Word: pounded
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Dates: during 1980-1989
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Like the Royal Navy and India, the pound had always been a jewel in the British imperial crown. But last week the government of Prime Minister Margaret Thatcher had to rush to rescue the once proud pound from sinking below $1 in value. The pound has always been something of an anomaly in international currency markets. While it takes several deutsche marks or French francs, and hundreds of Japanese yen, to equal one U.S. dollar, the British pound is the only major Western currency worth more than a dollar. In 1949 a pound was worth $4.03, and as recently...
...start of last week's currency trading, however, the pound had dropped to $1.1132 in London and only slightly more in New York, and it was sinking fast. Prime Minister Thatcher, an ardent champion of free markets, had always opposed official attempts to prop up a currency's value, but enough was enough. Said one minister: "No government sits on the sideline and lets its exchange rate disappear into the sea." On Monday the Thatcher government ordered the Bank of England to boost its prime lending rate from 10.5% to 12%, forcing corporate rates and home mortgages even higher...
...latest run on the pound was triggered primarily by concerns about the future of world oil prices. Because of the current glut in crude, petroleum + prices have been sliding for several months. Britain earns nearly $13 billion from the export of oil, and lower prices would be a serious blow to its economy...
...sinking pound was a new and embarrassing political problem for Thatcher. Opposition Leader Neil Kinnock called her handling of the crisis an "epic of bungling indecision." Two weeks ago, Thatcher's press secretary, Bernard Ingham, aggravated the tense situation by telling reporters that they could be "absolutely certain that we are not going to defend" a particular value of the pound. That unfortunate remark helped speed the currency's slide and forced Thatcher to abandon her hands-off policy...
...pound's troubles brought a sense of urgency to a routine meeting in Washington of finance ministers from the U.S., Britain, France, West Germany and Japan. After the session, Treasury Secretary Donald Regan said that the U.S. had eased the conditions under which it would intervene to try to influence prices in the currency markets. Said Regan: "We are willing to undertake coordinated intervention when we agree that it would be helpful." Previously the Administration had said it would buy or sell dollars or other currencies solely to prevent "disorderly" markets. The Government intervened only in such serious situations...