- For much of his time as Prime Minister of England, David Cameron has been criticized by the press and by other nations for his "austerity" program.
- England has come out of this time of criticism with not only stronger economic growth but also a stronger currency.
- The British Pound has risen by more than 13 percent against the US dollar since Mr. Cameron has been in office and this must indicate investor confidence.
Since David Cameron became the Prime Minister of England on May 11, 2010, the press has not given him many kudos for what is going on in the English economy. Almost everything that has been published has been on the downside, especially in criticizing his "austerity" budgets.
Well, right now, England looks like the only one around the eurozone, except Germany, who also has been criticized for its austerity measures that can take some pride in how its economy is performing.
My test of governmental leadership, a measure that I have presented many times before, is the performance of a country's currency in the foreign exchange market.
The recent performance of the British Pound has captured a headline this morning: "Sterling Continues to Strengthen." Yesterday, the British Pound hit its highest level in 5 years.
And, how does the battle go between Mr. Cameron and Mr. Obama, President of the United States?
Well, since Mr. Cameron came to office on May 11, 2010, the British Pound has risen 13.4 percent against the United States Dollar. On that first day in office, it took $1.4952 to purchase one pound. Today, it takes $1.6957 to purchase one pound.
The clear winner is Mr. Cameron.
But, what about the economic growth of the two economies?
Well, Mr. Cameron seems to be a winner on these counts as well.
In the first quarter of 2014, the United States grew, year-over-year, at a 2.0 percent annual rate. England grew at a 3.1 percent, year-over-year, rate of growth.
And, the United States government, both the Federal Reserve and the US Treasury Department, have been lowering their estimates for economic growth in the upcoming time. The International Monetary Fund has even lowered its forecast of economic growth for the United States to 2.0 percent for 2014.
The dilemma that England is now facing is the possibility that inflation may be heating up.
The annual rate of consumer price inflation in the UK rose to 1.8 percent in April prompting the Governor of the Bank of England, Mark Carney, to raise the possibility that the Bank of England might have to begin raising short-term interest rates sooner than had been expected.
This latest figure for inflation is still below the BOE's target rate of 2.0 percent. However, Mr. Carney apparently felt that it was important to raise the possibility of a sooner-than-expected rise in short-term rates before things got out-of-hand.
It seems as if the two countries that focused on getting their finances back in order, Germany and England, now seem to be in the driver's seat when it comes to having a strong national economic situation to back up their political efforts.
Germany has been dominating the European Union because of its strong economic position.
Mr. Cameron and England have begun to attempt to exercise its strength in discussions concerning the eurozone.
Whereas Angela Merkel, the German Chancellor, has seemingly not overplayed her hand with other leaders in Europe, Mr. Cameron has seemed to be on the edge of taking positions that are too strong and too public to be swallowed by these other leaders.
The bottom line is, however, that England seems to be running along at a relatively good pace according to the Wall Street Journal article "in contrast to an anemic recovery in the neighboring eurozone and has even outstripped growth in the U. S."
But, even more crucial, the economic policies of England seem sustainable given that the country's inflation is not allowed to overheat. The evidence captured in the fact that the British Pound continues to rise against the United States dollar indicates that market participants believe that England's current economic strength will continue to be maintained for the time being.
Expect, therefore, the value of the British Pound to rise against the value of the U.S. dollar.