Tuesday, January 13, 2009

Surprise! Our Brian's new 'foot-in-mouth' outbreak

As stated in the Financial Times today (here):

"Brian Lenihan, the Irish finance minister, accused the UK authorities of, in effect, devaluing the pound by expanding the UK money supply, action that was causing “immense difficulties” in the Irish economy. “It is a question for all of us in the EU as to the extent to which a competitive devaluation can be used as any kind of weapon,” he said."

Oh, dear. Our Brian does not get it - British monetary policy is about British economy. It is not - and should not be - about some abstract idea of European solidarity (which seems to work for our Government only when solidarity means that others do something 'nice' for Ireland) or coordinated responses to the crises (if the UK were to coordinate things with Ireland, they would be rising taxes, squeezing consumers, issuing blanket guarantees and wasting billions on inefficient public sector).

Whether the UK is engaging in a competitive devaluation, or is simply conducting more pro-active monetary policy than 'we-don't-give-a-damn-if-you-are-in-pain' ECB is a moot point. Bank of England has a mandate to manage money supply for the UK. British Exchequer has a mandate to respond to the real needs of the UK economy. It is Brian Lenihan who has a mandate (if only theoretically) to sort out his own Government's response to the crisis in Ireland. Does the fact that the latter does not seem to be up to his job imply that the former two are obliged to help him finance his wobbling decision-making?

Oh, when one hears an ex-lawyer talking about Forex valuations, ...it sounds only half as bad than when one realises that he is in charge of our entire Exchequer!
Post a Comment