A ratings agency – actually a team of ordinary men and women with much the same data as everybody else – has downgraded Japan. In their view there is now a teensy weensy possibility that the Japanese government will be unable or worse still, will choose not to pay back the interest and principal on some of the money they have borrowed. Indeed many of the economic numbers coming out of Japan are concerning and those who haven’t lent them any money will be feeling smug. Actual creditors will undoubtedly have been watching closely and with growing alarm and the formal downgrade adds to their discomfort. Yet, as I have commented before, the alphabet soup of about a dozen successive ratings levels from AAA to D have little to do with the blunt binary situation of pay versus no pay. And further, as we saw most recently in the credit crunch, a AAA credit rating means nothing if the borrower defaults anyway. Nevertheless we can take the downgrade as a reminder that the economic recovery is a slow and potholed road. The JSE All Share index has ended the first month of the year just about where it started.
Is it one of the conditions of the Davos shindig that TV interviews must be conducted outside in the freezing cold? Have you noticed that nearly every talking head appears on screen all bundled up and their words come out in little puffs of steam? Very dramatic! Also impressive are predictions like the demise of the euro, the certain rebound of the global economy and the suggestion that the prices of commodities especially food need regulation. The irony of this last idea seems to have been lost on the delegates, many of whom are undoubtedly there mainly for the legendary catering. There’s a sort of regional follow-up Forum in May in Cape Town. Snow is unlikely but hot air will again be plentiful. Already the committees are working on a theme as bland and meaningless as this week’s “Shared Norms for the New Reality”
How about Famous Brands’ explanation for improved business in their fast food venues being due to the heavy rains that chased people indoors to the malls and shops? It sort of makes sense. I spent a few days this week near the mouth of the flooding Umfolozi River. The muddy torrent flowing into the sea was so strong that the waves were completely brown and choked with vegetation washed down from the countryside. Fishing was out of the question but the fridge in the bar to which I retreated was in perfect working order.
The lack of fishing also gave me time to ponder my entry to the “Name a Prison” competition. Frankly it is an astonishingly bad idea and waste of money to take half page full colour advertisements in national newspapers to call for the names of citizens who need to be revered and honoured by having a slammer named after them. My own list of entries tends towards people who were once convicted and imprisoned for outrageous and appalling crimes against humanity but who are now free. On condition that they return to serve the life sentences so totally deserved they can name their new homes after themselves if they so wish.
And now the chaps down at Durban City Hall are congratulating each other for borrowing EUR100million at 6.7%pa. Payback of the principal (today equal to almost R1bn) is scheduled for 2026 when I think it is a fair to suggest that it might take a lot more than a billion rand to buy EUR100million. But by then very few of the fellows swilling the champagne will be around to face that problem. Borrowing offshore is a pretty fraught affair. Just ask the last SA government.
What I haven’t yet done is study the new Super 15 format beyond pencilling in July 9 as the day the Lions lift the trophy. But I have noted that the ‘bokke will not be playing at the House of Pain in Dunedin at all on their way to the World Cup final. That’s good news.
James Greener
28th January 2011
