The declining pound ain't so bad

There has been lots of naysaying, hysteria and near panic over the fall in value of the pound. But I think it's time to chill out.

Firstly, one advantage of staying out of the Euro is that our currency is free to float against other currencies - like the Euro. The Greeks and the Irish can't do that, so they're a little stuck. They can't devalue their currencies.

And right now the weak pound has its advantages: British goods are cheaper to buy in Europe, the US and Asia. Sure, foreign goods become a little dearer for us but we're heavily reliant on our exports to lead growth. So what's the big deal?

Secondly the pound isn't actually that low, viewed historically. It's still above the level it was during the Thatcher years. $1.50 is more or less where it's hovered since the 80s. The trouble is, people have short memories, and everyone loves a crisis. If there isn't one, they want to convince us that not only does one actually exist, but it's going to wipe us all out. We're doomed, doomed I tell you! Head for the hills! The Conservatives play this card. Well it's understandable in a way, they have an election to win. Cue apocalyptic warnings about how sterling is going down the plughole.

The trouble is that it isn't really. People think that if a currency is 'stong' then that is a reflection of a nation's status in the world - powerful, healthy and virile. Now it's true that over the very long term successful economies will have a strong currency (because people want to buy it) whereas less successful economies will have a weak one (for the inverse reason).

But we're not talking about very long-term here. The kerfuffle (I love that word) over sterling is just people making a lot of noise for their own ends. I've already mentioned the Tories; now consider the hedge fund managers. If you're always crying wolf it helps your case if the lupine menace actually shows up once in a while. So the hedge fund managers are sounding the alarm in the hope that sterling really will collapse so they can make a quick buck. They've bet against sterling, you see.

So we can ignore the hedge funds, and the politicians with an agenda. They're just squealing, but the unblinking eye of the internet, and the megaphone of instantaneous 24 hr news reports has magnified their squeal into a roar.
The reality is that buyers are still queuing up to buy Government gilts, and the credit rating agencies have no credibility any more.
Ok, so foreign holidays are a little dearer right now. So what? Go to Greece instead people, your money will go a bit further there. And anyway if sterling continues to slide then, well -it will be easier to persuade people to buy our debt, won't it?