Guest post from friend of Alhambra, Brian Cronin:
I emigrated to the US in 1983 and became an American citizen in 1987. It was the second best thing I ever did though it confounded some of my British friends. There cannot be too many American citizens who can say they voted for Margaret Thatcher but I can certainly lay claim to that. The election of May 3rd 1979 was a turning point in British politics. After years of turmoil and inept governance by the socialist Labor Party, Britain was ready for a change. Socialism and calling someone a socialist seems to be a dirty word in America but unless you have lived under such a regime, you can’t know. That election was transformational because it was the first time that a woman was elected as Prime Minister of Great Britain. She was a polarizing figure and you either loved what she stood for or you did not. There were plenty of people on both sides.
That’s why the new movie about her with Meryl Streep was such a disappointment. While the performance was very near spot on, I was always aware that it was just that – a performance. What I objected to was the distasteful way, at least for me, it depicted her in the early stages of dementia roaming around her apartment talking to her dead husband Denis. While it is undeniable that her health has suffered in recent years, that is not how I choose to remember her.
She was the leader of the opposition Conservative Party from 1975 to 1979 defeating Edward Heath for the leadership. Heath had taken Britain into the European Community in 1973 but Mrs. Thatcher had strong views about that and the later drive to have Britain join the euro, about which more later. Yet he had given her a cabinet position as Minister for Education and Science. Her policy of ending waste in government and ending the free delivery of milk to older school children earned her the title “Mrs. Thatcher, Milk Snatcher”.
Americans cannot really appreciate what it was like to live through the 1970s in Britain. The battle of wills between the public sector unions and the Labor government over the wage freeze to keep a lid on inflation led to strikes by a variety of workers including garbage collectors and grave diggers amongst others. This inability to control the unions, notionally on the same side politically as the Labor government, led to Conservative victory in 1979. Because the winter of 1978/79 was quite cold, it became known as “The Winter of Discontent”.
But it wasn’t just that. All the way through the seventies, many unions and in particular the coal miners and the railway workers struck often leading to a three day work week and rolling black outs. It got to the point where, in order to maintain constant staff, my bank (and others too) were putting staff up in hotels and paying them £5.00 a night for the inconvenience of being away from family. If you really wanted to rough it, you got £8.00 a night for sleeping on a camp bed inside the bank. Being young and in constant need of money, many of us opted for sleeping in the bank. But we were all much younger then!
You cannot really imagine what it’s like to be in a trading room underneath a jerry-rigged metal structure on top of the main desk with hurricane lamps swinging from it and trying to make money for your company. While it all had a sense of cameraderie and the “spirit of the blitz” while we all helped each other as the bombs were falling, so to speak, it was nevertheless extremely aggravating and little wonder therefore that when Labor went to the country in 1979, they lost quite handily.
A test of her character and steely resolve was not long in coming to the fore. Taking on the unions head on domestically (“the enemy within”) and Argentina over the Falkland Islands dispute (“The Empire Strikes Back!”), she won both handily. In the Meryl Streep movie, you see glimpses of all that. I would have preferred much more concentration on these battles than her own personal health struggles.
For financial market participants however, it is her attitude towards the euro which is of particular interest. “During my lifetime most of the problems the world has faced have come, in one fashion or other, from mainland Europe, and the solutions from outside it.” “A single currency is about the politics of Europe. It is about a federal Europe by the back door.”
She was a euro-skeptic from the start. As she had on this and other policies, she had opposition from within her own party, known as “the wets”, but she was well aware of the phobia that Germany had and still has about inflation. With memories of the great Weimar inflation within living memory for many in Germany, the attitude was that “2% inflation is 2% too much” and that’s how it was expressed to me by a Bundesbank official. A single European currency, grand though its aims might be, would not be able to handle the pressure and strains of economies at different stages of their economic cycle and, putting it kindly, different management styles. It would only be a matter of time before it all blew up. How prescient of the lady!
There is a word in German, “Schadenfreude”, which means taking pleasure in someone else’s pain and perhaps only the Germans could come up with that. But while it would be unkind to attribute that sentiment to all the euro-skeptics, there is certainly an element of “I told you so, but you wouldn’t listen!”
Brian Cronin worked in banking for 40 years, 35 of them in currency sales and trading. His last post was with ANZ Bank as VP, Markets Division where he produced a widely followed weekly commentary on currency markets. He is now retired and living in South Carolina – at least until we can coax him into joining us here at Alhambra.