Under the last Labour government the pound collapsed within the EU – far more than the latest ridiculous Treasury forecasts of possible future falls.
In July 2008 the pound bought $2. By January 2009 it was under $1.40, a fall of 30%.
In July 2007 the pound bought 250 yen. By January 2009 that was down to just 122. It had halved.
Better stewardship of the UK economy and events elsewhere since has brought the pound back up to $1.45 and to 160 yen.
I do not recall the Treasury forecasting the huge falls in sterling we experienced towards the end of the last decade.
If they were unable to forecast the pound accurately then when such a big change was about to happen, why should we believe their latest forecast?
May 23, 2016
Better UK interest rates and its further up on the dollar. But while banks are protected it ain’t gonna happen soon. Preparing larger sofa and bed to stuff it under!
May 23, 2016
A reason we should at least pretend to believe the latest Treasury forecast for Sterling is that if we are not seen to, then the recent trend suggests that even more ridiculous nonesense will be uttered as Project Fear is inexhorably transformed into Project Panic on its way to Project Utter Tripe. Let us charitably leave Chancellor Osborne with some prospect of redemption and rehabilitation into the real world.
May 23, 2016
John,
The Remain side are keen on the “Four horses of the Apocalypse” style of campaigning. Personally I think they are missing a trick. They should add the fifth horse of the Apocalypse – the EU horse… (Just ask the Greeks, Spaniards etc)
May 23, 2016
Project Fear has nothing to do with forecasting just ever wilder decrees of famine and pestilence.
It is now known that CMD was priming business leaders even before he started his non negotiations.
The man should be impeached.
I hope that there is a leadership challenge immediately after the vote regardless of the outcome.
May 24, 2016
This was put on by LL last week.http://www.telegraph.co.uk/news/2016/05/20/with-its-future-assured-the-bbc-is-now-happy-to-toe-david-camero/
May 23, 2016
Currency fluctuation is just another Remain lifebelt, when it suits them. It also suits the people who sell money, movement leads to profit.
This time last year the rate was around Eu 1.40 = £1.00. having dropped to Eu 1.23 in April this year it is today about Eu 1.295. If one could predict the reasons why, it would open the doors to untold wealth. At the end of Napoleon’s career one only needed a few homing pigeons and very fast horses to take advantage of the market. Today we could get the news before the Duke of Wellington thanks to the internet.
Be in no doubt, the Treasury is a tool of government. It’s weakness , as with many other parts of the civil service, is that it has allowed itself to be politicised, to it’s ongoing shame. Consequently anything it says should be taken with the proverbial pinch of salt.
May 23, 2016
I remember over the last few years about the economic dire of Japan that I wished I had kept my Japanese earnings, during the 1990s, in yen instead of changing them into £s. And the yen is still high.
May 23, 2016
We regularly buy Euros, and 9 times out of 10 when our FX dealers tell us to expect the rate to change one way or another they are wrong…
So, take any Treasury predictions with a sack of salt…
May 23, 2016
The pound should be allowed to float freely. The problem with having the pound too high is that the country does genuinely live above its means and the higher pound encourages too many imports and makes exports too expensive.
If the country is running an external deficit then someone has to fund it by borrowing. If the Govt does the borrowing we end up with a high budget deficit. If the private sector does the borrwoing we end up with unsustainable levels of debt and the creation of asset bubbles in the share and property market. When they burst we inevitably end up back in a worse state than before the borrowing was allowed to occur.
In 1985, Mrs Thatcher’s government allowed the pound to fall to $1.05. An historic low.
The speculators were overselling the pound at the time. The correct course of action was not to panic and not try to shore up the pound with borrowed money as the Callaghan govt had done several years previously.
That just puts money into their pocket! So full marks that time! A pity they didn’t do the same in 1991 (Black Wednesday) when the same govt made George Soros even more wealthy than he already was!
May 23, 2016
I think the rate was about £ 1.58 when I was in America for Thanksgiving in 2008. From then on it does not appear to have moved much along that average.
Although it does not necessarily follow: the price of gold is now rising and the dollar should decline other things being equal.
The idea the Pound will decline when on Brexit the whole world opens up for trade with us is unpatriotic wishful thinking by the Remaindians. They should stay clear of the Forex market and their local bookies. They’ll thank me for it.
