Comments on: The market rout continues

By: mikestallard

mikestallard — Sun, 12 Oct 2008 19:43:17 +0000

You are so right; this is becoming as embarrassing as the time when he promised to spend as much as the Labour in the first two years of Tory government!

By: mikestallard

mikestallard — Sat, 11 Oct 2008 17:21:56 +0000

Isn't a world currency already here?
We call it the "Dollar".

By: Tim Worstall

Tim Worstall — Sat, 11 Oct 2008 17:09:20 +0000

OK, I'll be serious. A world currency by definition means a world interest rate. Just as with the euro, a single currency means a single interest rate in the euro area (note that I mean a single base rate, a single macroeconomic stance, not that each and every borrower gets money at the same rate).

As you might have noticed this has caused some problems recently. Spain has a trade deficit of 10% of GDP, had a huge housing boom and now a huge housing slump. The Irish economy had an interest rate much too low for its own good for many years and similarly had a boom and a slump. Other countries (say, perhaps Italy, certainly Germany for a couple of years) had, in the same time period, interest rates that were too high for their domestic economies, thus stifling growth.

As an economist would put it, the eurozone is not an optimal currency area. And if that small number of countries isn't such an optimal area then there's no way at all that the entire world is.

In fact, there are many who would argue that the events of the 1980s showed us that not even the UK is an optimal currency area.

The reason I simply laughed is because these points are blindingly obvious to anyone with even a passing acquaintance with the facts. I assumed you were joking precisely because I assumed you knew such things.

That you now seem to insist that it was a serious suggestion isn't perhaps the wisest of moves on your part. You've revealed that you simply have no idea what you're talking about.

Better to be thought to be joshing than that, eh?

By: R.Rowan

R.Rowan — Sat, 11 Oct 2008 12:33:21 +0000

Has George Osborne caught the mc cavity syndrome where is the opposition.Promising to be supportive before knowing what is proposed seems to have left the front bench in a quandary,its time someone got a grip and started knocking Brown for his failures which have exacerbated the current situation.

By: Tony Makara

Tony Makara — Sat, 11 Oct 2008 07:18:50 +0000

The Bretton Woods era, for the most part, provided the greatest period of stability and prosperity and if we focus on UK history in particular we find that most of our problems began once Sterling was floated. Since then we have struggled to corner export markets and been saddled with lumpen-unemployment. Gold certainly does remain a sound investment and the Russians are currently building up their gold reserves to record levels. As readers will know, the plastic chancellor sold off our golden legacy. It is certainly an interesting debate.

By: Tony Makara

Tony Makara — Sat, 11 Oct 2008 07:01:39 +0000

Mr Worstall, perhaps if you debated the issues instead of trying to score cheap jibes people might take you more seriously. A world currency is an inevitability and I hope to see it established in my lifetime.

By: Fidelio

Fidelio — Fri, 10 Oct 2008 23:04:10 +0000

Thank you Mr Redwood. The very best of tutorials!

By: Richard

Richard — Fri, 10 Oct 2008 20:23:33 +0000

There do seem to be some jolly good deals about though – I didn't realize that dealers have machines that automatically sell shares when a given value is achieved – that seems folly. As per usual it would appear that OAP's are the most exposed – my brother's father in law has gone ostrich. I guess we're all going to have to act differently in the future – mini funds hedged all over the system – could be an opportunity I guess but confidence & expectations can be brutal.

Cheers John

By: Tim

Tim — Fri, 10 Oct 2008 19:18:42 +0000

I would be interested to hear John's thoughts on the Icelandic banking situation and how the regulator allowed them to take deposits in the UK when they had such an unfunded deposit protection mechanism.

By: mikestallard

mikestallard — Fri, 10 Oct 2008 16:43:44 +0000

I totally agree with Bernhard – well done for a really lucid explanation!
A footnote:
If you believe in old fashioned traditional virtues, then you must ask why are the banks still offering huge bonuses (Telegraph today: £3 billion)? Why should people on low incomes pay for these? Have these bankers no sense at all?
Another one:
In the Spectator Charles Moore, who is sane and who has a good track record, mentions that there is a serious danger of whole states going under. Iceland may be the first domino. The Euro is shaking. The UK went bust the last time Labour was in power. Why not again?
If you are right about our being £1.3 trillion in debt before the crisis struck, we can assume that we are now about £2.3 trillion in debt. This is three times the government's annual income at the moment, and then some.
I am very glad that I myself am not in that position.
Aren't you?