Sterling plummets on the back of Brown's debt-fuelled economy

Fraser

I can't believe the last 17 years of toil have amounted to nothing more than a much higher fixed cost for running the state. The national wealth has been undermined by Brown. Private sector wealth was essentially an illusion of asset and equity prices dissipated by the reckless blundering of a one eyed thief.

kinglear

What I cannot understand is why noone appears to be holding Brown to account. The only chance is the lectorate in w wee while - but until then we are swamped with his lies and spin.

Neil

Brilliant assessment - as you say "explain( lie) yourself out of this Gordon"!!

Dirty Euro

They must be worried at the thought of the tories getting in.
And with Obama about to be elected no wonder they are re investing in the USA

Dirty Euro

I am backing Britain Maybe you tories aren't.

oldtimer

The present is bad enough. The outlook is bleaker. And be wary of all that talk about exports leading us out of this mess. Today, Volvo Trucks said it had taken orders for just 115 new truck in the past quarter - the year before it took in orders for 41,000 trucks! (information from the FT Alphaville site). This is astonishing - as bad as, if not worse than, the early 1980s when orders fell of a cliff. A business I knew then had annual sales of big ticket items drop from c1000 to just 63. It closed shortly thereafter.

Silent Hunter

What has happened?

I thought Brown was supposed to have single-handedly saved the financial markets of Europe?

Well, finally the hubristic chickens are coming home to roost at Labours door.

I do hope that the bizarre run of 'positive to Labour polls' are finally shown for what they are...........SPIN !

Did anyone else hear Lord Mandy of Fol De Rol saying how times were going to get tough?
Rather sick; coming from someone who has just received a pension in excess of £1 MILLION for lining his pockets with money from Russian Oligarchs who are thankful for the aluminium tariffs (set by Mandy) being halved for them.

No conflict of interest there then ! Pass the sick bag.

TrevorsDen

Maybe it only the markets that are listening to what the tories say - certainly the media have been deaf for a long time.

I have been commenting for ages that we are likely to face a sterling crisis once Britain debt, spending and recession prospects became clear.

interest rates are now in no-mans land. lower and we get a Sterling crisis and import inflation leave em and we get a deeper recession.

let us all sit at the masters feet and see how Lord Mandy talks his way out of this.

euro

Cassius points out (http://www.cassiuswrites.com) that Brown now claims to be leading us OUT of recession!!!

William Norton

"I would love to hear Brown explain why sterling’s crash is a problem that started in America."

Tush tush, Fraser. Have you no faith?

As the Great Helmsman will tell you, once he's finished his swim in the Thames, you've missed the point. Sterling isn't crashing. What is happening - obviously - is that every other currency in the world is suffering a dangerous and destabilising hike in value, which only Britain has managed to avoid thanks to our prudent long-term totally debt-free leadership.

It's all part of the Supreme Leader's cunning plan for Britain to export or die. Well, die at any rate.

Top tip: the next phrase we'll all be hearing until we're sick of it will be something like "British industry now has a once-in-a-lifetime opportunity to undercut our competitors and boost exports".

And the first thing whose export we can expect to be boosted will be People.

Pentlands

The pound has its biggest one day fall in 37 years - but no mention of that fact on the biased BBC website...............

kinglear

Dirty Euro - how exactly are you doing this backing? Only buying British made goods? Only holidaying in Britain? Or what?

Gareth Sutcliffe

Small point - Govt deficit figures are generally quoted against GDP. The obvious reason for this is that GDP gives an idea of the ability to service the debt.

But if we are discussing the extent of overspending, it makes more sense(to me anyway) to give the ratio of deficit to tax revenue. In that case, you can see that the UK govt has been spending 7.5% more than its income, every year, even in the good times.

That is extremely profligate. And for the most part this 'investment' does not appear to have been in those items most worthy of public funds such as flood defences. Its all been on the client state.

The Laughing Cavalier

The commentators who are telling us how bad Brown is were, for the most part, those who sang his praises while he was getting us into this mess. Those of us who warned that this Potemkin Chancellor would lead us to disaster were ignored, derided even. When sterling gets close to parity with the Euro Brown will take us into it, thus completing the destruction of savings and pensions that he began in 1997.

TGF UKIP

"This is the market commenting more articulately than the Tories on Brown's "scorched earth" economic policy." Exactly so Fraser.

Sterling's decline should THEORETICALLY give the Tories an open goal for them to spell out -

a) That this is the international judgement on Brown level of debt and

b) what this decline in sterling will mean for everyone in terms of rocketing petrol and food prices and forget holidays, folks, you won't be able to afford the exchange rates.