May 23, 2016
It is all a bit confusing. We are asked to believe that Brexit = a recession + inflation + a collapse in the £ + 1/2m new unemployed + a house price collapse + a rise in interest rates. Even if some of these things were to happen, it seems quite unlikely all would. For example is it likely we could have a recession at the same time at the same time as inflation and a collapse in the pound? Is it likely we would have a collapse in the £ at the same time as interest rate rises?
Given that we will also apparently have WW III perhaps these bad economic indicators will in any case pale into insignificance.
May 23, 2016
On 23rd June 2016 on Brexit the EU will lose approximately 13% of its population. This 13% , that is the UK, is generally employed. Therefore the loss of a working population to an otherwise poorly-working population of the EU is catastrophic for the EU.
What will be the effect on the EURO as an international currency when it loses the underpinning solid gold of UK workers
May 23, 2016
France banning use of e mails outside work hours ?
They won’t even be able to sell those Euros for pounds during 17 hours of the day…
May 23, 2016
Lots of hand wringing all over Europe this morning, especially in Brussels, Guardian Towers and on the BBC while they anxiously await the outcome of the Austrian Presidential election.
What is certain is that Norbert Hofer will either “just win” of “just lose” the election.
If Hofer loses, Europe will utter a collective sigh of relief and carry on as usual but this completely misses the point :
The fact is that politicians a long way towards the far right are achieving more support that ever before across the Continent and this should not, and in the medium term, cannot be ignored.
As I say, whatever the ultimate outcome, Hofer has already won the clear support of 50% of the electorate in a free and fair election in a major European Country on a platform that is clearly on a completely different direction to that being taken by the EU.
Centreist Politicians will ignore these warning signals at their peril. They need to take note and change direction before it is too late and they are defeated at the ballot box.
At particular risk is Merkel who faces a General election next year. Remember that, after losing badly to the right in recent regional elections, she immediately came out and stated that the outcome would not cause her to change direction at all, particularly over her migrant policy. This is a very high risk strategy. As a result, it is by no means certain that her party and the CSU in Bavaria in particular, will allow her to be their candidate for Chancellor in 2017.
Then we have France.
We all know that Hollande is toast, but Marine LePenn is waiting in the wings. She will almost certainly make it into the second round of the Presidential election next year but it will not take much for the electorate to be angered enough to ignore the inevitable appeals from both of the established parties to gang up and defeat her in the second round. That would be sure to put her into the Elysee Palace.
Whatever the outcome of our referendum, the EU and the Eurozone will then be brought down or at least severely damaged because LePenn is committed to withdrawing from the single currency.
The EU is showing no sign whatsoever that it is prepared to take note of the concerns and wishes of the electorate, indeed, the whole structure, especially the European Parliament, is set up in such a way that it is almost impossible for even the most enlightened politicians to make it change direction.
Carrying on as before should simply not be an option but that’s exactly what they will try to do.
May 23, 2016
Indeed, they do sound increasingly desperate. Cameron even said it would be the first self inflicted recession. Hardly large incompetent left wing governments are always causing recessions. What about John Major’s ERM fiasco. That was certainly self inflicted and the dopes did not even apologise for it, nor even learn anything from it.
Osborne even suggested that people on low incomes, who are paying a large proportion on fuel, would suffer. In fact fuel cost could easily be halved without all the EU greencrap lunacy.
Osborne is clearly incompetent and economically totally illiterate (given his national living wage, landlord/tenant and pension muggings and other totally lunacies) so who would trust him on anything at all? Osborne is starting to make even 98% Denis Healey, (no return to boom and bust) Gordon Brown and ERM fiasco/joke John Major look good relative to him.
May 23, 2016
The BoE should be asked pointedly and in good time what “numerous tools” ( Mr Carney’s term ) are ready at hand for the very opposite of its gloomy forecast of what will immediately happen after Brexit and indeed immediately before the Referendum.
The BoE appears to have developed a plan to batten down the storm hatches when we might need a sophisticated cooling system in readiness for an Indian and indeed Chinese Summer. Had the BoE not presented an unbalanced lopsided number of “probabilities” and “possibilities” it would not need reminding of its responsibility.
May 23, 2016
How much would it cost to mailshot the whole country
with a short flyer
“Brexit the Movie – You Tube. Watch it and weep if you are left or right, young or old, black or white. Make your own mind up.”
Its not aimed at people who know the facts already but the 60 million ( 80 million ??)who don’t.
