The Falling Pound
The British pound has been taking a beating—yes, a pounding—falling to an all-time low against the U.S. dollar, and the conventional wisdom is that this is the result of the Liz Truss government’s eat-dessert-first “mini-budget,” which is big on tax cuts and popular subsidies, and short, in the view of many critics,on long-term prudence and credibility. Of all the many wonderful things the British might have imported from the United States, you’d think that they would have chosen something more useful, maybe a written constitution or something like that, rather than Washington-style fiscal incontinence. Instead, the Tories seem to have taken a page from the recent Republican playbook: tax cuts, higher debt, and distant memories of balanced-budget talk.
That’s one view. Daniel Hannan sees things a little differently.
Hannan, who does not answer the telephone as “Baron Hannan of Kingsclere,”
almost escaped British politics after contributing mightily to the successful campaign to abolish his old job as a U.K. member of the European Parliament. Instead he was lured into the House of Lords at the last minute by Boris Johnson. He observes that while the recent action has been dramatic, the pound has been on a declining trajectory vs. the dollar for more than a decade, falling sharply in 2008 from its pre-financial crisis value of more than $2 and trudging gloomily toward dollar parity. And the pound isn’t the only currency that has been sputtering against the dollar recently: With the Fed pushing up interest rates to fight inflation, the dollar has strengthened not only against the British currency but also markedly so against the currencies of China, South Korea, and, especially, Japan, where the central bank has been sticking to ultra-low interest rates in the hope of goosing economic growth that has alternated between miniscule and negative in recent years.