Nerve Ton:c
WHAT is interesting about the cut in the Bank rate to 6 per cent. is that it has provoked so little reaction in the City. The Stock Exchange, the money market, and the foreign exchange market all acknowledged the move in a perfunctory way, and then went on much as before. This is, of course, a compliment to the authorities' timing; the cut clearly came at the right time. Few commentators read the event that way, however, and in the press reactions have been much stronger. This is largely because so many commentators are wondering how to reconcile their attitudes to the way the economic situation seems to be developing. The cheap- money enthusiasts are naturally heard explaining that the improveinent in our fortunes is largely due to the fall in prices of our imports, and not to the use of Bank rate, which is still, of course, a redundant weapon, etc. etc. Elsewhere, however, there are commentators who have for some months been warning the country that it is thoroughly bad for us to be paying less for our imports in this way, because it impoverishes cus- tomers overseas Who buy our exports.
The high level of exports has even led to the suggestion that perhaps the American recession is not as bad as has been made out; but experts on the American economy insist that it is much worse than is generally realised. Their earlier attempts to make our flesh creep with tales of what would happen to the rest of the world when American industrial production fell by 10 per cent. are being replaced by not very different stories about what will happen when output there has fallen by 20 per cent.—for the simple reason that pro- duction has already fallen by 10 per cent. and the rest of the world has shrugged it off. To add to the general fun—and confusion- a leading newspaper, with a particular interest in economic affairs, has almost persuaded itself that the only way to stop inflation is to spend more money. Inflation has indeed become so much part of our everyday lives that as soon as it begins to subside, people cry out for more of the drug. The impact of the drug on people's attitudes and judgment is perhaps its most insidious consequence. What is really happening in this country is that for the first time since the end of the war we have a chance of making the, economy grow without the accompaniment of rising prices. But if we want growth together with stable prices we shall have to steady our nerves.
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