Tag Archives: G20

Currency Wars.

I have been predicting the collapse of the dollar followed by the collapse of the pound sterling for about 12 months. the phrase ‘double-dip recession’ has now gone into the language but again is one of those phrases which is quite meaningless because I do not believe that we ever came out of recession.

Economically speaking, we have all been whistling in the dark.

Today the US dollar plunged to its lowest level against the Japanese yen in 15 years and fell to its lowest level against the Swiss franc in 27 years.

The world currencies which are going to do well in the next 5 to 10 years of those which belong to countries who have something to sell, that is to say countries which have minerals and metals in the ground and/or any sort of manufacturing. Australia is such a country and today the American dollar fell against the Australian dollar to its lowest-ever level.

Again about 12 months ago I predicted that gold was headed for $2000 an ounce. Today it is already at $1360 an ounce. That’s what happens when the dollar plunges and  investors start to buy gold by the ton!

World governments are plugging the odd financial hole here and there but, in the grand scheme of things, they are impotent to stop the meltdown of the dollar.

Apart from accelerating the value of gold, what else is the demise of the mighty dollar achieving?

There are only THREE major asset classes. Gold, commodities and currencies. As investors dump the dollar and rush for the exits marked gold, commodities and other- currencies-as-long- as-it-isn’t- the- dollar, there are two certainties. The first is that very soon the US government will have no choice but to devalue the dollar. The second is that  the dollar’s plunge has put incredible pressure on the price of food as investors rush to invest in wheat, corn, soya etc.

By the end of this year, the United States and the United Kingdom will be leading the Western world in unemployment statistics as both economies  are losing jobs at a greatly accelerating rate. In 10 days time,  the British Chancellor will give the British unemployment statistics  even more momentum by declaring thousand more public sector job losses. In the past four weeks, the United States has declared another 95,000 job losses.

Both the Federal Reserve and the Bank of England are inking the printing presses – ready to print even more dollars and sterling.  That will inevitably lead to currency devaluation which in normal circumstances would inflate an economy . However, after the United States and United Kingdom, there is a long queue of countries also wanting to down-value their currencies. That way (if such a thing were possible), they could all default on each other’s debts. Never mind, perhaps the banks will bail them out.

As recently as two days ago, both the IMF and the G20 admitted that this is not the end of the world’s economic troubles but the beginning of something truly terrifying:

Currency Wars.

It is simply a question of who blinks first and which economy can print money the fastest.

So what of the investors? They will produce what is known as a self-amplifying problem. That faster governments print money, the faster the investors will dump any currency they hold and the faster they will invest in gold and commodities. That will inevitably give rise to chronic  inflation and a very unpleasant end-game.

Will all these shenanigans affect the pound or dollar in your pocket?

Before you ask that question, make sure that you still have pockets that haven’t been picked by your government.

(THIS is from just over a year ago)

Another month – another meeting.

First, there was the notorious G20 junket. Then we had the Copenhagen Accord. Now we have another meeting. This time, it is the The High Level Advisory Group on Climate Change Financing, held today at 10 Downing Street, London. This meeting precedes the next meeting , which is the Cancun climate change conference later this year.

Today’s meeting was attended by political “big-hitters” such as Guyanan President Bharrat Jagdeo, Norwegian Prime Minister Jens Stoltenberg and Ethiopian Prime Minister Meles Zenawi. President Barack Obama’s sent his chief economic adviser Larry Summers.

This is Gordon Brown’s statement:

“If we can solve this problem I believe we will be on our way to achieving a global agreement. And today’s first meeting of the group has made a really constructive start.

This is a positive sign that progress can be made with the right leadership. It is vital for Britain that we achieve success.”

The “problem” to which GB is referring is the small matter of raising $100 billion to help third-world countries to deal with climate change.

A REAL opportunity for politicians to have lots of meetings.

Hopefully, their business will be concluded either before there is either serious climate change or when the scientists confirm that the Earth is  in fact, cooling.

At the moment it’s a 50-50 shot.

Meanwhile, as you listen to the video below, you may notice that no-one is clouding any of the issues with facts.

The statements shown above were immediately followed by lunch and a quick game of that well-known and much-loved political game of  “Bullshit Tennis”.

(When Gordon Brown spoke of the delegates’ “full daries”, he was of course confirming that no meetings are ever held  either during Wimbledon fortnight or the Harrods autumn sale.)

G20 bender

These are the wines that were served up to the G20 delegates. The total bill for the wine was a bargain £6000 which is a small fraction of the total wining and dining bill which was approximately £500,000. Perhaps the taxpayer should be grateful. Here is the list:

Château Pichon Longueville Comtesse de Lalande 1986 – 19 bottles @ £140 per bottle.

Château Leoville Poyferré 1989 – 29 bottles @ £60 per bottle.

