11 JANUARY 1992, Page 21


The Ovine Tendency finds an instant cure for sterling discontents


our legs good, two legs better. There is something about our hapless currency that brings out the Ovine Tendency, and here it comes again. Eighteen months ago, every sheep on the Government benches and in big-business boardrooms was bleating to join Europe's exchange rate mechanism. By doing that, so they supposed, we would make sterling strong — so interest rates could come down, and mortgage rates too, and the inflation rate with them, given the cock-eyed way we measure it, and in no time at all there would be an electoral walkover and five more glorious years of Tory rule. The Confederation of British Industry was so keen on joining that it never asked about the rate of exchange. Four legs good, two legs bad, ERM per- fect! Patient readers (if such there be) of City and Suburban may remember my warning that life contained no such painless solutions. Has the Tendency learned that? Not a bit of it. The very same sheep, from Westminster to Wapping, are now bleating for devaluation. By doing that, so they sup- pose, we would make sterling cheap — so interest rates could come down, and so on ... If they won't take it from the Governor of the Bank of England, they can take it from me: when you devalue, you put inter- est rates up. You need to recover control of the market and avoid importing inflation, and that is how you do it. I expect that at some time we shall have a shake-up of val- ues within the ERM. and I should never be surprised or sorry if the whole contraption came apart. I do not, though, suppose that, in or out of it, we can find a quick fix. It is ovine to think that. By the way, look how strong the pound is — heading for two dol- lars, and putting an authentic dry martini Within the reach of millions! The sheep have not even noticed.