Some one has financed this film in addition to the crowdfunding, so can someone else (rich) continue the good work.
or is every super rich person pro EU.
May 24, 2016
£9.2 million of taxpayers’ money is what the government spent on its mailshot.
May 25, 2016
And the rest….
This was an expensively produced booklet printed unnecessarily on heavy 160gm2 paper- I reckon the true cost including distribution to be nearer £13 million.
May 23, 2016
JR, pleaseread Steve Hilton’s article in the DM. He state S that 30 percent w govt led and the rest was from the EU giving Ministers two days to respond or it would be automatic approval. E volume of paper. Eng too large for any minister to read in the timeframe. This supports the LibLab Con cartel doing the Eau bidding and being ruled by unelected bureaucrats who decide how our taxes are spent!
Katie Hopkins writes another good article close your own blogs about the rise of politicians standing up for their own citizens not immigrants or failed multiculturalism across Europe. Dominat Merkel and timid Cameron types making way for extreme right or left alternatives. Although the lazy left always name call and are quick to give labels. I note Chucka? on SKY TV this morning talking absolute rot about immigration without any interruption or correction!
Meanwhile the apocalyptic warnings continue without anyone asking why Cameron did not use his examples and supporters as a bargain in chip to get some thing from his negotiations.
May 23, 2016
The Treasury have been controlled by Osborne to create many scaremongering fantasies ; he has been wrong on so many occasions and there is no reason to give credibility to him now .
We are not in a facing doom situation -were Brexit to occur , quite the opposite . I accept that the City may face a certain degree of limitation following Brexit , but the talent and experience that exists in its ranks will quickly overcome any reduction . If the £ does experience a down-turn , there are many advantages that follow ; exports ought to boom .
Of course the Euro and the EU may collapse if we exit ; again there are many advantages to the member countries in re-establishing their currencies – Greece for example would gain enormously . Germany , definitely , has much to lose through a re-valued Deutsche Mark . Overall the collapse would re-awaken national identity and provide much more options for different countries to adopt . The one size to fit all does not work .
May 23, 2016
The “first” DIY recession says Cameron! Well the recent ones were caused by Major’s insane ERM and his stupidity in not coming out sooner and the one after that by incompetent bank regulation by the government agencies. So they were both DIY ones too (or Government caused ones). Perhaps the next one will be like Venezuela caused by Corbyn as he is such a fan of their economic strategy.
What a dire choice Corbyn/McDonnell or socialists light Cameron/Osborne.
The BBC (on radio 4) just now said Osborne was claiming the PSBR would rise post Brexit. In BBC think mode they helpfully went on to explain this was what he borrowed for “public services”. Well perhaps a little is, but most is pissed down the drain on EU fees, corrupt overseas aid, green crap, Swansea lagoons, HS2, road blocking, gold plated pensions for ERM & green crap enthusiasts and the likes.
May 23, 2016
Osborne should certainly want out of the EU. This as he is making such a pigs ear of the tax system, the trade deficit, the dreadful public services and the massive PSBR.
Brexit would at least given him a ruse to blame the mess (that he has augmented so well) on. Something other than his own lack of direction. Furthermore it will release him to get a job more suitable to his limited talents. Etc ed
May 23, 2016
I am fed up with the spiel. Nobody knows exactly what is going to happen . There may be a small rebound pound shock, but shocks are only temporary. Those who sell to us won’t stop , those who set up stores in this country won’t close them. Lets vote with our convictions and wait and see.
May 23, 2016
Cameron and Osborne ,no fear, think they are funny. I am Yorkshire. Instinctively, know I speak for us all when we saw Monty Pythons’ sketch on Yorkshiremen…well,we’re still shouting: “luxury” and “when ar worra lad we lived in showbox int’ middle o’ road” and laugh decade after decade. But Cam. and Osb. saying we’ll all end up down pit sucking sherbut and onions for the rest of our lives if we LEAVE the EU is plain daft. Stood on one another’s shoulders they wouldn’t make the height of a Yorkshire flowerpot.
May 23, 2016
Markets hate uncertainty.
Brown started reversing his earlier sensible programme in 2003, but interest rates were held high encouraging a strong Pound and screwing business. When the FX world stood up and took notice with the crash of 2008, the Pound dived, as did interest rates. Brown’s policies were seen as crazy, and the Pound was never going to pick up until he went.