Concha Y Toro Merlot Sunrise 2006 – 11 bottles @ £6 per bottle

Domaine de Planterieu 2006 – 13 bottles @ £5 per bottle

Nyetimber 1998 – 10 bottles @ £23

Louis Roederer Carte Blanche – 2 bottles @ £35

Fonseca 1977 – 5 bottles @ £137

Chapel Down Lamberhurst Eatste Bacchus Reserve 2004 – 30 bottles @ £10

Three Choirs Bacchus Estate Reserve 2004 – 17 bottles @ £10

The G20 weekend of excess  produced a statement and a document which has already been forgotten.

It was all designed to boost Gordon Brown’s image. He is now seen as the Walter Mitty of International politics.

The Brown Delusion

“Now down again. Slowly.”

The G20 conference was the most orchestrated, pre-determined piece of theatre that we have had the privilege of seeing since the 1968 Morecambe and Wise Christmas Show. The primary motivators were to somehow please the banks, instill confidence in both the markets and the voting public and lift Gordon Brown’s approval rating.

The three main devices  used were the over-wide smile , the already well-tried method of “let’s throw more money at it” and a long document.

Make no mistake – this amazing show of unity was for the voters back home. Gordon Brown was being so transparently Party Political that the G20 conference should have been funded by the Labour Party. He no doubt he sees himself as some sort of latter-day King Canute in an M&S suit but he does not wear it well – the image or the suit.

Barack Obama and his wife were the undoubted stars of the show – not because they are still new and shiny and unsullied by any of the recent banking shenanigans but because they are stars. Obama’s demeanour throughout was that of a modest thinking man who did not feel the need to stand either in the middle of the picture or at the front. Likewise, Michelle Obama did not put a foot wrong – although there was a moment when the Queen should have sent a flunkey to fetch a stool for her to stand on – such was the height mismatch between her and Michelle.

The communique produced after the meeting is vague in the extreme but there are a few quite interesting items. The first is a sop to the Franco-German alliance – or as I prefer to think of it – Vichy 2. A Financial Stability Board will be established. One presumes that this will develop into the Global Financial Services Gestapo so that if there is any financial naughtiness or even naughtiness-with-intent – “there vill be reprisals!!”. One serious point that has constantly been ignored is the fact that the banking issues are more to do with financial bandits completely confusing incompetent bankers. Any Financial Services Authority will train its beady eye on the incompetent bankers. The bandits will continue to operate but with even more stealth and guile.

The Head of the International Monetary Fund (currently Dominique Strauss-Kahn) will now be elected through “an open, transparent and merit-based selection process”. That simply means that any future encumbents can be  non-Europeans of any colour. Progress indeed. Likewise, the President of the World Bank (currently Robert Zoellick) can be non-American! Presumably, however, both will still be required to  attend the Bilderberg conference.

Those are just a couple of minor concessions. The rest of the document reads as if it had been written a while back. It is full of non time-stamped “cut and paste” rhetoric, e.g.

” We have today therefore pledged to do whatever is necessary.” 

” We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles.”

 “We are determined not-only to restore growth but to lay the foundation for a fair and sustainable world economy” 

There is much more of this sort of turgid nonsense and padding which looks as if it was drafted by a Civil Servant from the Ministry of the Bleedin’ Obvious.

The main single item from the whole circus was the agreement to recapitalise the IMF to the tune of $1.1trillion. One could argue that in these times of recession (and extreme poverty), all this could have been achieved through the usual channels without all the showbiz.

Meanwhile, somewhere in the depths of a thousand bank strongrooms, there are “papers” which represent billions of dollars-worth of damaged assets. The surviving hedge fund managers  are ready for the new game. Incompetent bankers are still in place. Retailers are being strangled by a lack of credit. Manufacturers are shedding millions of jobs. Governments are printing money that they don’t have and the City screen monkeys are still confused.

And yet today we feel optimistic. All because of several days of fine words and political sleight-of-hand.

 

G19 (+1)

 

“Sorry! That should have read: Monsieur Sarkozy is regarded by many as a cult”

There ought to have been just the one hymn sheet because if there are several hymn sheets, we are in for a very discordant Thursday.

Barack Obama is hoping that: ” G20 countries will do what is necessary to promote trade and growth.”M le President Sarkozy wants to create a Financial Interpol to police the financial services industry. The delusional Gordon Brown’s not-so-hidden agenda is to rescue his image and somehow emerge as King of the World but he persists in spouting inane generalisations such as  “clean up of the world banking system” and “more regulation of tax havens”.

Sarkozy is right. A Global Financial Services Authority is what is needed. If there are at least 20 Financial Services Authorities and the only thing that binds them is the hope of “greater co-operation” then all that is being thrown into the heaving fiscal mix are more junkets such as this G20 and more opportunities for the financial bandits to operate between even wider cracks within the world economy.

Somehow, it has been decided that “protectionism” is bad. Perhaps Mr Brown should spend more time thinking about the United Kingdom’s issues rather than constantly trying to put alleconomic problems in  the context of the “Global Economy”. Where was the Global Economy during the years that he stood at the Dispatch Box preening and accepting the plaudits? There was little credit given to the Global Economy when the British economy was behaving itself and Brown was  self-actualised and not self-delusional . History has already demonstrated that the Iron Chancellor’s image was so frail that it could be shattered and buried by one sentence from Vince Cable.

