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Tuesday, 17 October 2017

QE or not to QE; Moaning & The Cameron Veto; and Fred the Ed

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Anthony Peters, SwissInvest Strategist

It would be extremely tough to argue that Monday’s markets were anything other than ugly. In Europe, the effects of Friday’s relief rally more than wiped out, in the US they were all but gone. Triumphal statements from anywhere in mainland Europe about just about anything other than FC Barcelona seemingly immediately hit the skids and yesterday was no exception. Once again, the question was as to what had been achieved?

We all remember the wine lakes and the butter mountains but both of those shrink into insignificance when compared with the warehouses full of political and fiscal promises. Am I alone in being concerned that everyone seems to be clamouring for the ECB to resort to bond purchases as the “magic bullet” when every other “magic bullet” has so far failed to offer reprieve?

Let’s face it, QE has not saved Japan, QE has not saved the UK and QE has not saved the US either. All that QE really seems to have done is to postpone Judgement Day. I have been accused over the years of being something of a fiscal reactionary but if my expressed scepticism for the benefits of Delorsian Eurosocialism had been shared by some of the people in positions of power, then we might not be sitting quite as deeply in the brown stuff as we are.

I do not like the French approach that the ECB holds the key to solving all of the Eurozone’s problems and listening to some of what Francois Hollande, the Partie Socialiste candidate for the French Presidency, has to propose, you’d have to conclude that, on the Gallic Left at least, nothing has yet been learnt from the troubles of the past years.

The Cameron Veto

The debate about the UK’s role and position in the EU rolls on; the responses I received to the bits I wrote yesterday cover the full range with celebratory whooping and deepest gloom coming from all around the globe. There is no consensus on what the Cameron Veto really means. However, the best and most perfectly hedged comment came from a source which would probably prefer to remain anonymous and which read: “Share some but not all of the views expressed here. If I was a chess player I might think I’d sacrificed a few pawns to take a bishop, but only then realise just how vulnerable my King is looking.” The most pragmatic of approaches came from Switzerland which is very comfortable in being a member of the EEA without having to join the EU - it has all the benefits without any of the costs. The Swiss are a clever little bunch, you know.

I hear the moaning that the PM acted only in favour of the City but as those moaning civil servants, teachers and nurses begin to lose their jobs, they might conveniently remember who paid the taxes that gave them their jobs in the first place.

I am also quite intrigued by all the voices on the radio and talking heads on the TV who are opining on what impact the veto will have on British trade within the EU. Again, I might be something of a traditionalist, but I have a sneaking suspicion that if British industry can produce what other people want to buy, they’ll buy it. The nonsense which was being disgorged about buyers in Europe wanting to favour exporters from other eurozone members over British manufacturers because of the Cameron Veto makes me wonder what kind of intellectual pygmies run British trade associations; no wonder our exports are in a mess if this is the level of leadership SMEs have to look to in order to find access to non-domestic markets.

I hear the moaning that the PM acted only in favour of the City but as those moaning civil servants, teachers and nurses begin to lose their jobs, they might conveniently remember who paid the taxes that gave them their jobs in the first place. I am reminded of one of the banking unions in Scotland which blamed 5,000 announced job losses at RBS’s headquarters a few years back on irresponsible lending by senior management and my similar response at the time which was that it was only that irresponsible lending which had created the 5,000 jobs.

Fred the Editor

Which brings me neatly to the FSA report on the Royal Bank of Scotland. 20/20 hindsight is a great thing to have but it was pointed out to me – I haven’t read the report – that Sir Fred “The Shred” Goodwin, erstwhile CEO, had received a note from the FSA expressing some concerns about the bank’s strategy and that he had, apparently, edited its content before passing it on to the board of directors. If this is true, then we should have what we need in order to take Goodwin and hang him from the yard-arm. I recently mentioned Admiral John Byng who was hanged in 1757 for a failure to do his best under the Articles of War in order to, as it was said, “encourager les autres”.

In this particular case, too many pawns have been sacrificed and it is time that the king (or ex-king) climbs the scaffold too. As traders know, you can’t be fired for losing money but you can get done for breaking rules. Do I sense that we might have found the crowbar to prise open Goodwin’s defences?  

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