Saturday, December 13, 2008

Panic on the pound

The pound is dead - long live the Euro. That's been the message of the last week from various people as sterling dips against the EU currency and it has brought on new calls for us to join the Eurozone - although mostly from unreformed EUphiles rather than ordinary people.

But hang on a minute - wasn't it always the case in previous recessions that a weaker pound was a good thing? So far the only bad things I've heard about the weaker pound is that imports are more expensive, foreign holidays are going to cost more and British pensioners living in Europe and the USA are going to be worse off. So what?!

No offence, but I don't really care if British people who have chosen to live elsewhere are being hit by a dip in the value of the pound. They don't spend that money here so tough titties. Nor do I care much if fewer people go abroad for their holidays - that will have an effect on foreign countries tourist trade, but will be a boost for ours as more Britons holiday here and more foreign tourists will be attracted by a better value for their currency.

If we still had a manufacturing industry worth shouting about it would be a huge boost to that, but even with the mediocre industry we do still have to can only be a good thing if the things we make are cheaper to foreign buyers than they once were - that will help our balance of payments.

The weaker pound is not a disaster for us - it is a good thing. It will mean more money staying in our economy and will be a boost for us to come out of the recession quicker than we may otherwise have done.

What is more, countries in the Eurozone will soon find that the one size fits all currency is not working for them - if they are not already doing so. Germany, which relies so much on manufacturing and exports will find the high value of the euro a burden as will places like Greece and Spain who rely heavily on foreign tourism - with Britons making a good proportion of that.

I have to say that it's typical of our political climate that a run on the pound brings forth such short term thinking - few of our politicians or political commentators think much beyond next week, but I suspect that in a years time the decision to stay clear of the euro will be vindicated.

More than that, I suspect that in 20 years time the pound will still be going strong, but the euro will not exist. Actually, I don't even think the EU will still be around in 20 years time let alone its currency, but that's another thing entirely.

The weaker pound is not a bad thing right now - whatever they might say. Far from it - it is just what we need right now.

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