Kaletsky on the benefits of a weak pound

Anatole Kaletsky writes from Japan in today’s Times and discusses the benefits that flow from having a weaker exchange rate.

“A weak currency is something to be desired and encouraged during periods of recession, when employment output need additional stimulus. A strong currency, on the other hand, is desirable during boom periods, when economic activity needs to be restrained to prevent inflation. Right now, every big economy in the world, with the possible exception of China, needs extra stimulus — and therefore wants to have a weak currency. But that, of course, is impossible, since for every currency that weakens, another currency must go up.”

The conventional benefits are well explained in the article and there is reference to the Chairman of Komatsu who is now relieved that the UK did not join the Euro several years ago - but whose equipment can now be exported from their UK manufacturing base to the rest of the European Union at an ultra competitive price. UK financial services are also reaping the rewards of a weak sterling / dollar or euro rate since they bill their clients in dollars or euros but have a cost base in sterling (that is if they choose to remain in the UK!)

More here: Rejoice – the pound is down again