So the modern-day equivalent of the Tribal Elders will be talking economics but they will be thinking politics. Any summit such as this G20 meeting enables the leaders to discuss world economics but always with one eye on domestic politics.

Brown is very aware  – as are all the other G20 leaders that he is a dead man walking and the long-term fallout from the current economic crisis will be managed not by Brown but by the Conservatives led by David Cameron. (Somebody had to say it!)

So is this G20 summit necessary?

Brown is a historian and knows that Chamberlain was the first Prime Minister to engage in the sport of Summitry. Churchill’s meetings with the American and Russian leaders continued this fine tradition and in the 80s, Margaret Thatcher travelled as did Tony Blair in the 90s.

Currently, the technology is in place to make Summitry an obsolete sport but large numbers of politicians sitting round huge tables  still seems to be a popular diversion. Each already knows the other’s views and the odds are that there will be more conflict than accord. For instance, M Sarkozy is being backed as the first to flounce out.

The fundamental question is ” What is the problem and how do we sort it out?”.  That approach could  be a very fundamental error. In recent years, politicians have grown into the habit of putting themselves under tremendous pressure by asking the above question and then feeling the need to produce almost instant solutions – and of course we have become conditioned to expect that approach and more crucially, so have the media.

Brown the historian should know that the real question should not be “What’s the problem?” ( the modern politician’s approach) but ” What’s the story”  (the historian’s approach),  that is to say – let’s establish 100% how we managed to get into this mess. This approach takes time but in the long term , will produce the correct solutions.

Most Governments have already shown by their random actions of the last six months that they prefer to treat the symptom and not the cause.

In this respect, Gordon Brown should learn from both John Major and Tony Blair who both understood that firstly, the story of the Northern Ireland problem needed to be understood and that the solution would then follow as a by-product of that understanding. The whole process took a very long time but as recent attempts at destabilising the situation have shown, the solution is rock-solid.

This could be a time for reflection and not necessarily the customary politician’s sprint to action.

Soundbite Brown

“Osborne? Io sono huomo di cortelle e si tu no mascolta io te do na cortelatta.”

George Osborne has said Mr Brown’s attempts to secure a global agreement for a fiscal stimulus package have failed. It pains me to agree with the Shadow Chancellor but he is right.

Many (about 3500) fine words have emerged from last weekend’s G20 meeting. But what has really been achieved except perhaps an agreement to have another meeting in 2009?  Oh yes, there was a  statement that the G20 are going to “harness tax cuts to stimulate the global economy”.  

As Manuel might have said: “Que??”

The good intentions of the G20 will not prevent events such as a fire-sale of stocks by Hedge Fund managers or the accelerating erosion in the value of sterling. The sheer speed of developments within the global economy may create the real danger of politicians’ status  being demoted to that of observers rather than shapers of events because the provisional time for the follow-up G20 meeting is not until April 2009. 

In five months’ time the global economy will be in a VERY different place but meanwhile, the flow of politicians’ platitudes will continue as more financial placebos are dished out.

Brown has always indicated a dislike of political  “sound bites”  but in spite of that, his speechwriters have created some gems. Like an ageing football pundit, Brown has has increasingly relied on tired and crass political soundbites and clichés.

Brown now has a “route map” and that’s about it. “Road map” would have been a better phrase but that one has been taken. “Money map”, “Fiscal map”, “Green map”, “Mouse map”, “Door map” and even “Brown map” are all still available.

“Brown paper” is also an excellent one which has not yet been spotted by Brown’s wordsmiths.

It is a shame that these phrases cannot be registered like websites. Someone could make a fortune.

There have been many fine words but they do not seem to make much sense.

“These are extraordinary times and they require extraordinary measures”. Yep – can’t disagree with that one.  A  fine example of both a cliché and a truism  but Brown might as well have said “We are in deep  s*** and we really should think about getting out of it.”

G20 made a commitment to “boost growth and reform financial markets” is not a world-shattering assertion. Mind-numbing perhaps but definitely NOT world-shattering.

“The G20 are going to strive to draw up a timetable for a new world trade deal”  sounds like a fine statement but  would have sounded better if he’d left out the “strive to” phrase. Is Brown’s route map time-based or not?

Gordon Brown’s pseudo-Churchillian posturing and new world-leader status is looking increasingly silly and maybe a little delusional,  especially if you know that 45% of the world’s financial reserves are in the hands of the BRIC economies = Brazil, Russia, India and China. Currently they appear to be deferring to the USA, United Kingdom, Germany, France, Canada, Italy and France who collectively control less than 5% of the the world’s financial reserves.

Brown feels the hand of history on this shoulder (sorry!) and doubtless his writers are polishing a fine new set of clichés.

“Eloquent silence”  would be my favourite.