Time, and non-treasonous politicians, can heal crisis wounds
The Hang Seng is up 5-1/2%; the S&P put on 4.33% and the DAX 4.98% – the central banks yesterday did what only they can do well which is to intervene in a market which is already heading in the right direction. The technical month-end bid to credit and equities was just what was required when the Big Six announced measures to improve liquidity by cutting the price of emergency US dollar loans by 1/2% and thus prevent the global financial system from freezing.
The central banks will also establish a temporary bilateral liquidity swap arrangement between themselves to permit liquidity at short notice should market conditions deteriorate again – yippee! – equities were off to the races. However, it is quite clear that the trigger to the monetary authorities’ dramatic move must have been a deep-seated fear that something within the global banking system was just about to go horribly wrong.
Circling the wagons
Conjecture that a putative Lehman-style collapse of some unnamed European banking business had now been avoided leaves me more worried than reassured because we know that the world since the endless post-Lehman liquidity injections has not really become that much better. The issues which brought the banks to their knees and so very nearly put them out of business in 2008 might have been resprayed in pink and moved to another corner of the room but they are far from having been resolved. This concerted action, obviously aimed at keeping a very creaky system afloat, reminds me once again of the John Wayne kind of scene where the gallant US cavalry trooper, having shot his last bullet, scowls and in a last-ditch act of defence throws his gun at the enemy. While in there with the Wild West metaphors, we might as well conclude that the central banks are circling the wagons. You don’t circle the wagons in a moment of victory.
Nevertheless, the monetary authorities have bought more time and at the end of the day it is only time that can heal the wounds of the financial crisis – well, time and a few politicians who understand that the longer-term health of their nation is more important than their chances of re-election. Actually, strictly speaking, by placing their personal electoral fate ahead of the national interest is an act of treason, maybe even of high treason, and perhaps the best way to move forward in resolving the deep-seated problems which are facing so many of the developed Western economies would be to string up the odd politico – in the way Admiral Byng was hanged from the yard-arm in 1757 – “pour encourager les autres”. I quite like that idea; maybe something for a referendum …hmmm. Where’s Guido Fawkes when you need him?
My thanks to Ralf here at SwissInvest for bringing in a wonderful little titbit this morning – today is the 21st anniversary of the breakthrough of the channel tunnel which joins this sceptred isle to that dodgy continent full of foreigners. It helped to turn the traditional pre-Christmas “booze cruise” into the “dole roll”.
There were all kinds of promises of how the tunnel would bring “European culture” to Britain – which just goes to prove how little the Brits understand of the rest of the Union in that “European” doesn’t truly exist outside of Brussels (HvG will be having my guts for garters); no more French is spoken in Folkestone today than it was back then and not significantly more English is spoken in Calais either.
In Sangatte they apparently principally speak Bulgarian, Serbo-Croat and Somali. However, at £50-odd for a day return with the car and £50 for fuel, you can pop over for a day’s wine shopping with ease. When €/£ was in the 1.50s it was a no-brainer. At €1.16 it makes marginal sense. However, the UK Treasury is now aware that the ease of travel puts a limit on the way excise duties are levied on booze and fags – not only do the likes of us pop over for the day but it brings on industrial-sized smuggling. Do I hear cries of “fiscal union”?