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Foreign Exchange

Currency conspiracy theories

It appears that all it takes is a little bit of movement in the FX market to get the mass media all hot and bothered.

The UK national newspapers are full of stories about the disastrous effect the weak pound will have on the economy and the inevitably of EUR/GBP’s rise to parity. I seem to remember the same newspapers predicting cable would rise to 2.50 this time last year.

No matter how hard they try, journalists can’t help but equate a currency’s strength with the wellbeing of the economy and. worse, national pride. Following on from the amusing story covered here a few weeks ago about the plausibility of the US joining the euro, there have been some suggestions that the UK will now adopt the European single currency, given that it is so weak. There has also been a resurrection of an old claim that the US is about to abandon the dollar and introduce a regional currency called the amero.

Back to the UK, though, where it is being suggested that Peter Mandelson, the UK business secretary, has been winding up the country’s euro sceptics again by hinting the UK will join the eurozone. The sceptics will argue – again – about how inappropriate such a move would be, pointing out that the UK would lose control of running its own economy. Given that those charged with that task often seem incapable of running a bath, let alone an economy, entry might not necessarily be a bad thing. But to roll out another hackneyed cliché, such a move would probably be like jumping out of the fat and into the fire. After all, the European Central Bank has hardly covered itself in glory and it is doing its best to make the Bank of England look half-decent.

Similar conspiracy theories are also doing the rounds in the US. I saw an e-mail earlier this week of an old rant by a bloke called Hal Turner. He is one of those internet bloggers who shout loudly in the belief that it adds veracity to the rubbish he is spouting as fact. And sometimes it works – media myths do become ‘facts’. Naturally, Turner claims to have been censored.

But that hasn’t stopped him from claiming the US has informed the China Development Bank that it has shipped it $800 billion-worth of ameros. Turner goes on to insist it is not a hoax and claims to have got his hands on one of the coins. He holds this up to the camera. And although it looks like a gold foil-wrapped chocolate coin, he bangs it on the table to “prove” it is real. He then tries to show its most important feature, which is a “D” marked on the “coin”. This, he says portentously, means it was minted in Denver. Before you jump to conclusions, Turner then predicts that the dollar is going to become “exhausted and worthless as a currency”, which could suggest he is not entirely mad. But on the other hand...

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