A poor currency leads to a poor nation

Some 18 months ago, when I first started alerting the readers of this fine publication to the mounting economic gloom, and how Britain in particular would be unable to cope with a recession, the pound Sterling was worth 1.6 euros. Over the next year, the reckless handling of the economy by Gordon Brown saw it fall to 1.4.

Then the recession started to bite and some saw the “we’ll spend our way out of recession” approach of Mr Brown as both brave and imaginative. I warned that such policies could not work and I was not alone. Sixteen leading UK economists agreed, while both the IMF and the EC produced reports which found that Britain would suffer a worse recession than any G7 country and only Estonia and Latvia would have worse economic problems in the EU, while the Confederation of British Industry and the CEO of Barclays Bank reported that they feared unemployment would rise above three million.

Then, in November, the pound plunged to 1.24, as the money markets of the world took in both the state of the British economy and how Mr Brown was attempting to deal with the crisis. At the time I advised readers, who may have been confused by my predictions and the opinions of left wing readers writing in to condemn me, that the surest way to see who was right was to continue to watch the value of the pound.

Money markets are run by men who have no political allegiance, no preference or bias and can’t be bought like newspaper moguls. They mark currencies on, firstly, what their future value is likely to be and, as a very poor second, what interest rate is being offered. They simply can’t afford any other consideration as to buy pounds, dollars, euros or any other currency, when the rest of the world is selling them, would result in financial ruin.

So what has been happening since my article last month? The pound, once the most admired currency in the world, has continued to slide of course. It closed the week-ending 12 December at an appalling 1.11 against the euro, with reports that travellers at airports were getting as little as 92p for one euro – yes, that’s right, the once mighty pound is now less than one euro in exchange kiosks. Then at the time of dispatch of this piece it had tumbled again to 1.06 – now one for one is but days away. This means that Sterling has fallen by more than a staggering 20 per cent this year and 15 per cent in just the last seven weeks.

As a result, the pound has devalued by nearly 50 per cent against its heyday versus the euro and in the real world, therefore, Britain has lost half of its wealth compared to the rest of Europe. This makes Labour Prime Minister Harold Wilson’s devaluation of Sterling in 1966 look like a slight head cold compared to the nation’s current pneumonia.

And now identified as a weak currency, the pound will be driven down even lower by short selling, which will only serve to make Britain’s serious economic condition worse. It would appear that the final bricks are now being hacked away in Mr Brown’s decade-long demolition of the strongest economy in Europe – an inheritance that has been frittered away with breathless misjudgement, incompetence and self-delusion.

The strength of a national economy that boasts its own currency will always be judged by the acid test of comparing that country’s currency to others. And a nation with a poor currency automatically becomes a poor nation. Just ask South Africans or, even better, their neighbours in Zimbabwe!

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So, who gives a damn?

By and large, readers of TMIS are a cut above other chaps. But every now and then a reader will write in to complain about me writing on the rest of the world in general, and the UK in particular. I have always found this to be slightly strange, given that my column is entitled The World Around Us and not The Malta Around Us. The point is often put forward that while I might care what happens in Russia, France, India, the US, Zimbabwe and, in particular, the UK, they don’t give a damn and they nearly always suggest that nobody else on these beautiful islands does either.

Happily, they are wrong – for not only is their opinion insular, it is extremely short sighted as well. For what happens in the UK economy in particular should be of the greatest concern, either directly or indirectly, to anyone who either runs a company or works in the Maltese economy.

British tourists remain easily the largest segment of visitors to these islands. British Airways, Ryan Air, Easy Jet and British Jet, along with package holiday charter airlines, bring tens of thousands of them to these shores each year. Thousands more arrive on cruise ships. Air Malta flies to more British destinations weekly than to any other country, including neighbouring Italy, not only flying tourists but men engaging in important business for the islands’ economy.

Therefore, the collapse of Sterling will have an important adverse effect on Maltese economic health. Firstly, thanks to the strength of the euro against Sterling, the cut-price airlines bringing tourists looking for a cheap Maltese winter break or bargain basement summer holiday will be flying in half full as, for the British, the cost of their holidays will have almost doubled in a few years and therefore Malta will have gone off their radar. This will seriously affect restaurants, clubs, hotels and tourist attractions and those who supply them.

