By-pass the banks and get currency at much better rates

For most people, sending money abroad for various purposes (replenishing an overseas account, making payments when buying a property, etc) or simply buying some foreign currency banknotes as a part of funding a holiday abroad, has traditionally involved popping along to the bank and arranging the transaction. It will work pretty efficiently most of the time - the bank will make a charge for doing a transfer and, unless you are dealing in pretty large amounts, they will most probably 'sting' you with a pretty poor exchange rate.

When I was making the stage payments for the purchase of my holiday home abroad several years ago the individual payments I had to make were pretty substantial, so like most people I did the transactions though a foreign exchange trading company. For the very finest exchange rates, 'inter-bank' transactions normally begin at GBP5million and up, but if the individual amounts are rather lower (in the several tens of thousands of Pounds, typically the case when buying a property in a series of stage payments as the project progresses) one can still make very significant savings by going though a dealer, rather than simply going along to the bank branch, because even if they call up their own exchange centre to arrange the deal the margin they will take on the deal will be a lot greater than from a foreign exchange dealer. In addition, the foreign exchange dealer will not charge for the actual transfer, unless the deal falls below its own thresh-hold amount. Obviously one still needs to get the funds into the hands of the dealer so they can do the trade; in the days before internet banking (not so very long ago) that would probably mean sending the dealer a sterling cheque, which would take a few days to get there and be cleared by them, or (for a fee) arrange a domestic transfer through the local bank to the bank account of the dealer.

More recently I have been transferring funds once or twice a year to a currency dealer using my internet banking facility with my British bank in order to replenish my account abroad with the funds needed for my extended stays there; doing it only a couple of times a year means both better exchange rates because the amounts are a bit bigger and secondly no transfer charges because the amounts exceed the foreign exchange dealer's minimum amounts for free transfers - their profits come from the spreads they still make on the exchange rate, albeit a lot smaller than the local bank would levy.

However, I like to travel with some of the local currency of wherever I'm travelling to (unless the exchange control rules of the destination country preclude this) so that at least I can pay for a taxi on arrival or perhaps buy meals on the first day or so, before I can get to the bank there to change some money, in the old days in the form of travellers' cheques, in more recent years by sticking a piece of plastic in a cash-machine - and avoid the 'gouging' rates that exchange bureaux at airports typically indulge in. For this initial spending-money cash I have usually just gone to my bank, ordered the money a few days ahead and gone back to pick it up when delivered, paying the currency-note rate charged by the bank and thinking I had few realistic alternatives (apart from, say, going to the Thomas Cook branch in nearby Inverness) where perhaps the rate might be very slightly better.

However, having just a week or so ago done a relatively larger transfer to replenish my Spanish account using a foreign currency dealer (for reference this was World First), with me transferring the payment to them on-line via the internet and it reaching the destination two or three days more quickly than doing it direct from my own bank, as well as achieving a much better exchange rate (with a saving of about 3.5%) I began to wonder if I could get a better rate on-line for currency notes too, for that initial local spending money in Euros - a Google search threw up the compareholidaymoney.com website and the stark divergences in rates offered. The firm at the top of the list Travel FX seems to get a great number of uniformly-positive reviews so I thought I would give them a try. In a nutshell I booked a transaction with them last Saturday morning, transferred payment to them on-line during the weekend and received the Euro bank-notes today (via Royal Mail 'special delivery'), saving myself 3.99% compared with what I would have been charged by my bank locally, in fact the notes rate was not so much different from what a foreign currency dealer would have been offering for a funds transfer, whereas the margin on notes from local banks is usually much greater than for transfers, resulting in a much less favourable deal for bank-notes even than for transfers. As this was the first time I had ordered foreign currency notes over the internet I was slightly anxious that my notes would turn up as promised, but I have to report that I was kept fully informed by email at each stage of the process and the notes turned up here on time today, as agreed when I placed the order last Saturday. I shall most certainly consider using this method and this firm in future. It really is a "no-brainer" so far as I am concerned - technology and the internet have made such processes possible and it would be foolish not to use them.

The club expands - Slovakia will adopt the Euro wef 1JAN09

Slovakia will become the 16th of the current 27 members of the European Union to adopt the Euro as its currency on 1 January 2009. The fixed conversion rate between the Euro (EUR) and the existing Slovak national currency (SKK) is €1 = 30.1260 SKK.

The 15 EU countries currently using the Euro as their currency are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain.

