There was a time when 3% devaluation was seen as a disaster
for the credibility of the governance of a country and something to be
avoided if not ashamed of. Chancellors of the Exchequer the nations
accountant, would do anything to avoid a devaluation
and if and when it came they saw it as a personal failure, even a reason to resign.
The secrecy of deliberations surrounding the possibility of devaluing your currency was Machiavellian it was thought
that the event signalled a "run" on the currency and further pressure to
devalue more. This of course was in times of "fixed exchange
rates" when confidence in holding your currency and Stirling was a
major world currency, was part of the national psych.
Today we are in very different times. The pound has depreciated by
roughly 20% since Brexit was announced a few months ago its a trend
which has continued for a number of years now and it has dropped again
this morning. The currency is no longer in the
hands of the Chancellor but rather a creature bound by the whim of the
market. As the market defines our economic health and sustainability the
currency is allowed to find its own level. It could be argued that no
matter how ugly the Europeans are to us or
how damaged we are in not being able to sell into their market the
pound will equilibrialise the situation, falling as far as need be and
making our exports so cheap, no one can afford not to buy from us. Of
course as a counter our imports will go up by the
same margin and since we import more than we export these days,
something has to give. If it's only strawberries in December then it's
no real loss but on more crucial imports like the oil to feed our power
stations then the cost to each household will be
significant. If our overseas jaunts have to be curtailed it's not the
end of the world and a cheap currency makes it attractive for people from overseas to come here and so perhaps we become a theme park, a sort of dynamic Madam Tussaud's.
The reality is that we made a decision 30 years ago to get out of manufacturing and instead play the roulette wheel of
international banking. In which not only did we decimate whole regions
of the country to the scrap heap we experienced the inevitable
banking crash of 2007, virtually bankrupting us. Only the massive
printing of currency (quantitive easing) and the near suicidal decision
to hand the cash back to the people who had gambled it away in the first
place so they could refuel their passion, has
meant we are desperately at risk of becoming a larger version of Blackpool.
I liked Blackpool as a kid. It's endless arcades, slot machines,
wild rides and sticky rock but, as Corinthians 1 reminds us "when I was
a child I talked like a child thought like a child reasoned like a
child. When I became a man I put those childish
things behind me".
Today Blackpool is in my eyes, tacky and exploitative, largely out of date, offering a cheap one night thrill, perhaps the simile to our national condition is not so way off the mark after all.
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