Hopefully, this week’s measures taken across the world will finally lead to an end to the crisis. To an extent, I am talking my book, as I am long of various bank stocks. However, my wish stems more from having to listen to all the doom and gloom being peddled by so many media “experts” every time I turn the TV or radio on. As most of the people I know who actually work in financial markets don’t have a clue about what is going on, why on earth should some two-bob journalist – myself included – have any inkling?
That said, I do feel I have some sound advice to offer and so I asked Darling if he had considered some good-old fashioned FX-style intervention. I’m sure wading into the market and buying £50 billion-worth of bank stock would have had the desired impact. After all, when the package was announced, RBS’s market capitalization stood at just £16.4 billion, which suggests the government could have bought it three times over if it played its cards right.
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It seems my missive had an immediate impact. An hour after it was sent, the Bank of England duly cut its repo rate by 50 basis points. I shall be sending Darling another letter next week, telling him the Bank needs to stop dithering – for as well all know, the market doesn’t like ditherers – and cut by at last another 150 basis points by the end of 2008.