Blogging from the Highlands of Scotland until I return to the Murcia region of Spain in the Autumn for a month or so
'From fanaticism to barbarism is only one step' - Diderot

Thursday, 24 June 2010

Currency markets react positively to our new sensible government

For the first time in a couple of years the currency markets are beginning to realise we have a sensible grown-up government in charge of our destiny again, after more than a decade of having an incompetent crowd of Labour losers sending the country into the poor-house - the Pound is today at its highest against the Euro since November 2008, having reached the heady height of 1.2222. Life for the next several years is not going to be particularly easy, but I find myself beginning to feel mild optimism that the future is going to be rather better without the false promises and dissimulations that Labour specialised in.

5 comments:

  1. I could make much of the fact that under the last Labour administration, the pound hit $2.13 but it would be a self-defeating one.

    The problem with the maintenance of a relatively strong pound does not sit well with the ConDem attempts to bring down the deficit. Not to worry though because the likelihood of a double-dip recession will send it southwards again. The problem then might be the threat to the country's triple A credit rating and the higher interest on borrowing. The Tories are treading a very dodgy path.

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  2. Oh, and its record low was in February 1985 when it dropped to $2.05. The comparison is, of course, based on recent times rather than the days when there were 4 dollars to the pound.

    Have a good day.

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  3. I take your point - indeed I agree with you. However, there is a distinction between an over-valued currency (which will harm trade competitivity) and one which has been subject to severe swings, upward or downward, as a result of market 'sentiment', rather than fundamentals.

    The problem with Labour is that it does not have a 'feel' for free enterprise. It thought that a 'buoyant' economy, largely based on inflation of property prices, was a sound or durable model. Of course, Labour's 'non core' middle class voters (those who would never have voted for Labour pre-Tony Blair) loved discussing thair large notional property gains at dinner partyies and many concretised that by trading-up; the property market was very buoyant, but not (as is always the case with asset bubbles) likely to last forever. Historically low interest rates for borrowing exacerbated this trend.

    The second and more important failure was the change Labour made to financial regulation - I thought at the time that the 'liberation' of the BoE was good (and it was), but it was accompanied by the creation of a tri-partite regulatory 'by the numbers' system and the impact of this was appreciated by few at the time. I do not believe the disaster of Northern RBS and BoS could have happened prior to this change.

    The Conservatives, on the other hand, do understand the market - they will make mistakes (all governments do), but I think over the medium-long term things will improve. Unfortunately it is going to be tough for many years so their popularity may fall sharply, allowing the disaster of a return to power for Labour and its squandering ways. ALL Labour governments have ended in financial disaster, unfortunately - it is a simple fact. And it is always the Conservatives who must come in and put things right.

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  4. The deficiencies that brought the banking sector to its knees were hardly Brit only. You only need to look at the US for that and I cannot believe in a month of Sundays that the Tories would have created a system that would have regulated banks in any more efficient way. They are the masters of deregulation.

    As for property-fuelled booms, what about the 90s and the collapse of the Lawson bubble which was far deeper than anything that happened under labour. Believe me, I was in negative equity for years because of those clowns.

    As for Conservatives understanding the market, I refer you again to Black Wednesday. They have no more feel for it than any other party. Under Labour the FTSe reached record highs.

    One correction. In 1985, the pound dropped to $1.05 not $2.05 as I suggested.

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  5. The were not British only, I agreee, but they have been very much more srious here. Even Spain, which is in a real mess right now, did not go into this recession with massive government over-borrowing, as the UK did.

    As for 'Black Wednesday', yes of course that was a disaster, but resulted from trying to peg the Pound to the EMS (as it was then) at an unrealistic rate for resoons of national 'pride' rather than based on market fundamentals.

    The market will always, over the long-term, correct for government mismanagement. The current 'rise' in the Pound is as much to do with a market reassesssment of the Eurozone oeconomies and what might happen in Spain, Portugal and Italy after the debacle in Greece - a reassessment which perhaps shows that the Pound had fallen too low for a while.

    I realised you had made that simple typo whith the rate you mentioned in 1985 so did not bother mentioning it.

    As for the present government's policy - well I hope it succeeds. In fact I hoped in 1997 that the new Labour government would somehow be different from all other previous Labour governments and not leave the economy in ruins. By about 2002 I was warning family and friends and anyone else who would listen not to overstretch themselves with higher mortgages based on their affordabilitty at the then very low interesst rates; those who listened have not suffered too badly, those who did not, did. It is striking how few people in the public sector have suffered very little in recent years, when compared with the private sector; a correction is badly needed.

    As for deregulation, this dopes not simply mean taking away regulation - what Labouur thinks it does. Correctly done it means channelling human beings' natural instincts (which include greed as well as altruism) into productive channels, with enoough regulation to stop abuse; it is in this last area that Labour have absolutely no idea what they are doing. This continues with their futile posturings in Opposition.

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