Margaret Thatcher Iron Lady
Image from Britain's Iron Lady, Former Prime Minister Thatcher, Dies April 8, 2013.
Visionary Speech of Thatcher
Please consider the remarkable visionary speech of Margaret Thatcher to CNN World Economic Development Conference.
Thatcher spoke of the failure of the ERM, the Exchange Rate Mechanism, a predecessor to the Euro, then warned about the Euro.
The ERM required the British Pound to trade at a certain level. George Soros made a billion pounds betting against the ERM in a correct bet that the British Pound was overvalued.
The debacle is known as "Black Wednesday".
At the conference, just three days following Black Wednesday, Thatcher admitted her mistake in joining the ERM, then with prophetic vision, correctly predicted a sequence of events regarding the Eurozone.
Black Wednesday and Admission of Error Speech Snips
The stability which fixed rates offered was a false one. It prevented currencies for adjusting gradually to market realities, and in the end it produced wild swings of instability. There's nothing new about fixed exchange rates collapsing. What might be new is to finally learn the lesson that fixed rates don't — and can't — work in free markets.
It may be embarrassing to go back on a pledge to defend a particular exchange rate come hell or high water. But if the pledge was — like this one — misguided in the first place, the act of breaking it should provoke a round of applause, not condemnation.
Since countries differ in their level of economic development and potential, their fiscal policies and their rates of inflation, the most flexible and realistic method of economic adjustment is a system of floating exchange rates. Each country can then order its monetary policy to suit its domestic conditions — and then there is no need for any ministerial shouting across the exchanges.
Limited government, small government, honest government: these are themes not just for reforming the post-communist states but for getting our own economies back on track.
Prophetic Vision Regarding the Eurozone
If the divergence between different European economies is so great that even the ERM cannot contain them, how would those economies react to a single European currency? The answer is that there would be chaos of the sort which would make the difficulties of recent days pale by comparison.
Hugh sums would have to be transferred from richer to poorer countries and regions to allow them to take the strain. Even then unemployment and mass migration across now open frontiers would follow. And a full-fledged Single currency would allow no escape hatch.
The political consequences can already be glimpsed: the growth of extremist parties, battening on fears about mass immigration and unemployment, offering a real — if thoroughly unwelcome — alternative to the Euro-centrist political establishment.
If in addition you were to create a supra-national European federation, and the people could no longer hold their national parliaments to account, extremism could only grow further.
It is time for the European politicians to sit up and take note. Time to stop their endless rounds of summits — summitry is fast becoming a substitute for decision-making — and observe the reality around them.
There is a growing sense of remoteness, an alienation of people from their institutions of government and their political leaders. There is a fear that the European train will thunder forward, laden with its customary cargo of gravy, towards a destination neither wished nor understood by electorates. But the train can be stopped.
Tomorrow, the French people will vote on the future of Europe. It is not for me to instruct them on French interest. But I must stress that the referendum is not a vote on whether we should have a European Community — but on what kind of European Community it should be.
The video is 17 minutes long. The snips above start at the 9:12 mark.
Instead, I heartily endorse watching the entire video.
How often does a politician go on stage, admit a mistake, describe the correct solution, then give a prophetic warning with uncanny accuracy?
Mike "Mish" Shedlock