NOT SO SPLENDID ISOLATION

NOT SO SPLENDID ISOLATION

29 Mar 2020

On the 23rd of February I published these seemingly prophetic words. SPLENDID ISOLATION Another idea that we are rowing back from is internationalism. To put it another way, nationalism appears to be on the rise wherever you look. A better word might be insularity because this is not primarily about xenophobia. It is mostly an economic phenomenon again. For some reason we don’t really care about global poverty half as much as we care about global warming. Of course I didn’t have the slightest idea of what was about to happen. So sadly this blog is not a description of how I moved all my assets into cash and am now reinvesting at a 30% discount. While the world appears to have been turned upside down in the last four weeks, people everywhere were very already receptive to turning their backs on the rest of the world. And I was too kind when I downplayed the role of xenophobia. Every country seems to want to lie in its own dirt now and in many countries’ foreigners are regarded with suspicion or even hostility.  I am absolutely not referring to the UK, which is a highly diverse and generally welcoming country, but rather to more monocultural nations. I was in Sri Lanka last week just as the country started to go into lock down. Sri Lankans are and were almost uniformly delightful but when I found myself on a crowded bus with many people standing and the seat next to me vacant, no one wanted to sit next to the white man.  There are reports that African countries are wary of Europeans and Mexicans are demanding to be protected from US citizens.   Here is a comment found on Twitter: Today on my final reporting trip in China, my colleague and I are eating when a man walks up: “You foreign trash. Foreign trash! What are you doing in my country? And you, with him, you bitch.” I think he wanted to fight, but we stayed silent and let him rant. Quite the farewell. Poland closed its borders, causing huge disruption to citizens of Baltic states trying to get home. Given how many Poles work abroad,...

£££ The case for the pound £££

£££ The case for the pound £££

10 Nov 2018

  When I wrote recently about financial  contagion I pointed out that holding cash is an investment. It is effectively a bet against inflation and for political and economic stability. Moreover, holding any currency involves a potential hidden opportunity cost – that of not holding a different currency. On a couple of occasions in my lifetime, the British government has had to abandon a policy of maintaining the level of sterling against another currency; in 1967 against the dollar and in 1992 against the deutschmark. GREAT STERLING DEVALUATIONS OF OUR TIME On the first occasion, following a 14% devaluation, the PM Harold Wilson attracted a certain amount of ridicule for addressing the nation in the following terms. He acknowledged that sterling was worth less “abroad” but said: “That doesn’t mean, of course, that the pound here in Britain, in your pocket or purse or bank, has been devalued”. Essentially he said that the pound hadn’t been devalued against the pound. In truth, it wasn’t much of an argument but it relied on the fact that currency losses are largely invisible until people are obliged to make some kind of foreign transaction. I don’t remember the devaluation of 1967 but in 1992, on (Black) Wednesday 16th September I was sitting in a dealing room listening to an open line from the Bank of England’s dealer who repetitively intoned the price at which he was prepared to buy sterling. One of my colleagues told me that the Bank of England dealer always closed for the day at 4.30pm (presumably to catch the 5.07 to Sevenoaks) and wondered what would happen then. What happened is that he did indeed bid everyone a good afternoon and no doubt picked up his briefcase and headed for the door. In the time the world’s only buyer of sterling could have walked to the station, the dam had burst and he had pissed away £3.3 billion, which was real money in 1992. If that sounds like a story of pinstriped establishment incompetence from ancient British history, I must mention that the Bank of England is sitting on paper losses of some £49 billion (my estimate) from the gilts that it has bought...