Sterling and the Stock market take another pounding

Over the last few days sterling has fallen dramatically against the yen – from one pound buying 175 yen to only buying 141 yen. The Japanese base rate is 0.5% compared to the UK’s 4.5%.

International investors are leaving sterling. It all goes to show that relatively high interest rates do not necessarily keep a currency up. As someone who wants our interest rates down to help fight recession, I have also always stressed we need to get a better grip on our public finances to instill more confidence. That looks more and more like an obvious necessity from watching the markets.

Today’s market movements are more evidence that the UK authorities have to do more to reassure and to stabilise. The share prices of HBOS and RBS do not make good reading for taxpayers either. At current prices the taxpayer will lose £5 billion on buying the new shares in HBOS and RBS! Why, oh why?

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13 Comments

  1. Johnny Norfolk
    Posted October 24, 2008 at 4:27 pm | Permalink

    When Labour were last in power and had spent all our wealth, they had to go to the IMF for a a loan to bail us out.

    The loan was made available to us provided we increased government spending !!!!!

    Of course not.

    The then Labour government led by uncle Jim had to CUT spending to obtain the bail out loan.

    They then did so, and in came the winter of discontent and then in came Mrs T who then sorted things out.

    Its all happening again only much worse this time. we do not have Uncle Jim but Blunder Brown.

  2. Adrian Peirson
    Posted October 24, 2008 at 5:00 pm | Permalink

    We have to get Govt out of our lives, if they didn't take so much, we wouldn't need Welfare.
    Pensioners wouldn't need a couple of extar pounds per week in handouts if they weren't taxed on their pensions.
    Pansioners spend years building up a pot of money, when they retire they are forced to buy and Annuity with this.
    The Interest from this annuity pays their Pension.
    the Pot remains with the Pension Co.
    when the Pensioner dies, the Banking system, trousers the Pot of money saved up over decades by the Pensioner.
    We are being farmed, our Entire Monetary system is a fraud desiged for one purpose only, the syphon the wealth of nations upwards and enslave humanity.
    If govt wants people to stick with Sterling, it should honour the statement 'I promise the pay the bearer upon demand the sum of ….'
    IE Sterling should be backed by Gold.
    Paper money was never 'money' it was a receipt for Gold held by the Banks.
    Now the link between Gold has been severed, the Pound is simply a worthless Paper receipt, the only think that backs it is the Labour of the masses.
    That is How Govt and the International Banksters have enslaved us.
    By loaning money into existance, it is immediatly devalued by the accompanying interest rate, this is the inflation that eats away at the value of our money each year.

    • StevenL
      Posted October 24, 2008 at 8:32 pm | Permalink

      Capitalism and democracy are not about 'enslaving' anyone, in fact it is quite the opposite, it is an attenpt to create a free and peaceful civilisation. The freedom to win and lose is an important one, most of the guys who have banked big money in the investment banking business are just normal people who landed on their feet.

      Money is real too. I don't knwo about you, but I don't regard my salary (paid in £) as 'worthless paper'.

      I've just successfully exchanged £15 of it (about one and a half hours work for me) for 20 stubby bottles of lager, a joint of belly pork and a DVD I wanted.

      Someone had to brew the lager, blow the glass bottles, man the checkout, rear the pig, butcher the carcass, pack the meat, build the refridgerator it was kept in, write the script of the film, do the lighting, act it out etc etc.

      I certainly don't regard myself as a slave, I enjoy my job most of the time and 90 minutes work is a fair exchange for the fruits of everyone else's labour I've just purchased as far as I'm concerned.

      These kind of paranoid narrow-minded consipiracy theories are understandable given what is happening, but try to sit back and think about it logically.

      • Stuart Fairney
        Posted October 25, 2008 at 9:28 am | Permalink

        Well said indeed, Capitalism is about freedom. As Ayn Rand observed, "men can deal with each other in only two ways; freely by exchanging money for goods and services, or by force using whips and guns, there is no other way"

    • adam
      Posted October 27, 2008 at 5:50 pm | Permalink

      Adrian P.

      Its all electronic now, paper is obsolete.

