Wednesday, August 09, 2006

As Sterling soars, is the Euro the root of all evil?

The pound is 1200 years old, born about 775AD, when ‘sterlings’ or silver pennies were the main currency in Anglo-Saxon kingdoms. Through numerous incarnations, the name has persisted, derived from the old German word ‘ster’, meaning strong, pure, stable, reliable, or excellent. English silver was held in esteem and that respect was worth keeping. Before the foundation of the Bank of England, the first central bank in history, the Tower of London was the store for spare money. Silver pennies were the only coins right through until the 13th century and silver was the currency standard till the 18th century, when gold became the basis of the Pound. While it reduced exchange rate risk, stability based on gold helped British investors and traders. Global finance took off, ushering in an era of 'gentlemanly capitalism' when British investors poured money into offshore investments, protected by the immense strength of sterling and the might of the British Empire. When Britannia ruled the waves, sterling was the global economy's lifeblood.

It seems that much of the world is finding once again a confidence in Sterling, even as Her Majesty’s Government reiterates its intention to ditch the currency and adopt the Euro as soon as it can engineer a referendum victory. Other countries have been buying Pounds at the expense of the Euro, proving utterly wrong those who predicted that if Britain did not join the Euro that the consequences would be disastrous – economically and politically. We were told that the Pound would sink without trace, the status of the City of London as ‘financial capital of the world’ would diminish, and the Euro would supplant the US Dollar as the reserve currency of the future. Six years on from the Euro’s birth, the Europhiles have been proved wrong on all counts.

Conversely, the European economy has stagnated as the UK has enjoyed almost 14 years of continuous growth since liberation from the ERM. Unemployment is stuck at 12% in the Euro-zone, while in the UK it is presently 5%. And now the Pound Sterling is being restored to its traditional status as the choice of reserve currency for the world’s major central banks. Italy has displayed a supreme lack of confidence in the Euro by holding 24% of its reserves in Sterling, and she is joined by Russia and Switzerland who also hold large amounts of Sterling. The City of London has retained its global status, and known global reserves of Sterling have risen from £55 billion to £111 billion in the past two years. If the love of money is the root of all evil, the love of the Euro epitomises the adage.

33 Comments:

Anonymous Ulster Man said...

What are the top two currencies of reserve? Presumably the dollar is number one, so what is second?

We don't need the euro in the UK at all. Not having it hasn't damaged our economy one bit, in fact, Ulster has seen a boom of inward investment in recent years, and there's no reason to suspect this won't continue.

9 August 2006 at 10:12  
Blogger Mercian Crusader said...

I feel sorry for all of the countries that went into the Euro.
.
They have suffered huge rises in just about everything and now face the prospect of 'when' not 'if' the Euro will fail.
.
Germany has been steadily buying reserves of gold so it can relaunch the mark on the strength of her gold reserves. Incidentally most of that gold was what Gordon Brown sold off to prop the Euro up.
.
I WILL emigrate if the UK ever goes into the euro and or the EU

9 August 2006 at 10:48  
Anonymous DavidG said...

"I WILL emigrate if the UK ever goes into the euro and or the EU"

Err, the UK's already in the EU, so goodbye Mercian Crusader!

Who cares? It's just money. If you think the pound fares any better than the Euro, just look at exchange rates and inflation rates over decades, not a few months. It's long-term performance that's important. All currencies have short-term highs and lows. The Euro is still young, and needs time establish itself politically.

9 August 2006 at 10:52  
Blogger phone cam foolery said...

the Euro like the pound or dollar is a fiat currency,basically its CRAP!
It exists only in the minds of those who chose to believe
(a little like his grace)
One day the whole house of cards will collapse, gold is the only true currency of value, and prudent gordon swapped billions of pounds worth of ours in return for a few grands worth of paper and ink.

9 August 2006 at 12:32  
Blogger phone cam foolery said...

ps
Ulsterman your neck of the woods is a classic example of everything that is wrong with this country,, your "success" is entirely due to Gordon brown pouring billions of borrowed non existant pounds into your region, you produce nothing.

9 August 2006 at 12:34  
Anonymous hovis said...

DavidG - the Euro doesnt need time to establish itself - it is a fiat curency that is even worse that most backed not by a central bank but a commitee...it is apolitical contruct and doesnt bode well for the long term.

PCF - yes the pound is a fiat currency bu it is at least more coherent than the Euro. As it is what I hold most of my wealth in I hope it goes from strength to strength...

