A letter to the Editor of the Times which was published on 7th October 1991.
It is a pity that Sir Peter Hordern (October 1st) should subscribe to the view that central banks control inflation through their supply of the currency.
The massive inflation which we are only just recovering from was not due to the Bank of England’s printing a large over-supply of bank notes, but to the vast expansion of credit by the commercial banks. This expansion of credit in 1987-9 expressed as a proportion of GDP, more or less accounts for the inflation rates of 8 to 11 per cent during those years.
A central bank per se, whether independent or not, is an almost total irrelevance so far as inflation is concerned in a world dominated by thousands of different monetary agencies able to switch assets and liabilities across the world at the touch of a button.
For continentals the drive for a European central bank is seen as a vital step on the way to a European state and government. Monetary and political union are inseparable as everyone, except the British political centre, with its overwhelming wish to avoid hard choices, recognises.
A letter to the Daily Telegraph which was published on 4th July 1990.
The Vice-President of the German Bundesbank said on the BBC Today Programme in February that “of course, a country which merges its currency completely cannot remain independent politically”.
These views are commonplace on the Continent, which is why monetary and economic union is seen as an immediate precursor to a United States of Europe. Mr Ridley has only exploded the myth that there is any halt between our agreeing to monetary union with the rest of the EEC and our complete loss of status as an independent nation.
Monetary union and political union are effectively inseparable and the Government’s foolish pushing of the idea of a hard ecu is merely one more attempt to fudge the issue and avoid a split in its own ranks.
Mrs Thatcher’s Cabinet should face the fact that the “unhappiness” expressed by commentators about Mr Ridley’s remarks is as nothing to the deep unhappiness felt by millions at the way a Government, faced merely with a barrage of words, rather than bombs as in 1940, cannot find the simple courage to say: “Whatever the rest of the Continent does, we will not take Britain down the road to political extinction.”
