Sunday, 14 December 2008

Pound slips below euro... the Observer's headline, which is pretty poor stuff. The actual article adds 'on Britain's High Street', which should alert you that there's some smoke and mirrors going on here. Ah the tourist rate is below one euro! Well actually it's not even that impressive. It's the tourist rate when you take off the commission.

There's nothing wrong in noting that many tourists will essentially be getting 1 euro to 1 pound. But to dress it up as the actual exchange rate, which you normally quote, has fallen below that level, is silly. If one converted euros into pounds in Europe one would find the opposite.

Finally the article talks about euro entry, which I support, but makes no reference to, or asks the economists quoted, whether there is any viable prospect of Britain being allowed to join the euro at a rate of near 1 to 1. One issue that is rarely raised about the benefits of a floating currency is one benefit, the boost to domestic industry of a massive devaluation, is only available at any one time to one side of the exchange. For every winner a loser so to speak.

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