9 August 2006 at 14:16  
Anonymous Rick said...

gold is the only true currency of value,

hogwash...........it did nothing for Spain in the 16th and 17th Centuries except cause hyperinflation as they looted Aztec gold. What matters is productive capacity..........France has some of the largest gold hoards on earth but it is simply a metal with great condictive properties

9 August 2006 at 15:17  
Blogger Serf said...

It's long-term performance that's important.

Actually its not the performance of the currency that matters so much as the fact that the pound will reflect the reality of the UK economy in a way that the Euro never can.

9 August 2006 at 15:48  
Anonymous DavidG said...

Serf, you miss the point. It is long-term performance that's important as far as the public are concerned. Most people don't have a clue about GDP, inflation, the economy, interest rates, etc etc, all they care about is 'stability' in terms of prices and exchange rates for holidays. This can only be established 'over the long-term', so, in terms of perception (for winning a referendum) long-term performance is crucial.

9 August 2006 at 16:09  
Blogger phone cam foolery said...

Rick as the productive part of the world is now Asia and they love gold beyond any other commodity, I stand by my statement.
Ask a Chinese or a Indian if he would prefer $1000 in gold or $1000 in gold, he will take the gold, and as American debt gets higher and higher backed up by nothing more that impotent millitary agression gold will become more and more important.

9 August 2006 at 18:48  
Anonymous RIck said...

You mix up the concept of Stocks and Flows - of Preservation of Value versus Transactions. That is the mistake the ECB made.

Remember Fisher MV = PT

9 August 2006 at 18:52  
Blogger Professor D.C. Warmington said...

Dear Mr Foolery

You say "Ask a Chinese or a Indian if he would prefer $1000 in gold or $1000 in gold"; I would suggest instead that he would prefer $1000 in gold.

(A minor correction, not requiring the intervention of His Grace, on whose authority I would not have the temerity to trespass, but for whose sake I have taken it upon myself to advance this clarification.)

I am, sir, as ever,

Your faithful

Aubrey de Tocquaine

9 August 2006 at 21:09  
Blogger phone cam foolery said...

Aubrey,
I of course meant to type "$1000 in paper" and did so before fiddling about with spell check, inbetween making telephone calls and listening to my business partner complain about his builders F******* up his house ,plus telling me how much better life would be if he left his wife,and bought a bigger car and a bachelor apartment (mid life crisis).
As you can see, I was distracted.
Not that it matters

9 August 2006 at 22:16  
Blogger Mission Impossible said...

Fiscal arguments for the Euro may convince many, but let's look at some of the political issues.

European Technocrats regard the Euro as one of the precursors of a unified political entity, called the EU (or Europa), whatever. Agreed?

But, as can be demonstrated, the EU is fast turning into a totalitarian project. Many of its big fish are ex-communists, suitably re-labelled of course. Thanks to Maastricht, Britain is obliged to obey laws laid down by unelected or unaccountable bodies (typically totalitarian). Right-wing organizations and websites across Europe are already being harrassed. Right-wing political parties are threatened with bans, and their leaders threatened with trumped-up (usually racist) charges, leading to prison.

When I use the term "right-wing" here, what I mean is something that is NOT extreme left-wing, or a sub-Marxist entity ... such as Britain's "Hug-a-Hoodie" Conservative party under Cameron

In Britain, today, there exists a sinister Leninist organization, that has already worked with the BBC, to frame (with the intent to imprison) the leader of the BNP. Again, on trumped up racist charges. Some have even speculated, this organization ... called Searchlight (see www.searchlightmagazine.com) has political links with New Labour. In other words, searchlight act as New Labour's secret police. The BBC is called in once things have been set up for the cameras (or hidden microphones).

In addition, Europe is now being called by many ... Eurabia. Some argue that on present trends, it will fall into the Arab / Islamic orbit within 20 years. Human Rights legislation and open-borders, are only serving to add further momentum to already established trends. Jack Straw, our (thankfully) ex-Foreign Secretary, was very skilled at kissing the cheeks of Iranian Mullahs during his shuttle diplomacy over Iran's nuclearization: the first British Foreign Secretary to stoop so low! Full Turkish entry to the EU--assuming we fail to wake up and smell the coffee--will seal our Islamic fate.

So, what is the Euro then? The Arabs and Iranians have already lobbied to have Oil priced in Euros. Iran (if I remember correctly) has already acquired one of the world's largest reserves of Euros.

Is this the currency that Britain should adopt? Is not the Euro the currency of the new Soviet?