One thing, though, that both you hacks, Fraser, and your precious mates can do to get the message home is to stop talking in these %ages of GDP terms. Absolutley meaningless to Joe Public. He will though understand real figures though i.e. £351 bn debt in May 1997 and now at £700 and more when everything is included and £700bn equates to indebtedness, which their taxes will have to pay for, amounting to £28,000 for every UK household.

Of course if your two best mates hadn't so loudly and stupidly supported and embraced the Labour spending that's incurred all this debt and talked and behaved like conservatives they would be in a much stronger poition to take Gordon to task.

As it is there's more chance of Gordon and Mandy stopping lying and apologizing to the British people than there is of your precious pair landing any meaningful blows.

Dirty Euro

It is those bloody bankers.

Sterling crisis my elbow

Eh? It's higher now against the Euro than it was six months ago.

In any case can someone please tell me why this is a prioblem? Usually Tories are telling us that we face the danger of a slump so therefore they should be applauding this market-driven correction which carries minimal inflationary risk and prices us into export markets while stimulating demand for domestic produced manufactures to substitute for imports at home at a time of economic downturn.

Sounds like a win-win to me: which is why so many Tories cheered just this when it happened after the pound's ejection from the ERM in September 1992.

Get your story straight please.

Gareth Sutcliffe

Pentlands - in fairness, neither has sky, at least not in the headlines where it should be.

everyone is more interested in the GDP figures and Alan Greenspan's mea culpa

mac

kinglear - "or what?"

A pound to a pinch of proverbial he's a beneficiary of NewLabour's benevolent benefits society.

Up the workers, DES eh? Daytime telly and a packet of Rizla ciggy papers. Contentment, and all made possible by that nice Mr Brown.

Henry Rogers

But wait awhile, the wind is still rising. When the storm is at its wildest, Tony Blair will come to us, walking across the water, to save us all from shipwreck.

Toby

The sterling crash makes a nice headline, but doesn't really reflect what's happening in the markets. I commend the following chart to Coffee Housers:

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/13/11/twelve_month.stm

It shows that Sterling hasn't budged against the Euro since April. What we've seen over the past few days is the strengthening of the US$ against European currencies. This says much more aboutrelative perceptions of Europe and the US than it does about Britain's economic standing. Or put another way, we may be going down, but we've got good company...

ArmyBoy

I am a public sector worker (Army) and am truly terrified buy the current state of affairs. Not only have the Labour party pretty much bankrupted the UK economy but they want to borrow even more money. They are not just skuttling a sinking ship they are torpedoing it just to make sure. Even if the UK electorate see the light and kick Labour out of office, the Tories will have a nightmare job of getting Britain back on track, and due to this are probably not going to stay in office too long. Could this be the longer term goals of the Labour party??

John Miller

Well, Pentlands, lil'Bobby does mention sterling's fall on his blog. But it isn't really sterling falling y'kmow, its all those other pesky currencies rising.

Of course, when you explain to a drowning man that he isn't really sinking - it's just the sea rising, he may not appreciate the subtle difference...

William Norton

"which is why so many Tories cheered just this when it happened after the pound's ejection from the ERM in September 1992."

Mr Elbow, you have overlooked two critical differences between now and 1992:

(1) There was a Tory Govmt in 1992, and there is a Labour Govmt now. Clearly the '92 crash was an example of unparalleled statesmanship, whereas today it is patent evidence of incompetent bungling, as eny fule kno.

(2) Many of us at the time thought the '92 crash was the final knife in the ERM, Maastricht and the whole European brouhaha panjandrum. That prediction turned out to be not as accurate as we had hoped....

John Miller

Hmm, shall I explain this slowly to elbow?

When you go to the sweetie shop to buy your Smartie, the man behind the counter says "Today I have decided that the price is no longer one of your pennies, because I now think that they are nasty, smelly things and henceforth it shall be 2 pennies."

Where do you get the other penny?

Oh, and if you say you just make another one out of milk bottle lids, Germany tried that in 1945. But if you want to know what's so bad about inflation, ask somebody else - I can't be dong economic lessons all day.

JONNY

Only drawback to all this is: when they cut the interest rate the Pound will go subterranean.

JimBob

I read earlier this week that UK has lower national debt:GDP than other rich countries.

Out of interest, does anyone know whether this compares like with like? ie are other rich countries excluding public pensions, or anything else, from their debt figures?

mac

ArmyBoy: if you are a professional serving soldier then you really shouldn't consider yourself a "public sector worker". Rather, you serve the Crown not the government of the day, and the manner in which the Army has been treated by Brown and company is disgraceful.

