Sterling sky high as economy deteriorates
By Neil Behrmann
November, 2007:- In the past two months, the British economic and political landscape has changed from red to blue. So much so that there is a good chance that the Labour Party will lose the next election which must take place by 2010.
As the cliche goes, 'a week is a long time in politics', but Prime Minister Gordon Brown and his Labour Party are heading for a potentially rough economic winter. The Northern Rock debacle has placed a question on the government and Bank of England's credibility. The housing market has turned down and will expose the indebtedness of numerous families. Consumption and the financial boom are tapering off, and the budget and balance of payments deficits are high. Once again Labour is encumbered with sleaze. John Major's Conservative Government's exponents were sweet innocents in comparison.
Sterling, which surged to a peak of 2.11 against the dollar has fallen back to $ 2.06, but is still at extreme levels of overvaluation. As soon as there are signs of deepening economic cracks and interest rate declines, global hot money could flee, causing a dramatic slide in the currency. The economic cloud is an omen of gloomy times for the government. It has bailed out Northern Rock at potential costs of $60 billion to the UK taxpayers, equivalent to the annual budget of the nation's junior schools. Real estate prices are off the top and the market is at a virtual standstill. The slide in the stock market bodes ill for the financial sector, a significant part of the economy. The manufacturing sector and the City, so reliant on dollar earnings are already suffering from a ludicrous dollar rate of the pound. British bank stocks are in a serious bear market. Sterling has fallen slightly against the euro, but that currency is also seriously overvalued.
Brown's Hubris and Nemesis
In September, Mr Brown and his party were riding high. The polls were so much in favour of the red Labour brand that, in a fit of hubris, Mr Brown's advisers told him to hold an election and wipe out the Tory blues for years to come. It was seemingly an excellent time to hold an election, especially since the economy has become vulnerable. Labour election fever was at such heights that their parliamentary members bought new suits and other items for their campaigns. Mr Brown, who promised that his premiership would eschew the spin of his predecessor Tony Blair, spun like a top; he announced a new London-to-Heathrow train, a retreat from Iraq and a host of promises to the electorate.
Unfortunately for Mr Brown and his inner circle, the Conservatives soon won the upper ground. The threat of an election concentrated the minds of Tory leader David Cameron and his shadow Chancellor of the Exchequer, George Osborne. In a series of lightening moves, Mr Osborne announced at the October Conservative Party conference that the hated inheritance tax would effectively be slashed to zero for the heavily taxed middle class. Concentrating on marriage and stable families to counter disruptive social behaviour and violence, the Tories also promoted tax credits for married couples. Corporate tax would also be cut. At the Tory conference, speaker after speaker came up with credible policies to improve health, education, policing, pensions, social reforms and climate change.
Mr Cameron summarised those policies in a brilliant 67-minute off-the-cuff homely speech without an autocue. As a result, Labour's eleven-point poll lead was wiped out.
Then followed a series of serious blunders that damaged Mr Brown's credibility. Hubris turned into nemesis. He decided not to hold an election, which appeared reasonable enough considering that he has until 2010 to decide on a date. But his true blunder was to lie on television and in a press conference that it was his so-called 'vision' of the future that made him change his mind.
Sterling nearly 50 percent up against dollar in five years
Asked whether he would have held an election if Labour was 100 seats ahead in the polls, Mr Brown lied that he would have refrained. Mr Cameron's retort was withering. The prime minister was treating the British public 'like fools' by not admitting that poor opinion polls had led to his decision to call off an election.
Labour Lost For Ideas
In a desperate attempt to recover lost ground, Chancellor of the Exchequer Alistair Darling brazenly stole Conservative plans to slash inheritance tax and the opposition Liberal Democrat policies to cut global warming. The opposition parties attacked Mr Darling, who is dubbed the 'Magpie Chancellor' after the bird that steals from other nests. They claim that the tired Labour Party, that has been in power for more than a decade, is bereft of ideas.
Despite a huge increase in taxpayer money to fund the National Health Service, patients are dying in filthy hospitals and state education is unsatisfactory for a First World nation. Labour has also failed to uphold its promise to hold a referendum on the controversial European Treaty.
Despite Labour's attempts to filch opposition party policies, latest polls place the Tories thirteen points in the lead and well ahead of the Liberal Democrats. This is enough to form a new government. Mr Cameron's popularity is increasing, while Labour Party discipline is diminishing as MPs regret that they pushed out the charismatic Tony Blair.
Mr Brown haslost his political and moral authority; says Mr Cameron
"How long are we going to have to wait before the past makes way for the future?" The question resonates with the mood in Britain today.
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