CUTTING ROOM: Consignia's uphill struggle; just six months to e-day; farewell to the fiver - and to trouser pockets; Milt Friedman's laptop insult to the Fed ... Evan Davis at large

CUTTING ROOM: Consignia's uphill struggle; just six months to e-day; farewell to the fiver - and to trouser pockets; Milt Friedman's laptop insult to the Fed ... Evan Davis at large - Spare a thought for Consignia, or at least its Royal Mail division. It

by EVAN DAVIS, the economics editor of BBC's Newsnight
Last Updated: 31 Aug 2010

Spare a thought for Consignia, or at least its Royal Mail division. It has clearly got its work cut out. For one thing, the new postal regulator has been breathing down its neck, ready to license new competitors and ominously drawing comparisons between its performance and that of the Longbridge car plant. For another, Consignia was alone responsible for 10% of the total working days lost to industrial disputes in the UK in 2000.

And yet, while interviewing the deputy-general secretary of the Communications Workers Union, I couldn't help but notice he pointedly refused to let the word Consignia pass his lips, and insisted on sticking to the old Post Office nomenclature.

Talk about a company that has yet to carry the support of its workforce into a new era.

I'm glad to see that excitement is building over one of the world's biggest logistical challenges for years: the conversion of the eurozone to new notes and coins on 1 January 2002. The numbers are quite staggering: the European Central Bank tells me it needs to produce 14 billion banknotes and 50 billion coins. It seems an awful lot, but then you have to remember the Germans are much less disposed to using plastic than we Brits. And I'm told that in Spain, people even pay for petrol in cash (an activity that, given the price, would be almost as impossible over here as buying a house with a suitcase of tenners).

Concern is rife, of course, that e-day will be a disaster. After all, it occurs at a bad time of year - a busy retail season and on a bank holiday. Pity they didn't pick 15 February, as we did when we turned decimal back in 1971.

The nightmare is getting all the notes and coins out there. Secure transport for distributing the new cash will be overworked - you need only a bad snowfall and the whole cash supply system will dry up.

And the shops - which will give change in euros while accepting old money - will need whopping great floats, because they will be giving new cash out while getting none in. To get the small-denomination euros into circulation, it is the retailers who will have to distribute them. On balance, maybe we should be glad we are out of it until the hard work is done.

Talking of the logistics of small-note distribution, it's an issue that's beginning to affect life in Britain, as the pounds 5 note seems to be on its way out. When you get one, it is invariably falling to bits; and usually if you buy a newspaper with a tenner, you get a load of coins back.

I have taken this up with the Bank of England, who put a rather complacent spin on the development. They admit that demand for fivers has fallen as banks no longer put them in cash machines. Looking at the figures, I noticed that since 1998, pounds 5 notes have gone from 4.4% of the cash circulating to just 3.8%. And production of new fivers has fallen by more than a quarter in the past three years. I'm sure the Bank doesn't mind, as coins last much longer and are less trouble for them all round. But for those us who can't sew very well, getting the dry cleaner to repair the holes in our pockets from the tonnage of Britain's irritatingly heavy coinage that we carry around is a real cost.

Remember Milton Friedman, the Chicago University monetarist guru who inspired Margaret Thatcher. It all seems such a long time ago. In the 1970s he was suggesting government should aim for 4% inflation, a target that seemed absurdly ambitious at the time.

Well, the Nobel prize-winner is no longer at Chicago; he has retired to San Francisco Bay with his wife Rose, and still pontificates to anyone who cares to phone him. But age has done nothing to dim his rebelliousness. I notice that his latest comments are on the US Federal Reserve.

'I've always been in favour of replacing the Fed with a computer,' he says. In essence, he wants a laptop to take over the most important economic policy-setting job in the world, simply programmed to inject extra money into the economy at a steady, consistent rate. 'It would do that week after week, month after month, hopefully year after year,' he says.

'It sounds so simple,' Rose Friedman adds. 'Why can't a human do this?'

But what would the markets make of it? A PC might get the sums right, but could it really compete with the air of Delphic certainty accompanying Alan Greenspan's pronouncements? I think not.

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