Run On The Pound ? Jeremy Corbyn Says Should Plan For

Right to plan for ‘run on pound’ if Labour wins says Corbyn and Labour party

British pound already down 20% since Brexit, collapse already in play

Run on the pound likely due to Labour’s ‘command economy’ approach

Collapse in Sterling would undermine UK financial system

Portfolios holding sterling and related assets would be significantly affected

Pension funds and property the most likely to get hit by run on the pound

Gold to benefit as sterling collapse picks up pace

Editor: Mark O’Byrne

currency collapse

Last week Labour Shadow ChancellorJohn McDonnell said the party was carrying outwar-game-type scenario-planningfor events such asa run on the pound.

A run on the pound would see the value of the currency plummet, increase inflation and increase the value of those age old stores of value namely gold and silver.

McDonnell’s reasons for war-gaming were because of expectations that a ‘radical’ Labour government would face a range of challenges.

He saidwas seeking to answer the question about what happens when, or if, they come for us.

When asked what McDonnell meant by ‘they’, party leader Jeremy Corbyn said he was likely referring to outside forces who have previously punished Labour governments in such a way.

Pound collapse 1971

Of course the most famous run on the pound in living memory happened in 1992 but for Labour it was nearly 50 years ago that still haunts them.

In November 1967 Harold Wilson’s government announcedit was lowering the exchange rate. The pound fell to$2.40, down from $2.80, a fallof just over 14%.

Wilson is now much ridiculed for his statement made on national radio and television in which he ‘reassured’ citizens that:

It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

Wilson’s comments, whilst derided at the time, seem to still ring true for our own government who do not appreciate that ongoing policies have resulted in a ongoing devaluation in the pound.

Labour’s adverse effect on the pound

It is not a ridiculous thought that ‘they’ might come for us should Labour be victorious. If one takes a look at Labour’s policies then we would come about as close to a command economy as one can get in peacetime.

McDonnell has pledged to ‘take back’ rail, water, energy and the Royal Mail.

Both the CBIthe British Chambers of Commerce have denounced the shadow chancellor’s plans asforced nationalisation

Europe has seen this before, writes Alex Rankine:

Not since Franois Mitterrand took the French presidency in 1981 has a European party come this close to power with such a radical policy programme. Mitterrand’s purist socialist experiment was brought to heel by the markets when the franc slumped, creating a surge in inflation and a policy U-turn.

Labour are prepared for this and almost seem to be relishing the idea.Mark Serwotka, from the PCS union representing civil servants, said Labour would face huge opposition should it win. Serwotka predictedall the usual arms of the ruling class will be brought to bear.

The union leader included using financial markets to bring economic pressures such as the flight of capital and trying to destabilise the economy.

GBP 2 year performance

For the Conservatives,Labour’s plans would go too far, and ordinary working people will end up footing the bill, Chancellor Philip Hammond said.

The problem is, ordinary working people are already footing the bill. Without the help of Labour’s socialist policies.

What is a run on the pound and theconsequences

A run on a currency usually happens when markets feel it is overvalued or is likely to drop quickly.

Both international investors and speculators sell the currency and assets denominated in that currency en masse, forcing its value down.

The UK’s most recent, famous example is from 1992.That September, a day now known asBlack Wednesday, the falling value of sterling forced the Conservative government exit theEuropean Exchange Rate Mechanism after its attempts to support the currency failed.

In the most recent threat of a run on Sterling Labour’s opposition seized on McDonnell’s comments. Current Chancellor of the Exchequer Philip Hammond said Labour’s economic policies would trigger a collapse in business investment and a crash in the value of the pound, causing a shock wave of inflation.

When there is a panic sell of a currency, the value drops and we see arise in price of imported goods and raw materials.

There is of course major capital flight. A sudden exodus of large sums of money out of the country which wouldundermine the stability of the financial system in the UK.

Altogether financial shocks such as these could push up inflation.

It sounds awful but the truth is Labour’s success may only mean an acceleration of what is already in place.

The value of the pound has been in decline for many decades now. This is thanks to stealth inflation caused by loose monetary policies and little foc