About That Historic Collapse In Sterling: It Was "Only" The 9th Biggest Drop Going Back To 1862
Over the past several days, the financial media has been preoccupied with the fascinating - and historic - drop in sterling which as this site also noted, was the biggest in history. As it turns out, that is not the case, as the data was limited by the available records on file with major service providers such as Bloomberg and Reuters. However, if one goes back in time, as DB's Jim Reid has done, it appears that Friday's sterling move was rather puny by true historical comparisons.
As Reid writes, "I'm sure you've read by now that Sterling's drop on Friday (-7.64% based on GFD data) was the largest on record against the dollar. Think again. Although it's the biggest drop since the collapse of the Bretton Woods system in the early 1970s there have been 8 bigger daily down moves since 1862.
The bigger moves (with brief reasons for those within the last century) are 1) 19 Sep 1949: (-30.41%) Pound devalued under Bretton Woods due to economic concerns; 2) 21 Sep 1931: (-23.57%) Gold Standard abandoned in the Depression; 3) 30 Sep 1869: (-18.75%); 4) 20 Nov 1967: (-13.02%) Harold Wilson's famous 'pound in your pocket' devaluation to battle the UK's economic problems; 5) 25 Mar 1863: (-10.90%); 6) 10 May 1940: (-9.79%) War related deviation from the dollar peg; 7) 25 Sep 1931: (-7.89%) A few days after the Gold Standard was abandoned, the pound continued to depreciate although it did jump by 7.14% next day. 8) 19 June 1866: (-7.76%).From the Federal Reserve Bank of New York's Liberty Street Economics blog, May 6, 2016:
So in the >38,000 business days since 1862, Friday was only the 9th worse day for Sterling. So maybe it's not all that bad...
Historical Echoes: Echoes, Schmechoes, This Post Only Has a Drop of History in It
You might hear: “Economy eschmonomy.” Another possibility is: “Economy schmeconomy.” This phenomenon of repeating a word with the prefix shm- (or sometimes “schm-”), is called shm-reduplication. It challenges the relevance and sometimes the value of the repeated word, and examples can be found in articles like this Newsday clip “The High End: Economy, shmeconomy — the rich still travel.”
Who cares about whether it’s eschmonomy or schmeconomy? A pair of linguists from MIT and Harvard, that’s who. This 2003 paper describes the authors’ attempt to understand how the shm-reduplication works (the linguistic rules that govern its use) and how the researchers used interviews and questionnaires to investigate those rules. The authors also review the Yiddish origins of this usage (there are competing theories), provide a short section on the meaning of phrases that use the reduplication, and inform us that there is a relative lack of study of this form of reduplication (there are a few other forms).
Who loves shm-reduplication? The media; print, online, broadcast . . . you name it. It’s a very compact linguistic device. A simple two-word phrase can convey a wealth of information about the author (or speaker), the audience, the object of the shm-reduplication, and the overall situation. “Economy eschmonomy” could mean the opposite of “it’s the economy, stupid” — phrased differently: Never mind about the economy, this other thing (aliens from outer space, for example) is much more important. Or it could be a more personal statement: Forget about the economy, I’m going on a vacation (this comes up in an example below).
Some illustrative examples of shm-reduplication on the web:
Currency shmurrency In Barron’s, columnist Alan Abelson says: “For even if Beijing were to up the value of the yuan by as much a 15% … it wouldn't get our somnolent factories up and smoking again. The reason is simply that what our manufacturing workers earn in an hour, their counterparts in China earn in a week. Currency, shmurrency, no matter how hard and how smart our folks work, that gap is as ugly and daunting as it is yawning.” (June 2005)
Interest rates, schminterest rates South African blogger, Piet Viljoen, says that interest rate fluctuations shouldn’t affect your stock portfolio. (March 2009)
Income Schmincome In a brief post on NewRepublic.com, Martin Peretz pokes fun at the headline choices of several major papers in reporting President Obama’s income. (April 2009)...MORE