Friday 4th January 2013 was a turning point

Reading some of the financial technical press and better class of website content yesterday afternoon, there was a very Friday feeling about it all. The first short week after New Year is always a butt-kick after several consecutive days of food, family and fantasy. Everyone sounded pretty bored, and glad of the two-day respite now beginning. In fact, I think this ennuie was a more than slightly depressive response to the arrival back at a desk, and the discovery that Santa Claus hadn’t brought that much desired present marked Salvation For All.

The actual news events (forget the usual dopey analysis of them) spoke for themselves. For once, new developments presented an astonishingly consistent picture of Getting Real. As the day drew to an apathetic close, for me ‘Thank God it’s Friday’ had morphed into ‘Total Gloves-off Fighting’. What Zero Hedge described on Thursday as ‘the continuation of postponement and avoidance and reckless governance of the nation’ (neat precis) was shaping up to become Now it’s going to get Nasty.

Much of it was the same old same old that doubtless contributed to the air of tired resignation: deliberate uncertainty being created in every potential investor-escape sector, stock markets being pumped ever higher on QE-driven fantasies bearing zero correlation to market sales, brief ecstasy at the US Payroll data release and so forth.

Behind these featured, ageing actors lurked the extras providing a by now standard backdrop of gathering storm: moaning winds beneath billowing clouds, and a sign up ahead saying ‘Bates Motel’. Some snippets of truth were coming out about the real situation in Spain; gold traded down to $1629 an oz for a while, when it should really have been settled in the $1660-1690 range. US insurance companies and institutional lenders were rumoured to be getting heavy with Congress about cliffs, ceilings, and general dicking about. Poor figures from UK services sector alongside equivocal stuff from US payrolls – plus the growing reality that ‘job’ has become just another governmental data lie. For the analysis of part time vs full time employment in the West shows without further room for doubt that people are working shorter hours less formally for less cash….and this isn’t a personal lifestyle choice on their part.

However, three very sore, pulsating bright-red thumbs were in amongst the well-manicured hands gently manipulating the news along. The first was a brief wobble in the US Treasuries sector, with some significant rises in bond yields. For a few hours, one or two nervous screen-rats came face to face with the future. It was mercifully brief, but it was there: “cheap debt is not forever” it whispered.

The second was the behaviour of the Japanese Yen, in itself of note given the context of new political developments in the Land of the Rising Sun. A currency trend like this one helps to make Nipponese exports struggle:

yenoctdec12

Much of this has been win-win Chinese buying…an unwelcome bedfellow to recent Sino-Japanese sabre-rattling. This is how yesterday went:

yen4113

Between 7 and 9 am, the top Samurai decided “enough already”. Between 9 and 1, aggressive buying pumped the currency straight back up again.

Now this sort of stuff happens all the time. But on this occasion, set against the three-month trend was a clear attempt being made to fight back against sovereign financial attack.

The third event happened on the other side of the world, but involved precisely the same bare knuckled punch-up in which the Queensberry rules haven clearly been taken up to the attic for storage. The Swiss continued to dump all the francs they could sell, but piled bigtime into Sterling.

This isn’t surprising either: in 2008 the Quid bought 2.35 Sf; as of now it buys 1.49. At one time in 2011 it was at 1.20, but then the consistent Zurich policy of currency value-for-money protection got going properly. Yesterday and Thursday, however, the forced revaluation of the UK Pound was focused and concerted enough to attract the attention of heavyweights like Ambrose Evans-Pritchard.

As early as Thursday evening, AEP was noting that ‘The Bank of England is straining every sinew to drive down sterling with quantitative easing, and what happens? The Swiss National Bank trumps Threadneedle Street with an outright blitz of Gilt purchases.’ He went on to make the Asian currency link too, asking what might happen when ‘Japan kicks in with its own nuclear plans to drive down the yen, and Asia follows suit’. Well, my nose says that it began yesterday, and the score so far is Japan 1 China 1 (1-0 ht).

It is, however, a surreal form of soccer in which the objective is to keep heading the ball past your own keeper.

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Yesterday was a qualitative turning point in my book. I think we got the first signs that the crew of the globalist SS Titanic had assessed the damage and decided it was lifeboats time. Yesterday was the day the stern started to lift far enough above the water level to reveal some propellers on All Stop.

Summits beginning with G will soon be moving on from vapid promises and mendacious commitments to barely controlled anarchy. The UK is hosting the coming year, and Prime Minister David Cameron is already salivating at the prestige he expects to come his way. I think he is heading for a nightmare as the facade breaks down, and the swing to survivalism takes hold. But thuggish sovereign cheating makes fools of us all: we shall see.

As I’ve opined many times before, currency devaluation wars are really the forerunner to outright protectionism. Unlike many commentators, my view remains a somewhat sanguine “Bring it on”. What bust-banisher Gordon ‘Globalglobalglobblegobble’ Brown sneeringly called ‘siege economics’ could well be an extreme commercial form which, in time, gives way to sovereign self-sufficiency complemented by the export of any surpluses – packaged stylishly and honestly as high-margin added-value products for the emerging Asian rich. Such an idea is found risible by the growth-nutters (and most of Camerlot); but if we do withdraw from the EU it will become an imperative alongside zero immigration. I don’t have any problem with that.

In the meantime, next week will be the first ‘normal’ trading period we’ve had since November. I expect some revelations about Greek banks, bent Italian figures, and Spanish Caja insolvency. I’m also picking up disturbing hints about the potential for telling comments from Berlin as and when those ‘shocks’ are revealed. But then, I’ve heard them before…and Frau Merkel is a dab hand at sqashing any debate that shows signs of taking reality on board.

Stay tuned.

Footnote: I am in receipt of a minor Pedant’s Revolt over the use of the word ‘neocon’ to describe the insane yet dominant Friedmanite capitalist model currently holding sway across the world. I do think this is angels on a pinhead stuff, but for the record, the word is not the ‘misnomer’ some of you would have us believe. The prefix neo means new. It is derived from the Greek word neos, which means young, fresh, new or recent. But in modern times it has come to hint at revival, copy and parallel – as in neo-classical, neo-colonialist, neo-realism and so forth. 

Neo-conservative economics admire (and are derived from) the Adam Smith school of laissez-faire mercantilism as outlined in The Wealth of Nations. As such, ‘neocons’ favour a conservatively light hand being applied to the regulation of international trade: in its contemporary form, it in turn favours a conservative lack of intervention in and regulation of the means of producing goods and financing corporate growth – as well as embracing the ideas of Milton Friedman…often alongside Theodore Levitt.

I do not accept the term neo-liberal as in any way descriptive of this school, as today’s most voluble and powerful business and media leaders are economically illiberal when it comes to genuine competition, and giving an even break to nimble small alongside mighty leviathan. Many of them are monopolist baby-stranglers, price-fixers, law-benders and government-bribers….they are risk averse, and prefer shareholder reward to healthy innovation. As such, they are not in any way economically liberal. Usually, they are politically conservative and repressive.

Anal defining aside, most commentators and readers of the econo-fiscal landscape accept and understand what ‘neocon’ means – viz, ‘self-serving denialist jerk who thinks wealth is more important than civilised fulfilment, and cynically active denier of the utter failure of Friedmanism wherever it has been tried’. As a piece of recognised and deservedly tarnished shorthand, therefore, I will be continuing to use it. And this discussion is now closed.