In the event details:
• The pound sterling fell to $1.0327 at one time in trading.
• The currency depreciation has reached nearly 8 percent since Thursday and 21 percent since the beginning of the year, at a rate comparable to and comparable to currency crises in Britain’s post-war history.
• These panic attacks often involved attempts to keep the pound sterling at a fixed rate against other currencies, which is no longer a problem for the free-floating pound.
According to “Reuters”, the following are major stations in which the British currency experienced sharp declines since World War II:
Britain’s exit vote from the European Union in 2016
• The pound sterling fell by eight percent, a day after the British voters voted in favor of withdrawing from the European Union.
• The currency was already declining for about a year to reach $1.145 in early October 2016, which represented a 28 percent drop from the peak to the lowest level.
Black Wednesday in 1992
• At a turning point for its membership in the European Union, Britain exited in September 1992 from the exchange rate mechanism, a system that aimed to reduce currency fluctuations before launching the single European currency (Euro).
• This led to a sharp drop in the value of the pound sterling, and although the economy eventually boomed, it damaged the reputation of the Conservative Party in terms of managing the economy until it came to a crushing defeat for Prime Minister John Major in the 1997 elections.
• In an attempt to support the pound sterling, the government raised interest rates to 15 percent and the Bank of England (BoE) sold $40 billion in reserves in the months leading up to Black Wednesday.
• Britain has also used some innovative accounting measures to hide the size of its foreign exchange losses, including a “secret negative forward ledger” of 12.5 billion pounds.
• In 1997, the Treasury said that the final cost of the crisis exceeded three billion pounds sterling.
• An exceptional level for the dollar in 1985
• The pound sterling began in the eighties of the twentieth century with a value of $2.30, but in early 1985 it reached a record low of $1.05 with the increase in the value of the US currency due to global trade imbalances, and the parity of the pound sterling with the dollar, which was not previously imagined, became a real possibility.
• Despite the British government raising interest rates to prevent further slippage, some of the sterling’s declines came for reasons related to the British currency itself.
• A briefing came from a media spokesperson for Prime Minister Margaret Thatcher to the media in January 1985 with the aim of reassuring the financial markets of extremely counterproductive results.
• One of the ministers complained, according to the minutes of a cabinet meeting published years later, that “things did not improve due to the press response, which was mixed between that the government does not have a specific target for the pound and complete ambiguity about its level.”
• In the end, the British pound rose against the dollar after the five leading industrialized countries of the world at the time concluded the Plaza Accord in which they agreed that the value of the US dollar was overvalued and that measures should be taken to reduce it.
The IMF crisis in 1976
• By the mid-1970s, the British economy was in dire straits. Attempts to revive it early in that decade led to a severe collapse a few years later, exacerbated by an oil crisis.
• The inflation rate exceeded 25 percent in 1975 and the newly-floating pound sterling witnessed a state of free fall, and eventually reached its lowest level at that time at 1.58 dollars in October 1976.
• A series of bleak forecasts regarding government borrowing indicated that Britain might no longer be able to afford it, forcing then-Finance Minister Dennis Healy to seek external assistance from the International Monetary Fund in a blow to Britain’s prestige as a major economic power.
• The value of the loan amounted to 3.9 billion dollars, and it was the largest loan ever obtained from the International Monetary Fund at the time, and it came in return for significant cuts in public spending.
• Healy later regretted that the government’s borrowing situation turned out to be much better than expected, raising questions about whether the loan, which was repaid early, was really necessary.
Devaluation in 1967
• Successive Conservative and Labor governments struggled to contain spending in the 1960s, increasing pressure on the British pound, which was pegged at $2.80.
• By 1967, the pressure had become irresistible, but disagreement within the government and with the Bank of England, which was opposed to devaluation of the pound sterling as an easy way out of Britain’s problems, caused poor management of the devaluation process.
• Investors learned that the plan failed in November 1967 when then-Secretary of the Treasury James Callahan chose not to confirm or deny to Parliament whether there were ongoing talks about devaluation or an emergency loan.
• The Bank of England had no choice but to burn reserves for one day until Labor Prime Minister Harold Wilson, who considered the pound a symbol of national status, officially announced a devaluation of the currency to $2.40.
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