Cameron was seen at the time as the sensible alternative, and at least the coalition had aims, even though many of those were as daft as a brush. Stability in FX returned a little, until recently when the markets started noticing the slightly crazed stance taken by the government in the referendum campaign, and that Osborne never seems to reach his goals for debt reduction.
A new path with an independent UK, a firm grip on finances, and growing self-confidence as a nation could do us all good. Rather like post 1992 the FX markets might keep the Pound low, but industry will reap the benefits.
May 23, 2016
Another well observed article by JR
It’s becoming apparent that what the Leave campaign needs is a campaigner with the intellectual firepower needed to make the big arguments. That person is John Redwood – but for some reason he has been denied a prominent voice on the campaign. Why is Gisella Stuart given lots of airtime but JR seems to hardly get any..She is an able politician but has less much experience of economic matters….
Is it too much to hope that personalities are put aside and Vote leave simply play their best team ?.
Perhaps JR could
May 23, 2016
Agreed. Why don’t you compile and publish brief bios of ‘the great and the good’ who are vociferously telling us what doom and gloom await us if we Brexit? For example:
Lord Hesletine – believed the UK should join the EuroZone. Still believes we should join the Eurozone;
John Major – the Chancellor who took us into the ERM; the PM who wasted £2 billion of UK money on the foreign exchanges between 12 noon and 5 pm on Black (White) Wednesday by delaying our exit from the ERM; the PM who failed to veto the Maastricht Treaty; and
Christine Largarde – urged the UK to join the EuroZone; has (used ed)her office of CEO of the IMF in order to prop up the Euro.
May 24, 2016
The Treasury is as clueless about the future of the pound as everyoner else – so is the Governor of the Bank of England.
Back in the late 1970s the business I then worked in faced a significant decision to end the life of a well known product, closing the factory that made it and costing the jobs of everyone who worked in it. About 90% of its output was exported. In those far off days the pound was bouncing all over the place. The business was losing millions of pounds of unsustainable losses. Before making the fateful decision it was decided to seek the opinion of the then Governor of the BoE, Gordon Richardson, on the future trajectory of the pound’s fx rate. His reply was instructive. The fx rate was like water, it will find its own level and he was no more able to predict its level tomorrow, next week or next year than anyone else. Nor can Mr Osborne or his Treasury forecasters do so today.
May 25, 2016
That’s right. No-one can really know the future changes of currency values. But everyone can have their own opinion and speculate, with real money, if they choose.
Of course if anyone knows otherwise they would be well advised to keep their forecasts to themselves and use them to make lots of money.
May 24, 2016
Off topic:
There are not enough MPs on the Treasury Committee who can dissect the sophistry and contrived semantical relationships of certain utterances.
To talk of possible Brexit as now making “Uncertainty” in the Market is to suggest that this UK generated “uncertainty” is more powerful than all other “Certainties” in all the Market put together.Another kids game of linguistics was about the Oil Price in which it was said that the BoE’ remit is not to “predict” the Oil price ..but it DID predict the oil price (wrongly ) as did the OBR (wrongly) and announced it was partly basing its findings on such. Also , the assertion that “No-one did or could predict the oil price “…poppycock. And that the “unpredictability of commodities such as oil is proof of financial efficiency” What a complete and absolute load of Banks-of-England.
It seems the BoE eats lots of carrots; for, it has superior eyesight in being able to see in the darkness of uncertainty which by definition has to be uncertain and dark. It is assuming that the deliberations of the other 27 members of the EU at any one time are certainties.
The BoE’s assessment that the very thought of Brexit is having a real effect on Sterling is contrary to everything we know about currency fluctuations and their manipulations in the market. Bad news, even if it is not just “uncertainty”, does not necessarily and certainly cannot by itself make a currency decline. Sometimes the interim result is upwards. These answers by the BoE are nothing short of Alice-in Wonderland tautologies and verbal riddles. The BoE has taken the Treasury Committee for dupes and got away with it.
phttp://parliamentlive.tv/Event/Index/935d4712-2792-4047-9139-6a1fc2c3a6bc
May 26, 2016
The pound is worth a lot more, even now, than it would be had we entered the euro at .71 pence to one euro.
May 29, 2016
@Actually it isn’t.
The pound is now trading 76 pence to the euro.
But that’s not a bad thing. The floating pound gives the UK economy an advantage which the countries of the eurozone don’t have.