  3. Tony Makara
    Posted October 24, 2008 at 5:06 pm | Permalink

    There are a lot of factors here, mainly that Sterling was deliberately overvalued for so long, something that suited the government as credit chasing imports was passed off as a magical boom and a fake feelgood factor. Once Sterling hit a ceiling, it was only a matter of time before holders began to offload sensing its imminent fall, now they can't offload fast enough.

    The state of the British economy means that cuts in interest rates are a certainty, that in turn will lead to inflation, who would want to hold Sterling right now? As overvalued quickly becomes undervalued and we are back to the yo-yo boom-bust politics those of us over 35 are so familiar with.

    The Conservative party must commit to maintaining price stability, as painful as the consequences will be for jobs. There is no point in us slashing rates today to rachet them up tomorrow. After the fiscal irresponsibility of the last decade we now need sober and sensible economic policies. Otherwise in a few years from now we will be back where we started all over again on the boom-bust carousel.

  4. Acorn
    Posted October 24, 2008 at 6:24 pm | Permalink

    "Pounds for sale; lovely British Pounds; come on get them while they're cheap". "What do you mean you want more interest on your pounds; cheeky bugger; these are British pounds I tell you".

    Either there are two many for sale or nobody wants them. Snag; having Johnny Foreigner own most of your country means when the going gets tough, Johnny flogs his bits of dear old Blightie; swaps his pounds [now falling in value, see above] for dollars; waves two fingers and urinates off, back home.

    On the bright side, think how cheap are manufactures are going to be for exporters. Our current account negative balance has to improve, whoopee. Snag; we don't actually make that much to export. Another snag; Mick the Maker can't get that bank loan to up his output.

    We all know from our site host that there are a lot of government IOUs we will have to pay the interest on soon. Our banks have a lot more toxics on their books which will vomit out soon. Commercial paper defaulters – company debt – credit card debt defaulters; and all those personal loans for that fifty inch plasma TV; about £1300 billion worth.

    So how do we tell the world we are serious about fixing the problem. We have to cut NOW, a £100 billion out of public sector spending; that's a million employees and the three pounds they each spend for every pound we pay them. That means repealing/suspending a lot of legislation that adds little value for money; has no value in the lifeboat when the ship is sinking.

    The five-a-day outreach officers and their like have to go. Any state employee who is not dealing with the primary basic type services – emptying bins etc – has to go NOW. Those involved in the future conceptual like, local development plans; community multicultural integration strategy conceptualiser, have to go NOW. Paying unemployment benefit is a lot less than what we are currently paying them.

    Suspend all employment laws; going on strike means summary dismissal; grievance procedures, in the bin. Fall off a ladder while installing a fire alarm because, "you were given the wrong ladder", sacked for incompetence – not knowing he had the wrong ladder. Then watch productivity rise overnight.

    [Acorn is not knowingly related to Richard Littlejohn of the Daily Mail but is probably his biggest fan].

    • Donitz
      Posted October 24, 2008 at 9:32 pm | Permalink

      Well said. I particularly like the:

      "community multicultural integration strategy conceptualiser"

  5. mikestallard
    Posted October 24, 2008 at 7:05 pm | Permalink

    A few brief months ago, it was rather outre to remark that the economy of the entire country might well crash. It used, then, to be simply ridiculous to mention Argentina, Zimbabwe or the famous German inflation.
    Myself, I am a pessimist on the lines of "Blessed are they that expect nothing; for they shall not be disappointed."
    I note, in today's Telegraph, an article, on the leader page, something along the lines of a national crash scheduled for the near future. In the First Post Daily, there was, yesterday, a fascinating article on the recent Argentinan crash.
    Now the pound is dropping.
    Still the stubborn government refuses to cut taxes, refuses to cut back the burgeoning bureaucracy (where desk drivers are called "Nurses and Teachers"), and flatly refuses to listen to advice on cutting back spending. In fact we are, apparently, going to spend our way out of the crisis.
    And where, prithee, are the Conservative voices? Where was the parliamentary debate the other evening when only 17 people turned out and there weren't even enough questions to discuss? (Mail).
    Just when we are expected to give back our trillion or so in loans in order to get a bail out from the IMF (if it is still going then), these very desk drivers will be queuing up for their trillion pounds worth of pensions.
    And then, of course, there will be the PFIs to pay back (another trillion?)
    No wonder the pound is dying on its feet!

