JUST how smart is it for the central bank to let it be known it is happy to see the currency depreciate?
After all, history suggests that when word gets about that the authorities would like to see the pound take a tumble, the foreign-exchange market is only too happy to oblige.
True, it may take a while, but the message gets across. It did so in the late Eighties, when the Treasury was determined to stop the pound rising against the German mark. By the end of the decade, the currency’s strength against the mark was not a problem anymore.
Just now, the Bank of England is intensely relaxed about the fall in Sterling, down five per cent this year on its trade-weighted index against a basket of major currencies, on top of a 25 per cent decline against the dollar since 2007.
A good idea? Not if the past is any kind of guide.
For example, although few now remember, the all-time low-point for the pound against the dollar occurred in January 1985, when Sterling began a plunge from the not-very-dizzy height of $1.20 towards parity, aided by the line from Downing Street that Margaret Thatcher did not wish to buck the market and that £1-$1 was nothing much to worry about.
On that occasion it was the Treasury and the Bank of England that took action to prevent this (supposed) national humiliation from coming to pass, and within a few short weeks an enormous 4.5 percentage-point rise in interest rates had stemmed the flow of funds out of the pound.
For younger readers, that is not a mis-print – the rise in Bank Rate was indeed nine times the current level.
So here is a not-very-prescient prediction: Sterling’s fall, which would have been overdone even had markets simply been left to get on with it, will overshoot wildly given the enthusiasm of the Bank for a weaker pound.
Perhaps it will be left to the new boss Mark Carney to fill the traditional role of a Governor trying to restore faith in Sterling. Poor chap. Still if he can’t take a joke, he ought not to have joined.
1) Oh what a lovely currency war!
MY column in today's edition of The Mail on Sunday examines the Bank's attitude to the depreciation of Sterling, a trend that can only gather pace tomorrow when the foreign exchanges re-open and traders react to the decision late Friday of Moody's to reduce Britain's credit rating from AAA to AA1.
Much attention in the 'currency war' is focused on friction inside the developed world - some in the eurozone are getting particularly shirty about US, Japanese and British (alleged) misuse of quantitative-easing money-creation programmes as a backdoor devaluation mechanism in contrast to the more orthodox European Central Bank (sorry guys - you shouldn't have contracted out your currency to an institution based in Frankfurt if you didn't want a bit of Teutonic rigour).
But increasing huffing and puffing is coming from the emerging giants. Expect Brazil, China, India and others to complain ever-more-vocally about what they see as an attempt to use currency movements to make their exports to the west less attractive.
I hope they are ignored. In the late Sixties, the US woke up to the fact that Japan and West Germany (as was) were holding their currencies artificially low in order to build export markets and eventually forced them to revalue. The emerging giants have been doing much the same.
On the subject of pot and kettle, I had to smile when the American authorities got into a frightful bait the other day about the 'extra-territoriality' of Europe's proposed financial transaction tax (FTT). True, Brussels has been typically imperialistic, suggesting the tax ought to apply to the trading of any financial security issued in those European currencies applying the FTT even when that trade is between people or institutions far away - an Indian buying from a fund manager in San Francisco, for example.
But which country has for decades applied a 'long arm' doctrine to fraud and other financial crimes committed using its own currency? Yep, Uncle Sam. Back in the Nineties, when I reported on such things, it was routinely stated that as two-thirds of world trade was dollar-denominated and 99 per cent of dollar trades cleared through Manhattan, US investigators could stick their noses pretty much anywhere.
2) Look who's talking
BACK in January 2008, David Cameron (then in Opposition, of course) referred to Gordon Brown as the 'strange man in Downing Street'. Fair enough, I suppose, politics being a rough old business (as Brown himself would be the first to acknowledge). But I was never sure of the wisdom of this line of attack and indeed, come May 2010, Brown (strange or not) very nearly managed to remain in Downing Street.
Anyway, the 'strange' tag came back to me watching Mr Cameron in action recently. In India, he seemed to inform his hosts that there was no limit on the number of Indians who could come to Britain.
Really? I thought we had a net migration target.
Then he said Britain needed more women in senior positions in business, politics and somewhere else - maybe the judiciary, I can't remember. Presumably the Indians were very grateful for his insights.
Back home, he became embroiled in an unworthy dispute with the BBC about the Eastleigh by-election.
Really rather, er...strange.
3) Strive strive strive!
ANYBODY else sick of the praise being heaped on 'the strivers'? Like 'the proletariat' in the old Communist bloc, 'the strivers' comprise a mythical, officially-approved class in whose service almost all professional politicians claim to be acting.
And as with the heroic workers of old, 'the strivers' are defined by their class enemies. These include, of course, 'the skivers' (it even rhymes!). These are the work-shy, those against whom no official measures can ever be too tough.
They include also, of course, caricature chinless wonders, junky peers who enliven the media by pranging expensive cars, other surviving specimens of the decadent aristocracy.
But by implication, the strivers' biggest enemy is those who have striven and have now made it, the settled, professional, independent middle class. These are the anti-social parasites who deny the strivers' children their rightful places at top universities and keep the strivers out of the senior professions, who avoid whenever possible using public services and, when they do use them, abuse their articulacy to get the best deal.
Of course, it is from this group that the political class is almost entirely drawn. But hey, who needs consistency? Or principle?
4) General miscellany
FAREWELL Richard Briers, whom I met once in the very foothills of my career as a journalist. It was 1980, and the great man was at a bookshop in Reading, signing copies of a volume of memoirs. I was despatched with a photographer to get a picture-caption story.
Terrified, my 19-year-old self sidled up to Briers and asked him a blurted-out silly question about how he found the town. 'Lovely,' he replied.
That could have been just about spun out to fit a picture caption, but on return to the office the deputy new editor explained that he envisaged something more expansive, a 'bijou featurette' on the TV superstar's book-signing.
'So, Tiger [I think he called me this to cheer me up, as I wasn't much good]. What did you get from him?'
I told him.
'Lovely? Lovely! Oh terrific. Great piece, I don't think. Richard Briers - what makes him tick? Lovely.'
Actually, he saw the funny side. Eventually.
Briers, of course, played a rare (for him) bad guy in an episode of Inspector Morse. He was a malicious college master called - I think - Sir Clicksby Bream, and he positively exuded unpleasantness. What with Inspector Lewis (Morse's sidekick-turned-replacement) staging his on-screen retirement a couple of weeks back, I contemplated, in an idle sort of way, the longevity of what I refuse to call the 'Morse franchise'.
After all, Morse was big when my now-wife and I started dating in 1993. He was a John Major-era TV phenomenon.
Oh hang on, no he wasn't. Wrong on both counts.
The last Morse series concluded in 1992 (there were, by my calculation, five one-off specials after that) and the first was aired at the start of 1987. If anything, the grumpy sleuth was one of Thatcher's offspring.
Which fact, I have no doubt, would have cheered him up no end.
Thanks again for reading and enjoy the rest of the weekend.
Going South: Why Britain Will Have A Third World Economy By 2014, by Larry Elliott and Dan Atkinson is published by Palgrave Macmillan