle of Man / Gibraltar?

[ozboy]

Yes, have Oz P2P,  cash & shares; flogged the property yonks ago because soon as Tenants, Accountants, Tradesmen, and Agents find out you're an overseas resident they all stripe you up.

In fact, been thinking of moving a lot more out there because, on balance, I have (slightly) more faith in Downunder and their ability to *weather the financial storms than I do here.

* Notwithstanding their dastardly devaluation in '76 of course!

[dualinvestor]

I have a very  deep mistrust of Government and their innate ability to stiff the populace, which was probably borne when the Aussie Government devalued the Dollar by 17.5% overnight in 1976, just prior to me embarking for these fair shores.

I'd have thought the only way to hedge against official & sudden currency devaluation is to have foreign holdings, but wonder if there's something I'm missing and other course/s of action to pursue? 

I am aware of the additional risks in increasing foreign holdings, before anyone points it out, and shorting the Pound and similar activities are all a bit too sophisticated for moi. 

The days of any Government in a developed economy being able to "officially devalue" their currency as occurred in the 60s,70s and early 80s are now over.  Those that can remember Harold Wilson's television broadcast about the value of the pound in your pocket not being affected by that day's devaluation against the US dollar will get more subtle lies nowadays.

Government policies or even the colour of the Government can affect the value of it's currency, sometimes quite substantially but nowadays it's the market that truly determines what a currency is worth.  Each day more money is exchanged than to finance all world trade in goods for several years so exchange rates are more a way of people to make a profit than a measure of the relative strength of economies, especially with the emergence of "super currencies" such as the euro, e.g. on relative strength if the Deutch mark still existed it the pound might be worth 90p in euro terms, whereas if the drachma was still with us the pound might be worth £1.30 (both estimates as an example not actual valuation).

So apart from policies or elections I don't think the proposition "what would happen if a Government officially devalues a currency" is any longer relevant but the market may choose to do it unofficially.

[Troy]

Yes, have Oz P2P,  cash & shares; flogged the property yonks ago because soon as Tenants, Accountants, Tradesmen, and Agents find out you're an overseas resident they all stripe you up.
 

Gee, reckon I could top any story you've got on this subject.  Then had months of litigation when I returned home and had to put up with senile judges incapable of understanding opportunity cost, like for like replacement, and similar terms.