3 SEPTEMBER 1988, Page 20


Nigel puts the frighteners on, but hopes they don't scare sterling


Time, gentlemen, please. The party is over, and has been over for a while, but too many people can't take the hint — so enter the bouncer. Nigel Lawson is now seeing what the frighteners can do, and his difficulty will be not to frighten his friends. Conducted on credit, the binge ran for a whole year longer than he had expected or intended. It was given an extension last autumn, in response to the stock market crash, and again in the spring in response to a speculative rush into sterling. Seven successive interest rate rises were his polite way of saying that it was past closing time. The eighth, last week, was different. It was impolite, and intended to be sobering. It was what Nicholas Budgen, the Chancel- lor's drier-than-thou backbench critic, had demanded in The Spectator a few weeks earlier — something to shock, as the old- fashioned credit squeezes used to do. The trouble with such shocks is that they recoil upon those who inflict them. The Chancel- lor's own stock has suffered a sharp shake- , out. He must hope that this does not spread from domestic to international sentiment (though he is well aware that there is no way to insulate them) and make itself felt on sterling. International confi- dence has enabled us to finance the pay- ments deficit — at times, altogether too easily. No wonder Mr Lawson thought that the pound could not sustain the levels to which, in the spring, the markets were driving it. Now it looks like a market which could do one of two things: stay where it is, or go down. Currency markets seldom stay where they are, and not if they are fright- ened.