10 August 2006 at 05:55  
Blogger Rigger Mortice said...

without wishing to spoil a party,currency values are ,as PCF has alluded,based purely on confidence.At the moment the owrld loves dollars and pounds but this is bound to change in the next twelve moths.

both in the US and the UK, the govts are operating on both massive fiscal and current account deficits.As long as the Chinese and other widget makers keep buying American/UK govt bonds we're ok but when they see medium term dollar and pound declines as inevitable,they will sell,theereby setting in motiona vicious circle of decline.

The strentgh of Britains postition remains in it's ability to set it's own interest rate unlike euopre.there you could have localised inflation in Italy runnign at 10% but if the rest of the eurozone has an average of 3% then the inflation in Italy will run unchecked.

Perversely I would buy euros at the moment with a year view,but only because dollar/sterling look overbought.

Sorry I should get out more

10 August 2006 at 09:43  
Anonymous Rick said...

how much better life would be if he left his wife,and bought a bigger car and a bachelor apartment (mid life crisis).

what pray did you advise him to do ?

That you should be a confidant of someone in sp precarious a mental state is a tribute to your inner calm no doubt

10 August 2006 at 11:33  
Anonymous hovis said...

DavidG "...as far as the public are concerned. Most people don't have a clue about GDP, inflation, the economy, interest rates, etc etc, all they care about is 'stability' in terms of prices and exchange rates for holidays"

That is disingenuous; suggesting that simply because the public are not fully aware of something its doesnt matter. Rather like saying most of the public dont have a clue about absolute hormone levels during puberty - indeed they dont but it still affects them. So back on topic what IS needed is a currency that performs. Your sophistic contortions make no difference to the fact that the Euro is a poor currency and a politcal contruct. Over the long term this will show.

10 August 2006 at 13:09  
Blogger Deogolwulf said...

On a point of pedantry, one might note that "Stirling" is derived most probably from Middle English "sterre" ("star"), from Old English "steorra", from Proto-Germanic *"sterron", *"sternon", with the addition of the diminutive suffix "–ling". Unfortunately today I find myself out of sorts and at a loose end.

10 August 2006 at 13:26  
Blogger Cranmer said...

Mr Deogolwulf,

Welcome to Cranmer's blog - you are most welcome. His Grace welcomes all points of pedantry, as long as they are intelligent and erudite, as your contribution evidently is. Surely, however, on a point of reciprocal pedantry, you mean 'Sterling', since Stirling is, to His Grace's knowledge, a town in central Scotland.

10 August 2006 at 13:43  
Blogger phone cam foolery said...

Rick,
I told him not to be silly.

10 August 2006 at 16:22  
Blogger istanbultory said...

Just a wee comment, your grace, before the "imminent attack" pronounced by Mr. Reid.
Self-evidently, on almost every measure -inflation, unemployment, growth, inward investment — Britain is out-performing the moribund euro-zone. Despite the best efforts of New Labour.
At least the Euro has had no negative impact on the Vatican's coffers which are most plentiful.The consolidated final balance sheet of the Holy See for the financial year 2005 ended with a positive balance of 9.7 million euros, which represents its largest assets in the last eight years. An improvement of around 6.6 million euros the previous financial year 2004 you'll be pleased to know. Just thought you'd like to know...

10 August 2006 at 18:01  
Blogger Cranmer said...

Mr GC,

Thank you for this. His Grace is always keen to hear of the swelling coffers of the Vatican. By assets, you mean 'liquid', as opposed to its vast, incalculable wealth of treasures.

While the 'liquid' millions may be needed for a rainy day, Cranmer wonders how many poor could be fed if one or two of the other 'assets' were sold to reputable museums around the world.

10 August 2006 at 18:17  
Blogger istanbultory said...

Your Grace,
I was, as you correctly observe, referring to the Vatican's liquid assets. The Vatican's net worth is unknowable but has been estimated at close to $1 billion. In the wake of huge settlement payments on abuse cases, I am surprised, however, that the Holy See's liquid assets are still so healthy.

10 August 2006 at 21:12  
Blogger Professor D.C. Warmington said...

Your Grace, and Mr Deogolwulf --

I consulted my copy of Skeat's Etymological Dictionary (1911 edition), which has this to say about the word "sterling":

"Sterling. (Modern English). Middle English sterling, a sterling coin; Anglo Saxon esterling. Said [Prof. Skeat's italics] to be named from the Esterlings (i.e. easterlings; which the accent disproves). Perhaps M.E. sterling = starling; with reference to the four birds seen on many coins of Edward the Confessor."

