While we are all suffering from the after-effects of that dose of medicine which he, as Chancellor of the Exchequer, injected into the country on that fateful day in October 1990, he has never explained to the country where he got his prescription from. When he prescribed 2.95 marks as the correct value of the pound to enter into ERM, just about everybody else was predicting an even lower rate. In May 1990 Handelsblatt, the equivalent of the Financial Times in Germany, predicted that Britain would ultimately join the ERM with the pound at 2.45 to 2.50 marks. General expectation in the City was around 2.75 marks (see Lloyds Bank's Economic Bulletin of May 1990). Why then did we suddenly enter the ERM with an overvalued pound?
During most of the Fifties and Sixties, Germany and Japan kept the deutschmark and the yen very much undervalued, which helped to expand their exports and industries. Why has Britain's weak economy been prescribed an overvalued pound which is lengthening our recession into a possible slump? If the Prime Minister cannot answer that, he has as much chance of being listened to with respect as Ayatollah Khomeini would have had if he had asked the world to listen to his proposals for peace and non-violence.