Man in a Shed: Compare and contrast Black Wednesdays

Wednesday, October 08, 2008

Compare and contrast Black Wednesdays

The economic reputation of the Conservatives was destroyed for a decade after Black Wednesday when the pound was forced out of the ERM with the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.

Today Labour has just put at risk £300 billion. Now some of that will be coming back. On Black Weds the amount of money at risk was estimated to be about £27 billion for Bank of England interventions etc.

I don't have the yearly inflation figures to put all this money in real terms but it seems likely that this is about slightly under 10 times the risked capital that supporting the pound on Black Wednesday represented.

The question - what should happen to Labour's reputation after Black Wednesday II ?

Remember we are the most indebted nation in the G8 - and that's before all this started - thanks Gordon.

1 comment:

Anonymous said...: They weren't forced out the ERM they could have stayed in. Have a read of a paper on my website
www.viewfromtheramparts.com Its down at the bottom of the page, marked Black Wednesday; 9:12 am

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The pound in your pocket

"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists." James Callaghan

“The trouble with theoretical economists is that they don't understand that when you have a deficit, you can only finance it by borrowing, and you've got to persuade people that it's worth lending money to you and that they'll get their money back... there's no way of escaping it.” Dennis Healey during the 1976 Stirling Crisis.

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens ... Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." John Maynard Keynes, 1920.

"To preserve [the people's] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude." Thomas Jefferson, President of the United States of America,1801-1809.

Inflation is taxation without legislation .. Milton Friedman