Of the other 11 countries, two (Denmark and the UK) have negotiated opt-outs which mean they have no obligation, ever, to adopt the Euro as their currency if they do not wish to do so. The main Swedish political parties have agreed not to join the Euro until approval in a national referendum is given; a referendum in 2003 rejected adoption so Sweden has chosen not to join ERM II. Full details of each EU member's status vis-a-vis the Euro may be viewed here.

You can see images of the Euro coins being issued by Slovakia to coincide with its adoption of the Euro as its currency here. Euro notes are uniform throughout the Eurozone and show no differences from country to country.

A welcome splash of cold hard economic reality

John Redwood may not be my absolute favourite politician (his views on Europe don't sit well with me), but he is consistently on the button when it comes to talking about desirable economic outcomes and how to get there. His latest post Sterling is Warning the Government and the MPC is a welcome and long-overdue splash of reality - to summarise his message, real living standards will have to decline in both the UK and the US (and some other western countries, too), because we have been living beyond our means, on borrowed money, for far too long. And the lending countries over the past few years, and much more overtly in recent times, have begun to call a halt. How does the Government/Bank of England expect to get its debt sales away successfully, to support yet more expenditure on bloated social policies, with the prospect of further interest rate cuts looming? The markets are answering that question by sending Sterling lower.

The present Labour government has successfully squandered the pretty good financial situation it inherited from an unpopular Conservative government in 1997 over the past 11 years, and caused a balloon of public and private debt. Unfortunately, when there is too much pressure, balloons have tendency to burst. That's where we are now. It's not pretty and its not comfortable to live through, but unless politicians (both Labour and Conservative, not to mention the Republican and incoming Democratic administrations in the US) begin to lay out the facts for their electorates in stark terms, then there is no way forward. Potentially electorally disastrous of course, but pretending that we can somehow borrow yet more to get ourselves out of the present economic pit we are in is not going to help anyone in the long run. Electorates need to face up to where their profligacy has led - if they (we) continue to elect politicians who won't tell us the truth, then we deserve all that will likely follow.

Two more join the club - Cyprus and Malta adopt the Euro

Two of the recent (2004) intake into the European Union, Cyprus and Malta, have adopted the Euro as their currency from midnight last night, taking the currency union from 13 to 15 of the 27 EU members. The fixed converion rates to the new currency are €1.71 for 1 Cyprus Pound, whereas a Maltese Lira is fixed at €2.34 . The Cypriot Euro coins will be inscribed in both Greek and Turkish and the two British 'sovereign bases' on Cyprus will become the first two British sovereign territories to adopt the Euro as legal tender, a practical measure resulting from the fact that roughly 10,000 Cypriots live or work there. (NB/ For those not aware of it, the Euro banknotes are standard throughout the Eurozone and do not vary from country to country; only the coins vary on one side depending on which Eurozone member country has issued them.)

Joaquín Almunia, European Commissioner for Economic and Monetary Affairs, remarked:

"Today with the adoption of the euro, Cyprus and Malta have become even more integrated in the heart of the European Union, less than four years after they joined the EU. This is thanks to the stability-orientated economic policies pursued by both countries, which I hope will continue after they adopted the euro. I encourage the Cypriots and the Maltese to embrace our shared currency with confidence because they are entering a monetary union that has proven its worth in terms of price stability and low interest rates."

With inflation beginning to rear its ugly head in some of the Meditteranean EU members and economies which have become severely over-heated (e.g. Spain), things are not quite so rosy for some of the existing countries which use the Euro, though. Nevertheless I expect the change will make life easier for both Cypriots and Maltese and for those visiting the two countries, specially from other countries within the currency union.

New Bank of England 'Adam Smith' note enters circulation today

The Bank of England is putting its new GBP20 note, with a portrait of 18th century economist Adam Smith on the reverse, into circulation today, although the previous version (featuring Sir Edward Elgar) will continue to circulate for some years.

I wrote about this last October when the introduction of the new note was announced. Even the richest folk in the world think Adam Smith is a pretty cool dude.

Economist Adam Smith to feature on new Bank of England £20 note

Adam Smith, author of the one of the most influential economics treatises ever written, 'The Wealth of Nations', is to appear on the Bank of England's TWENTY POUND notes, to replace composer Edward Elgar, early next year. The man whom many regard as having invented "the concept of competition and market forces" will, incidentally, be the first Scotsman to appear on a Bank of England note, although he already appears on a FIFTY POUND note issued by one of the Scottish note issuing banks (Clydesdale Bank).

Now if only our Government would start to apply his economic theories rigorously!