Hit me with your dithering stick: An open letter to Alistair Darling
I was prompted this week to send an open letter to Alistair Darling, the UK’s Chancellor of the Exchequer, as a result of the extreme volatility and confusion stalking the country’s equity market. The same letter could have been sent to most of his G7 (or G10 or G58 for that matter) counterparts.
Hopefully, this week’s measures taken across the world will finally lead to an end to the crisis. To an extent, I am talking my book, as I am long of various bank stocks. However, my wish stems more from having to listen to all the doom and gloom being peddled by so many media “experts” every time I turn the TV or radio on. As most of the people I know who actually work in financial markets don’t have a clue about what is going on, why on earth should some two-bob journalist – myself included – have any inkling?
That said, I do feel I have some sound advice to offer and so I asked Darling if he had considered some good-old fashioned FX-style intervention. I’m sure wading into the market and buying £50 billion-worth of bank stock would have had the desired impact. After all, when the package was announced, RBS’s market capitalization stood at just £16.4 billion, which suggests the government could have bought it three times over if it played its cards right.
It seems my missive had an immediate impact. An hour after it was sent, the Bank of England duly cut its repo rate by 50 basis points. I shall be sending Darling another letter next week, telling him the Bank needs to stop dithering – for as well all know, the market doesn’t like ditherers – and cut by at last another 150 basis points by the end of 2008.