Good luck.

TGF UKIP

Fraser, can you cut through the crap and provide some explanations please.

What JimBob may well be referring to and what Brown was probably spouting in the House this week are some flattering debt to GDP figures.

Let me quote from the Sunday Times' David Smith (no mug he) in his piece last week:

"Maurice Fitzpatrick of Grant Thornton points out that Britain's public debt position, WHICH IS BETTER THAN ANY OTHER G7 COUNTRY (my caps), is a big advantage. Even a UK debt to GDP figure of between 40% and 50% of gross domestic product, which Alistair Darling is likely to admit to in his pre-budget report next month, is half the G7 average of 93%. America is on 61%, Germany 63%, France 64%, Canada 68%, Italy 104% and Japan a huge 195%."

While you are all steamed up about this 43/37% and are inciting with very little difficulty the rest of the Coffee House to be similarly het up, Gordon is sailing blithely above on the crest of figures like those provided by by Messrs Smith/Fitzpatrick.

When anoraks like we Coffee Housers are confused, Fraser, what chance Joe Public, which is why I keep, and will keep banging on, about the necessity of avoiding percentages and sticking to real billions - £351bn debt May 97 and £700bn+ today - and bringing it home by spelling it out that that £700bn means £28,000 per household for their taxes to pay off down the road.

Sancta semper simplicitas, Fraser and some explanation please.

hadrian

JimBob, you can bet that bottom dollar you have stached away for a sterling rainy day that our GDP is genuinely in excess of others, however hard Broon tries to cook the books.
And if Britain is about to become 'the new Iceland', it just goes to show all the nonsense Broon was spewing about Scotland desperately needing to hang on in in the U.K. to survive financially.
In the run-up to Glenrothes I do believe, Fraser, your bloggs should be mandatory reading for Mr Salmond. Sheer dynamite. Sadly the British electorate will only hear the explosions when it's the eleventh hour- as usual.

Nicholas

Dirty Euro you are not backing Britain you are backing Labour. The two are mutually exclusive.

Travis Bickle

just think of the mess we could be in if this situation wasn't the last thing he thinks of every night, and first thing every morning. Thank you Mr Brown for your concern.

Yours

A. overtaxed liberty stolen spied on citizen

El Sid

Others have beaten me to it, but the performance of sterling against the currency of our largest trading partner (flat for 6 months) tells you that this isn't really a sterling-specific thing. And it's a mistake IMO to regard a flight to the dollar bloc as a flight to the USA.

Everyone's got this notion that the interbank market is about Lloyds lending to Barclays and vice versa. In fact it's supported by vast flows of cash from Chinese and Gulf banks recycling the money they've made from selling us tat and oil respectively. When the interbank market seized up, they parked their sterling cash at the BoE, their euro cash at the ECB and so on. However, they've been making a loss by doing so, so now they've packed up their toys and taking their cash home. This has visible effects on the euro and sterling, it's less obvious when they give up on the USA because their home currencies are more or less pegged to the dollar. But it's happening to the USA as well - this is all part of the great shift from West to East.

JimBob - UK's 40% debt:GDP compared to say 60% of France is "real" - but that 20% difference is the sovereign wealth fund that we accumulated from North Sea oil. By lumping it in with our general accounts, we've effectively hidden it and invested it in UK government gilts, but it does represent a "real" bit of extra wealth compared to France. However Gordon is determined to urinate away our family silver -the Labour government has benefited from ~£70bn of direct revenues from the North Sea since 1997 (about the same in nominal terms as the Thatcher government), and it looks like a decade of oil money has been spent in the last month. Prudence indeed.

Other top stat - the deficit in the 12 months to July 2007 was over £30bn - before any hint of credit crisis. Who was Chancellor in those 12 months?

Rob Atkins

This man is like Humpty Dumpty in Alice through the Looking Glass - he changes the meaning of words to suit himself :'recession' becomes 'downturn', 'boom and bust' becomes 'tory boom and bust', and most mendaciously 'national debt' becomes 'national debt minus northern rock, PFI, pension deficits and any other debts he can hang a different label on'

I've got one to the list 'Government spending our way out of recession' means 'I've spent all your money, now I'm going to spend your children's money'. Get rid of this man before he bankrupts the country, like he's tried to bankrupt our friends in Iceland.

Craig Strachan

Funny how, for all the talk about "decoupling" and the passing of the economic torch to Asia, the whole world still runs home to the US$ when things get scary.

