What's The Pound Worth?

In recent months I have been prone to moan on and on about bankers and the incompetents running our economy - and those of most of the Western World if it comes to it. Today I was reading the on-line newsletter of Money Week and they produced a graph that shows how total incompetence has been a relatively modern phenomenon. The graph is shown above and it charts the value of the pound over the last 250 years. You will see that while the pound remained on the gold standard the value from 1750 to 1914 remained relatively constant. Then they gave up the gold standard and started printing money to pay for the First World War. And the value of the pound started to tumble. And it carried on tumbling until today its is worth about 1/235 th of what it was 95 years ago. And as Dominic Frisby points out, if Britain and Germany had remained on the gold standard the war would have ended in a few months because nobody would have had the money to pay for it. But they and many other governments since have adopted the Zimbabwean solution - print as much as money as you need to pay the debts. The value of the pound rallied for a bit in the 1920s when Winston Churchill put us back on the gold standard but with the Wall Street collapse and the depression of the 1930s we gave up the gold standard again and carried on printing money. And so the decline in the pound was restored.

All the signs at the moment are that the Coalition government is making little progress in getting the debts under control and they are going to have to rely on the old remedy of inflating away the debts. But looking at the graph above it is looking as though we will need inflation of Zimbabwean proportions to write of the £1 trillion outstanding. Does George Osborne sleep at night? If the answer is "Yes!" then he doesn't understand how bad the mess is.

And yesterday the football transfer window closed with a last minute orgy of spending that makes it clear that these gluttonous footballers are still on another planet. Just as an example: Andy Carroll departs Newcastle United a mere 4 months after signing a new 5 year contract. "I did not want to leave Newcastle," he says. "I was forced out." Now the forcing just may be related to the fact that he suddenly decided via his agent that he needed more money. He was struggling to get by on a mere £28,000 per week - or put it another way, £1,456,000 per year. This week, Newcastle offered him more money - we will ignore the recent signing of a new contract, which, presumably, said what he would be paid. It was not enough. They offered yet more money. It was still not enough and thus he was "forced" to leave as Liverpool handed over £25,000,000 and agreed to pay struggling Andy a bit more money - ie £70,000 per week - or £3,640,000 per year. That should help to keep the wolf from the door for the next couple of years or so. Now this is a very talented player - with a dodgy knee and a terrible track record of heavy drinking, drunkenness, fighting, affray, assault, etc. He has all the characteristics of becoming another Paul Gascoine.

And we are all in this together.

I don't think so!

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