Sterling's fall should be a solution, not a problem. Basic economics tells us it will make exports cheaper and imports dearer, which should raise demand for exports, cut demand for imports, and thus raise economic growth. Sadly, things aren't so simple.
The trouble is, this isn't happening yet. Latest trade figures show that non-oil export volumes rose just 3.1 per cent in the last year. This is little help to GDP growth.
This is not a new problem. Our chart shows that the link between the pound and export volumes is not strong. Big moves in sterling - for example, its strong rise in 1996-97 - often have little effect on exports.
One reason for this lies in the international division of labour. UK firms increasingly rarely compete head-to-head with foreign manufacturers of the same goods. Instead, they specialise in higher-value-added goods and have fewer direct competitors. And the less competition a firm faces, the less responsive will be demand for its goods to changes in prices. Instead, what matters is the strength of demand. If the global economy is weak, exporters will suffer even if the pound falls.
However, there's other evidence to show that exchange rates can support economic growth. US export volumes rose 11.1 per cent in the last four quarters, helping real GDP to grow a respectable 2.2 per cent despite the credit crunch.
So, how can the US benefit so much from a weak currency when the UK doesn't?
Partly, of course, it's because the US depreciation has been larger. The US dollar's trade-weighted index is 23 per cent below its peak. Sterling's is only 16 per cent off its peak. But there's another big, and overlooked difference: time. The dollar fell for five years. Sterling has been falling for just 18 months. The difference matters.
Put yourself in the position of a producer who finds that a weaker currency has made it potentially profitable to start exporting to a new market. Do you start selling more immediately?
Not necessarily. It costs money to sell goods. You have to invest in advertising and marketing, build up a sales network and contacts, give credit to wholesalers, bribe officials and so on. Do you really want to incur these costs?
It depends what you think will happen to the exchange rate. If you fear this might bounce back, you might not make these investments for fear your efforts will become unprofitable. It's only when you are confident that the exchange rate will stay low that you will beef up your export drive.
But the problem is that exchange rates are volatile, so we can never tell immediately after a fall whether the low rate will last or not. When anything makes a lot of noise, any signal it sends can get lost. For example, since we left the exchange rate mechanism in 1992, the annualised volatility of monthly changes in sterling's trade-weighted index has been 5.6 per cent. This means there's a roughly one-in-five chance of it rising 5 per cent in a year.
Faced with this risk, the immediate response of exporters to a fall in the exchange rate might, quite rationally, be to do nothing - to wait and see if the weakness persists. Only when they are confident this will be the case will they beef up their export efforts.
There are therefore long lags between changes in exchange rates and changes in exports. And, depending on the state of exporters' expectations, these lags will be variable.
And herein lies the big difference between the UK and the US. American exporters have by now had time to realise that a weak dollar might be here to stay, and so have begun to adjust their export policy accordingly. UK exporters haven't had so much time, and are still waiting and seeing.
There's more. In our globalised world of footloose capital (cliches are sometimes true), exports and imports aren't the only routes through which exchange rates can affect economic activity. They also do so through decisions on investment location. At the margin - an important qualifier - a weak pound increases the profitability of locating in the UK relative to elsewhere. The result should be that UK firms who were considering locating elsewhere might stay put, while foreign ones might come here*.
However, exactly the same reasoning that applies to exports applies to investment decisions - maybe more so. It'll take time before firms respond to the weak pound.
All this has three implications.
First, we should expect the US to be stronger than the UK for the next few months. This is not (or at least not just) because UK economic policy is poor, but because the US has had time for the exchange rate to take effect in supporting growth, while the UK has not.
A second implication is political. In the next few months, it will look as if sterling's fall isn't working in boosting growth. Those who want us to join the eurozone will therefore become more confident, and claim that giving up our own exchange rate isn't a great loss as exchange rates don't act as shock absorbers to support economic activity. If I'm right, this claim will be mistaken.
Third, if the pound does stay weak - and this is an 'if' - we could see surprisingly strong growth eventually, once exporters and investors act upon its weakness. The trouble is, we can't say for sure when this will happen.
*I'm talking here of the decision on where to locate production and jobs - which is a separate question from that of locating a head office.
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