TrevorsDen

Like with like?
This is the point - does anybody really believe the GDP figurs? As soon as our GDP starts to fall it will go up as a %age (ignoring the actual real money figure going up as well) and Brown will redefine both to make it look better.

"£351 bn debt in May 1997 and now at £700"
-- again to the point. After 11 years of 'growth' our actual debt figure has gone up? Huh? So what good has this growth actually done?
Not only has our debt gone up but our individual debt has gone up massively as well - this is a figure Brown studiously avoids mentioning.

What this betrays is a great weakness in our economy - our 'growth' has not created wealth to be dispersed or disbursed, it has just resulted in a ball and chain of debt - which will drag us down or hold us back or impoverish our future -- or all three.

A fall in the value of sterling would in theory help exports but since we do not make much any more this hardly helps much (unless you are exporting minis to the USA) - but it will keep import costs (hence inflation) high.

Ultimately a depreciating currency robs us and diminishes us and ratchets our poverty downwards.

"win win" ??? typical lefty nonsense.

Oh and as for the £/Euro being unchanged --- a year ago 1 Euro would buy £0.655
Today it will buy £0.806.

If this is progress I am a banana.

lola

I am not sure that is just 'debt' as such, and I am ready to be corrected. But debt is money supply. Broad money. What Brown has done is inflate the money supply. I reckon about 10% p.a. in excess of GDP. If you view Sterling as a proxy for common stock in UK plc we now have about 2.35 times more stock for the same business size as in 1997. So either we have to drive more return or reduce the supply of shares - buy them back, or in other words deflate the money supply. (Or we could grow GDP exponentionally. No chance.). Whatever Brown now does he cannot escape this. Borrowing more from international investors is out of the question. It,s just more money supply. He cannot simply print more money, well not unless he wants to be known as Mugabe Brown. Whatever way you look at it the money supply (of Sterling) has to shrink. This will be extremely painful. For his part waht he has to do is to drastically cut spending. As the biggest bit of the budget are generally social security type payments this means....

Carol

Fraser could you re publish this in the News of the World on Sunday?

Junio

If only Robert Peston could write like this!

J Jenkins

Brown is still peddling the 'low inflation, low debt' lie to the media.

What a ****.

Fraser Nelson

Hadrian, I actually think Salmond is handling himself quite well. A senior Tory told me recently that things have come to a sorry pass when the SNP has more to say about this than the Tory front bench.

John Moss

JimBob

Suggest you go to the website of the CEntre for Policy Studies and download Brooks Mewmark's excellent analysis of total UK Govt Debt.

Everybody else, please, please remember that the Government debt figure is huge, household debt is not Brown's fault, well only a little, the Government debt of £1.85 TRILLION is!

Simon

JimBob 6.18pm

and TGF UKIP, hadrian, El Sid , TrevorsDen and Iola.

I'm not at all sure whether the comparative ratios of National (Government) Debt : GDP are very useful in assessing the respective financial healths of various countries. I'd have thought that a more apt comparison between countries would be the ratio to GDP of total nett external debt, government, corporate and household combined.

What we're really looking at here, I'd suggest, is how much Keynesian demand-stimulation will need to be funded from overseas; how easy it is going to be to persuade foreign investors to give us this funding; and how sustainable will be the ratio of nett overall debt : GDP when we finally come out of the recession.

In other words, is there a part of the additional government borrowing that is not directly fundable from increased domestic savings? Are we in a sufficiently healthy financial position for any required overseas funding to be relatively straighforwardly obtained? And will any overseas borrowing taken up be able to be rolled-over in the next upswing, or is there no scope for an upward sea-change in our nett overseas debt : GDP ratio?

David Lindsay

The falling pound will take an awful lot down with it.

It is good for manufacturing. Which is good for trade unions. And which is (or would again be) concentrated in the North, the Midlands, the Scottish Lowlands and South Wales.

All that, and a public stake in the banks, too.

The Revolution is being reversed in reverse.

First the turn of the century assault on the Constitution (the neutering of the Lords, the only logical end to the "process" of Scottish devolution, such economic case as there ever really was for a United Ireland) and civil liberies.

Now the underlying 1980s assault on economic responsibility.

Annd before long that which underlay (and was entrenched by) Thatcherism, namely the 1960s assault on moral and social responsibility.

Fraser Nelson

TGI, great point. That would be a prime Brownie as the figures you quote are for gross debt and the 37% figure Brown always quotes is net debt. The UK gross debt was at 50% without NR, B&B, PFI etc. See Annex 32 & 33 of the OECD's latest World Economuc Outlook published in JUne.

imaknobhead

A pound a week is to much for this magazine. Wrie eomething worth reading with balanced views.