The O.E.D. takes a different view, more akin to Mr D's, suggesting "perhaps steorling, 'coin with a star' (f. steorra star), some of the early Norman pennies having on them a small star; see New English Dictionary."

Skeat was little short of a genius, and even he didn't know the origin of this charming word.

As you may guess, I am not only an incurable pedant, but a lover of our English tongue, which should, as Your Grace suggested in an earlier thread, be henceforth settled upon as the lingua franca of the E.U.: concerning which and its currency, may I add that I cannot see the point of either? Britain should withdraw at once. Our trade with these foreigners would not be impaired one jot; we must not believe the scaremongering put about by the political class, which got us dragged into this sorry mess, on a false prospectus, in the first place.

I am, as ever,

Yours truly, &c.

A. de T.

Postscript, to Mr Phone Cam Foolery: please pardon my earlier pedantry. I too am often distracted by interruptions, though luckily I do not have a business partner.

10 August 2006 at 21:31  
Blogger Deogolwulf said...

Your Grace,

The shame I have brought upon myself for making so silly an error is indelible; for is it not true that a pedant looks a great buffoon if - in his pointing out the small error of another – he makes a similar one himself, being that he has attached importance to the eradication of that other’s error, but not guarded against his own? I shall have myself taken out and shot as soon as is convenient.

Yours,

Deogolwulf


A. de T,

I am, unlike Skeat, far short of being a genius, and I shall therefore take the “sterling = starling” proposition into respectful consideration.

Yours,

Deogolwulf

11 August 2006 at 10:45  
Blogger Cranmer said...

I shall have myself taken out and shot as soon as is convenient.

His Grace thinks this a trifle extreme, and somewhat of an overreaction, unless, of course, Deogolwulf is a Mohammedan, in which case such an act may be considered wholly necessary.

11 August 2006 at 10:56  
Blogger Deogolwulf said...

I shall perhaps have a little lie down and a nibble on a biscuit instead, since Your Grace has been so forgiving.

11 August 2006 at 12:39  
Blogger Professor D.C. Warmington said...

Dear Mr Deogolwulf,

I share His Grace's concern, and am glad you have commuted your self-punishment from execution to biscuit-nibbling. If you read my 9.31 p.m. again, you will see that your derivation is shared by no less an authority than the Oxford English Dictionary, so even the biscuit-nibbling may be rather extreme.

May I recommend this recipe, published by my eccentric friend, Mr T. P. Fuller? The biscuits, which I have often eaten at Mr Fuller's house, are excellent, and will turn your ill-deserved punishment into a positive pleasure.

I am, sir,

Yours concernedly

A. de T.

11 August 2006 at 13:15  
Blogger Deogolwulf said...

Dear A. de T.,

I am taken greatly by your friend's recipe, and no less by his eccentricity. I shall try out the former, even in apprehension that it leads to the latter.

Yours respectfully,

Deogolwulf

11 August 2006 at 14:33  
Blogger phone cam foolery said...

Ok Aubrey
you know how to bake a fine biscuit, what about decent restaurant standard Madras Curry?
I have been trying for months, looked on the net, purchased books, but every time I try there is always a little something missing.
Thanks to a brilliant paste at Sainsburys I can do a great Thai but not a good old fashioned curry house Madras, it is driving me nuts, if any of you have a good recipe I would be delighted to read it, we may need it when we finally drive these Mohammedans into the sea.

11 August 2006 at 16:07  
Blogger Professor D.C. Warmington said...

Dear Mr Foolery

Alas, it is my friend Mr F. who is the chef, and I know for a fact that he execrates what he slightingly terms "foreign muck". His cuisine is strictly of the old-fashioned English kind. Ask him for a recipe for Yorkshire pudding, roast parsnips, Eccles cakes, & the like, and no doubt he will oblige, but curry is a step too far.

I am sorry not to have been more helpful, and remain

Yours truly, &c.

A. de T.

11 August 2006 at 18:27  
Blogger phone cam foolery said...

Aubrey,
I am more of a Chorley cake man,
less flaky pastry flying all over the place.
If you ever get the chance to visit "Bettys" in Yorkshire do so.

11 August 2006 at 22:42  
Blogger Croydonian said...

If His Grace will excuse the continuing meander, PCF might care to try this:
'Curry Club Indian Restaurant Cookbook'. My culinary ability ends just afer toast, but a friend has used recipes from that book to good effect, and they are quite restaurant-y.

12 August 2006 at 23:13  

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