Britain’s ever-sagging pound
If you had stayed at a room in Tokyo’s Imperial Hotel in 1965 it would’ve cost you ¥2,500 – the equivalent of £2.50. If you stayed there today it would cost ¥26,600.
If the exchange rate hadn’t changed since the 1960s, that would mean a sterling cost today of £26.60. But as Robert Brooke of Halkin Services points out, the exchange rate has changed. Due to the fact that the pound has lost 89% of its value in the last four decades or so the room will actually cost you £227. We regularly devalue the pound, says Brooke, telling ourselves it can only make things better. When Harold Wilson devalued in 1967 he did so claiming that it would address the root cause of Britain’s financial problems. So far, “history has proved him completely wrong”.
Yet today we tell ourselves the same story. The pound has fallen 25% plus in trade weighted terms since the financial crisis began. The general view from the authorities is that this is a good thing. We’re lucky we still have the ability to make ourselves competitive and to stimulate our manufacturing and export industries in this way, they say. They may be right (although I see little sign of it). But what they rarely do is mention the impoverishment that comes with regular devaluation.
• Read the full editor’s letter here: Britain’s ever-sagging pound.