  6. Susan
    Posted October 24, 2008 at 7:20 pm | Permalink

    I'm old. I've always voted but never for the Labour Party. It's been eleven long years; how long must we wait for the Conservatives to fight back? What are the rules and grounds for a motion of 'No Confidence' in the government?

    Regarding what you say, I don't think Pensioners can wait until 2010. Neither can the nation wait. It's a scorched earth policy and we don't deserve this fate. We've been poisoned and the medicine will taste very nasty – I do hope, Mr Redwood, that your proposals on deregulation will be adopted by the incoming Conservative government. How many laws will a Conservative government overturn?

    Reply: An Opposition can table a No Confidence motion if it wishes. We do not do so, as it would unite Labour and highlight how massively outnumbered we are when it comes to a vote. They are much more attractive and useful when there is the prospect of winning the vote.

  7. Susan
    Posted October 24, 2008 at 8:39 pm | Permalink

    Thank you for your response to my question on a 'no confidence' vote. Are you able to answer my last question re the many laws since 1997 which need to be repealed?

    Reply: I set out my view on this in "Freeing Britain to compete". David Cameron has said we need to get powers back from Brussels.

  8. Neil Craig
    Posted October 25, 2008 at 1:50 pm | Permalink

    While the fall in the £ is certainly going to push up inflation it will also reduce imports & encourage manufacturing exports. It will also disguise/male more comfortable the inevitable house price fall. Just as the failure of Major's attempt to keep the £ in the ERM led to a boom the fall in the £ may revitalise our economy.

    However the ultimate solution to recession will not be by juggling with money but by improving our productivity. If government said they were going to allow the building of as many nuclear power stations as the market wants, producing electricity at 1/4 of the present price like France does & starting tomorrow, it would do far more for investor confidence than all the cheerful speeches in the world.

  9. Adrian Peirson
    Posted October 26, 2008 at 9:57 pm | Permalink

    A pound is only worth a Pound because Govt says so.
    It is unbacked, it has no intrinsic value.
    those £50 Pound notes are not Miniature rembrants, they are fakes, they are prints, they can turn them out at will by simply printing more.

    They are receipts for Gold, held in storage. now the link is severed, they are worthless.
    Just because no one realises the scam and you can do your shopping with it, does not alter the facts.
    If the Bank lent me £1000 Pounds worth of Gold, then I would Owe them something of value, as it is they lent me worthless paper, credit is simply thin air that they conjure up as a debt the moment they decide to lend you the 'money'.
    Its like you coming to me to Borrow £10,000, I make the figure £10,000 appear in your bank account, but I don't have £10,000.
    It just an electronic number.
    But wait you say, I can with draw the Money from the cash machine, yes you can, there is a certain amount of worthless paper currency out there. So its a trick, yes, a few people can withdraw Cash.
    But if too many peopoe try to withdraw at the same time, then there is a problem, the scam is exposed, that is why the Govt had to step in with Northern Rock.
    The Banks Never had the amount of cash that they say they have lent out in the first place.
    It is called Fractional Reserve Banking, they Lend out TEN times more 'money' as credit than they actually hold on reserve.
    IE they lend out Each depositors money to TEN other People, charging them 8% EACH.
    It is a Scam, concocted by Westminster and the International Banksters.
    It really is that simple.

    They have the Gold, we are left playing with the receipts.

    Give me control of a nations money supply, and I care not who makes here laws'.
    Congressman Ron Paul trying to get the Message out. http://uk.youtube.com/results?search_query=ron+pa

    Here is how the Media Machine Silence him. http://uk.youtube.com/watch?v=7iW5kOB1pmg

    Most People Believe that the Federal Reserve is a Government Body, in fact, Just like the Bank of England, it is Neither Federal, and neither does it have any (gold) reserves.
    It is a Private Company, run for Profit.
    http://uk.youtube.com/watch?v=QlIhhYGujoQ

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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