CITY AND SUBURBAN
My worst case of agoraphobia when the markets told the truth
CHRISTOPHER FILDES
oraphobia, the fear of open spaces, has a literal meaning: terror in the market Place. Five years ago, the collapse of the world's stock markets gave me the worst fit of agoraphobia I have had in my life. By comparison, Black Wednesday was a nasty few minutes. So (I thought) interest rates have been hoisted from 10 to 12 per cent and from 12 to 15, where they will bring on a slump and shut the High Street banks? So the Treasury and Bank of England must have gone mad, and some chaps in plain vans will come along and sort them out — soon, please. When Wall Street and Tokyo and London fell together out of a bluish Sky, what frightened me was the idea that the markets were sane. They were (I thought) telling us something we would not enjoy. That was not the conventional view. Once the shock died down, the markets' antics were dismissed as dangerous folly — only the boys playing with their electronic toys, nothing to do with the real world, just as Black Wednesday now gets blamed on the dealers in braces. Chairmen of compa- nies (some of them still with us) said that business was never better, as anyone but a stockbroker could see. Five years on, the crash resounds like a great clap of thunder — the end of the 1980s' high summer. The world's leading economies had been living on credit, and the credit was going to run out. Shiny bubbles (Maxwell, BCCI) would burst. Borrowers would fail and drag lenders down with them. Financial systems were under threat across the world, and to have avoided collapse (or confined it to Scandinavia) is something. Meanwhile gov- ernments, here, in the United States, in Germany, in Italy, still think they have the divine right to borrow all they want and let the financial markets take the conse- quences. Black Wednesday told them something they will not enjoy.
Lamont-free zone . . .
THE Daily Mail has declared itself a Madonna-free zone, by way of giving its readers a break, and I had hoped to do the same for Norman Lamont. Here he is again, though, flag-flapping at Brighton, and, at Westminster, telling the Treasury Committee all about his new policy. This was an awkward brief. He had first to answer (or, failing that, duck) the question Posed by A.P. Herbert 50 years ago, in wartime:
If it all will be wonderful after the war, Why didn't we have this old wo-er befo-er?
If the new, cheap pound is (as he said at Brighton) the boost that British exports have been waiting for, why have they had to wait in the cold for so long? Conversely, if the old, expensive pound was (as he said at Westminster) such a boon in curbing wages and prices, won't they miss it? In reply, Mr Lamont intoned his mantra about bearing down on inflation. He has set himself an objective, but, as he accepts, the inflation rate is an end of policy, not a means. To see if he is going in the right direction, he will now look at indicators of every sort. Some will contradict others, and tempt a Chan- cellor to look at the number that is telling him what he would like to believe. In the spirit of the free zone, let me just say that this leaves quite a lot on trust.
. . . subject to advice
I WOULD like to extend the free zone to the Chancellor's advisers. They are having a rough time just now. Sir Terence Burns at the Treasury and Eddie George at the Bank of England find themselves lam- pooned as the sinister back-stage figures whose bad guidance got Mr Lamont and the rest of us into this pickle. I am sure that the conspiracy theorists can do better than this. They will soon bring in Sir Nigel Wicks, the note-scribbling sherpa at Mr Lamont's side when he faced the commit- tee — and then Alan Budd, who has fol- lowed Sir Terence as chief economic advis- er, and Sarah Hogg in her Downing Street attic. After that, they can go for the fore- casters. Deferring to the monarch and blaming his counsellors is a tactic which goes back to the reign of Charles I and, I dare say, to Ethelred the Unready. This time it will not wash. A Chancellor is not there to take advice and pass it on, pausing only to commission a few token paragraphs to snub those whose advice would be differ- ent. The more tedious and technical the argument, the less he can afford to take it on trust. The full-funding rule, the different ways of measuring money, the meaning of zero inflation, the mark as a proxy for mon- etary stability — these are fit themes for the World Boring Championships when next held at Haringey Stadium, but, unfor- tunately, they have mattered when other and jollier topics have not. Denis Healey or Nigel Lawson would have taken on their advisers and argued, but some Chancellors are open to argument, whilst others are open to persuasion.
Alchemy
MY BID for British Coal is ready on the lunching-pad (well, this is the City) and at the press of a button I can fire it off at Mr Heseltine and make myself a fortune. He has been most helpful. His newest round of closures will leave me with a staff of 25,000 people and pension funds engineered for an industry which once employed 750,000. I shall control a world-league investment business with a few coal-mines tacked on. It is nice of Mr Heseltine to spend so much money (from British and European taxpay- ers) on tidying up before I come in. I may then need Arthur Scargill's experience of switching money into foreign banks. Between us we can answer the question that fascinates me — what happens when the British Coal pension funds own every- thing and there aren't any miners? Or will pension reform, long overdue, come first?
No, no, Nobel
I LEARN with horror that Governor Clin- ton has won the backing of nearly 600 economists, including nine Nobel prize win- ners. This, in a probable future president of the United States, is the last thing we want. When the Conservatives' economic for- tunes were at their lowest point before this one, Geoffrey Howe as Chancellor was publicly savaged by 364 economists, includ- ing four former chief economic advisers. He concluded that 364 economists couldn't be right, and they weren't. Professor Gary Becker of Michigan has just won the Nobel prize for economics. Mr Clinton should quarrel with him at once.
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