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  • Lawrence Bailey

Playing the exchange game

I think we’ve established since this column started that my grasp of economics is what you might call basic. Even so, I think I can recognise a trend when I see it.

Take currency exchange rates for example. They’re supposed to reflect the underlying strength of the economy, right? Well, maybe, maybe not.

Apparently, it depends on whether you want a thriving economy or a healthy one. A thriving economy is one where buoyant consumer spending lifts manufacturing activity and prices look after themselves. A healthy economy on the other hand is when interest rates are higher, returns on investment grow and borrowing - especially government borrowing - is "under control".

These aren't my slanted definitions of success by the way. You can find them in various manifesto pledges; and that’s enough alone to make them questionable.

The idea of politicians playing fast and loose with economic reality to get themselves elected is hardly a new one. Where the issues arise of course is when delivery inevitably falters. That’s because the money market is essentially about betting on outcomes; when probabilities change, so do the stakes.

The US Dollar is currently losing ground to currencies around the world. This is not due to Donald Trump’s policies but that he’s been unable to secure the tax cuts and infrastructure spending he promised.

On our side of the Atlantic, Sterling has dropped against the Euro although not entirely for the reasons you might think.

The European Central Bank has been pumping €60bn a month into the Eurozone to bolster its performance. This will soon end, making the currency more valuable, and dealers are stocking up in anticipation.

All that said, Brexit remains the single largest source of uncertainty facing the UK economy and it’s amazing how cabinet ministers have only just sussed that their internal aggro isn’t helping anyone.

But then again, does it matter what kind of clever negotiation takes place when no-one can be entirely sure what the UK position is at the moment or what its likely to be as things progress.

I have a feeling that it won’t just be the currency left out in the cold.

Idle hands at the Senedd

I’m sure that those with ears better attuned to Senedd keyholes than myself will correct me but the media story of an un-named Plaid Cymru AM citing poor election results as a reason to dump leader Leanne Wood sounds a bit contrived.

I understand how Labour-bashing can be an instinctive activity in some nationalist circles. Like union-bashing among tories, it serves a visceral need whilst also showing political compatriots that your heart is in the right place.

The fact that Wood’s doesn’t go in for the same knee-jerk stuff is far from being a weakness. She snapped Labour out of its post-election hubris and into the real world by initially refusing the grant Carwyn Jones a coronation. Then she started dealing.

It’s doubtful that any prospective applicants thinking of replacing her would be able to display the same level of astuteness and approachability. That truth can hardly be lost on the critics – even the anonymous ones.

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