Let it float
Sir: It is my sincere belief that the present Government are going the wrong way about tackling this country's balance-of-payments problems. By trying to support the value of the pound sterling ( 'dirty' floating, to use the jargon of professional economists) on everincreasing sums of money borrowed from abroad, instead of letting the pound float freely and naturally to find its own level, Messrs Callaghan and Healey arestill further mortgaging our future to foreigners. In fact, they seem quite incapable of distinguishing the symptoms from the economic disease. The symptom is, of course, a distressing tendency for the value of the pound to decline in international money markets unless supported at the expense of Britain's precious reserves of gold and foreign currency. And the disease, of which both Mr Healey and Mr Callaghan seem blithely unaware, is an excessive combination of purchases of foreign manufactures and holidays abroad. These are the two factors which are obviously increasing the demand for foreign currency and reducing the demand for sterling, so causing the price of sterling to drop by the classic economic pressures of supply-and-demand !
Andrew Alexander made a very good point in a recent issue that the British Treasury's reluctance to let sterling fall, be
cause they regard a falling pound as a cause of inflation, is irrational. As Mr Alexander argued, a lower pound means more income from exports and that is why British Leyland had better results than feared. I would also agree that a lower pound would discourage imports of manufactured goods. So would the Bank of England please let sterling float freely!
If my advice (and probably Mr Barber's intention when Chancellor of the Exchequer) to let the pound sterling float freely were adopted, then there would be no need to worsen the unemployment situation by sadistic cuts in public spending on education and other worthwhile projects by local authorities. Let the cuts, instead, be in the next importation of foreign cars, particularly those from Japan which places difficulties in the way of those countries attempting to export cars to her shores!
P. M. Kingston 109 Littledean, Yate, Avon
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