Comments on: Labour and sterling

By: mazza1230

mazza1230 — Sun, 14 Dec 2008 11:22:00 +0000

Toby Helm writing in The Observer today: “Sterling’s decline to a value of less than a Euro, after commission charges, is seen by economists and opposition politicians as a pivotal ‘psychological moment’ – and evidence of declining faith in the British economy on global currency markets”.

The Bill Clinton maxim of “It’s the Economy, Stupid!”, would suggest that If Gordon wants to stand any chance of being re-elected he had better hold a General Election before voters twig that the cost of next year’s holidays has just gone up 25%….

By: Anthony Painter

Anthony Painter — Sun, 14 Dec 2008 10:04:00 +0000

The collapse of the global financial system got us into this situation. I don’t think you’ll find many economists who would argue that it was borrowing (not public borrowing anyway.) There are legitimate criticisms but not the one that is being made.

If we accept the premise that borrowing was too high- not a premise that particularly stands up when you consider than our national debt as a proportion of GDP has been historically and relatively low for the last decade- then all we can say is that it means that it has limited our ability to respond. How long we are in debt rather depends on when and how strongly the economy recovers.

By: mazza1230

mazza1230 — Sun, 14 Dec 2008 08:12:00 +0000

Hear! Hear!

By: Rob Atkins

Rob Atkins — Sat, 13 Dec 2008 20:22:00 +0000

Deliberate but fatally flawed, and will be a burden on this country for a generation. Debt got us into this problem; more debt is not the solution. This is sham Keynesianism – Keynes never hypothesised this prognosis for a country already in severe debt. We will all suffer for Brown’s foolish delusions. He is more interested in his own selfish future, than that of the rest of us combined. He will go down in history as an unparalleled economic incompetent.

By: Anthony Painter

Anthony Painter — Sat, 13 Dec 2008 20:11:00 +0000

Out of interest, do you not think that the impact on sterling was not something that was understood and factored into the decision to respond in this way?

The balance of payments is reflective of our economic structure but to say that fiscal stimulus should not be undertaken on that basis is too strong.

The downside is also limited through coordinated action:

http://www.timesonline.co.uk/tol/news/world/europe/article5333625.ece

The approach is deliberate.

By: Rob Atkins

Rob Atkins — Sat, 13 Dec 2008 20:02:00 +0000

There can be no question that the flight from sterling this time is in large part because of the massive increase in debt being fuelled by Brown’s ‘solution’ to the impending recession. Had we been in significant balance of payments surplus beforehand (like a number of other major economies) this might have been plausible. But with debt being piled on debt, the impact on sterling was inevitable. The fact that the Bank of England has had to reduce base rates to encourage lending is exacerbating a fundamental economic problem in this country of too much debt.

By: mazza1230

mazza1230 — Sat, 13 Dec 2008 18:41:00 +0000

The credit crunch does certainly provide a very convenient rug under which Gordon can sweep the detritus caused by his profligate spending.

By: Anthony Painter

Anthony Painter — Sat, 13 Dec 2008 18:31:00 +0000

Gordon Brown became Prime Minister in June 2007. Sterling’s fall began around September 2007. I think most observers would see the credit cruch and the collapse of Northern Rock as more instrinsically linked to sterling’s fate than Gordon Brown becoming Prime Minister. Your argument just doesn’t stack up at all I’m afraid.

By: mazza1230

mazza1230 — Sat, 13 Dec 2008 18:23:00 +0000

I have QEDed that, following a period of relative stability, the decline of Sterling from 68p to 88p started the moment that Gordon got his hands on the levers of power. The Money Markets simply do not trust the British Economy under Labour with Brown in control.

By: Anthony Painter

Anthony Painter — Sat, 13 Dec 2008 18:12:00 +0000

What have you QED’ed?