Word: thatchers
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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...
...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...
...Although Thatcher's action last week stemmed the pound's decline temporarily, the long-term effectiveness of such rescue efforts is questionable. During the past few years, several governments have attempted to intervene unilaterally in world money markets in order to push the value of their currencies up or down. They have had only brief, limited success. Ultimately, the markets determine a currency's value...
...eleven months, but he says that is having a minor effect on the economy because there have been no fuel shortages and workers are drifting back to the pits. He expects inflation to fall from 4.8% in 1984 to 4.5%. In Brittan's view, the government of Margaret Thatcher is quietly "giving the modest stimulus to the economy that some of its critics are asking for." In fact, bank credit has been growing faster than monetary targets, yet instead of raising interest rates, the government for the past several months has been allowing the British pound to depreciate against...