Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
The hatred of Europe I'll grant you, but I see fear of the decline of sterling, the need to join the euro, and the end of British pretention to superiority, profiled behind this column. Charlemagne is scared.

And see Willem Buiter's blog in the FT, where he explains (with charts) the current risks to sterling:

FT.com | Willem Buiter's Maverecon | Could the UK face a sterling crisis, or are we in one already?

But in these data there is nothing that cannot be explained as a (long overdue) correction of a persistent overvaluation of sterling - a misalignment that has biased the economic playing field against industries, both exporting and import competing, that would have had a fairer crack of the whip at a more reasonable exchange rate.

One interpretation of the drivers of this persistent overvaluation would be a Dutch disease story, where the role of the natural resource sector in the standard version of the Dutch disease is taking by the UK banking sector.  In this interpretation, a long financial industry bubble in the UK has driven up the real exchange rate in the whole economy and crowded out other sectors producing internationally tradable commodities.  The recent sharp depreciation of sterling corrects this long-standing anomaly.

Clearly, this conjecture requires further thought and research.

(My bold). That's very, very close to the Anglo Disease bone, close enough to wonder about a "lift"?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Nov 18th, 2008 at 03:29:31 AM EST

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