Why Hasn't the Pound Crashed?
About this episode
Dominic Frisby discusses the surprising resilience of the British pound despite significant economic challenges.
Imagine you are in the circus, watching a tightrope walker who’s been on the sauce. He sways, the crowd gasps, he sways again, more gasps, and yet somehow he doesn’t fall. This goes on and on and eventually you get bored watching. That, it seems to me, is Britain. Public debt is now knocking on £3 trillion. (Remember you could have spent a million pounds every day since Jesus was born and still not have spent a trillion - that’s how incomprehensible a sum a trillion is). Interest payments now run at over £110 billion a year - more than we spend on education. Debt-to-GDP hovers around 100%. Growth is wilted. Productivity is like blancmange. Taxes are everywhere and record-breaking. Waste and bloat and bureaucracy are rampant. But the political response to every problem is the same: spend more. Despite all of this, like our inebriated tight rope walker, sterling refuses to drop. The pound trades around $1.35. The gilt market continues to function. The bond vigilantes, whoever these mystical people are, appear to be away at lunch with Lord Lucan.. Why? The answer begins with a simple but often overlooked fact that currencies are not valued absolutely, but relatively. You look at…
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