Friday, February 8, 2013


...and the Brits won it!  After an all-nighter, David Cameron emerged victorious having convinced the leaders of Euroland to cut the EU budget for the first time in history.  Unlike some famous battles in the past it was the Brits and the Germans alligned on one side against the French which, if memory serves, last occurred in 1815...but then the Germans were on any side that paid them.  How much was involved?  Not very much to be sure and it is a multi-year budget running until 2022, a "forward looking" budget according to Harry Von Rompuy the EU President (as opposed to a backward looking budget, Harry?) and with that time frame a lot can change.  But it was important for two things: it was a huge political victory for Cameron both in Europe and at home and if anyone was in doubt as to who mattered more as between Frankie and Angie, that doubt was put to rest.  It just might keep the British in the Union as little thing when compared to the prospects of just a few short weeks ago.  Now the European Parliament can veto the entire thing and there are quite dumb enough to do just that, but I suspect that the Cameron view will prevail even there especially with Angie firmly on board.  Quite a result indeed.

Overshadowed by all this was the decision by the assembled to move forward with the exploration of trade agreements with both Japan and the United States which IMHO is a good deal more important than the above but which, certainly in our case, is probably going to be a long time in coming if it comes at all.  If Von Rompuy though he was, from time to time,  having a bit of a bad time with Cameron wait until he starts dealing with The Leader where I suspect he will find a distinct lack of interest and an attention span some what shorter than that of my late, beloved Wheaten Terrier.  Then again, she was a very bright dog.

While that was going on we now have a wonderful little currency war shaping up all around the world.  In response to Draghi's comments the other day that the strength of the Euro might be a real drag on growth in 2013, Japan took the hint as its finance minister today suggested that the devaluation of the Yen might have gone a bit too far and we really don't want to allow this to get out of hand do we Draghi-san?  I would hate to be an FX trader today.  Euroland has clearly been hurt by an exchange rate what with all the upset still closed at 1.33+ to the dollar today.  Problem is everyone is chasing each others markets including the U.S. whose trade deficit by the way narrowed sharply last month.  Checkbooks at 20 paces!  Problem for everyone is that Mr. Bernanke has the biggest checkbook in town and a singular mindset to prove himself to be correct.  It could get ugly.
Then again, a goodly part of our Balance of Trade is Oil and we are awash in that commodity at this stage opposed to past years which may well mean that despite what people may wish to do on a currency basis, we are seeing a significant and perhaps permanent shift that may not be affected in any scenario.  Interesting stuff I think.

Finally, three cheers for the Irish who apparently have convinced the ECB that a restructuring of their obligations owed to the central bank was in the best interest of all parties.  It appears that the ECB has agreed to exchange high-yielding short term obligations for debt with far longer maturities with a greatly reduced interest rate...something I might add that they have been loath to do as Ireland is not the only member of Euroland  that are in to them for a bob or two.  In exchange, Ireland will immediately liquidate Anglo-Irish Bank (what they should have done four years ago) and promise to sin no more.  So now the precedent has been set and principal compromised.  It will be interesting to see who is first in line to cut other deals with Sr. Draghi who, incidentally, has yet to comment on this one.  It will be a lovely little...war?

Yes, Carter, it was the Times...days late as usual

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