Then the Ryan Airs of this world will simply either cut flights or even drop Malta as a destination. October 2008 visitors to the island were already 12 per cent down on the same month in 2007 and this will be just the tip of the iceberg, I can assure you.

Secondly, the strength of the euro will give rise to a fall of Maltese business with the UK, as call centres, financial services and other exports become less attractive to the British on price alone. In the meantime, the severity of the recession in Europe in general and the UK in particular will even drive down business in places like the free port.

The truth is that Malta will be unable to avoid the world recession in any event but that the downturn will be all the more serious, thanks to the idiotic economic errors of Gordon Brown in the UK that have resulted in the collapse of the pound.

Do you know it was less than a year ago that a desperate Dr Gonzi repeatedly claimed that Malta would emerge as the leading tourist destination of the Mediterranean by 2015. I warned you then that to believe that meant that you also believed in flying pigs. So how many pigs have you seen glide across the blue sky past Mdina since then? And how many of you still think that what happens around the world is of little consequence to Malta? Very few, I suspect and even fewer in a year’s time, when my words are driven home by a horrid recession. But it will never be everyone, as some socialist revisionists – just like their communist friends – are completely blind to either economic reality or the truth. Oh well, vive la difference – after all I would have nothing to complain about if everyone agreed with me.

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Let’s keep India v. Pakistan a cricket fixture only

I have repeatedly written that Russia is the biggest threat to world peace. However, Pakistan’s inability to deal with the training of terrorists in mountain camps there is also a very serious issue. Three-quarters of terrorist attacks by Islamic fanatics around the world are undertaken, apparently, by young men and even women trained in Pakistan.

The recent attack in Mumbai, where hundreds of people were gunned down and 177 killed as a result, has caused very serious friction between the Indian and Pakistani governments.

When the British partitioned India in 1947, clashes between Hindus and Moslems resulted in the slaughter of over five million people in a matter of months. Partition failed to reduce this religious tension, which has meant that the governments of both countries have done a good deal of sabre-rattling in between the three wars that have occurred in the 60 years since.

The Mumbai incident has got them at it again – but with the added danger that both nations are now nuclear powers. World leaders must work hard to defuse the situation and Pakistan must do a lot more to rid itself of these terrorists, even if it means calling on the international community to help them – something they have been very reluctant to do to date.

It is in the interests of all of us that India v Pakistan remains a cricket fixture only.

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Genocide didn’t make the world react, so I doubt cholera will

Western leaders wring their hands in despair as a cholera epidemic sweeps through Zimbabwe. They condemn the insane and evil dictator Robert Mugabe. They say he should go now, even if Russia and China disagree. So will they do something to rescue the starving, the ill and the dying there? Of course not! They didn’t when Mugabe’s thugs were committing genocide so why should they for a mere cholera outbreak? What a pity somebody can’t discover oil in the country. I’m certain that, if this were to happen, a moral and holy war would be mounted against this monster immediately.

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About ******* time

Not long after the death of Linda McCartney, Sir Paul was elected to the Rock and Roll Hall of Fame. He had already been elected as a Beatle but, unlike the late John Lennon, not in his own right until then.

His daughter Stella accompanied him on to the stage to receive the award and turned to face the audience and the TV cameras. Emblazoned across her ample bosom were the words “About f*****g time”.

Three weeks ago, The Lord Nelson restaurant in Mosta received its first award for fine dining to add to the several others previously won for good eating. And all I can add is, “about ******* time”.

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There is one silver lining in these grey clouds of recession

Could there be one little bright spot in these dark times of recession? Yes, there just may be. The fall in demand for gas and oil has made many European countries less dependent on Russia and the Russian economy has been very badly hit as result. No doubt this will only serve to strengthen the grip Vladimir Putin and his mates have on political power there. Of course it will only be a matter of time before he deems it essential to take new emergency powers and finally do away with any pretence of democracy. However, just now he is struggling to prevent an economic meltdown and therefore less likely to be contemplating invading anybody. So hopefully World War III will be postponed for 2009. What about after that? Who knows?