The UK base rate was crushed down to 2% this week and the pound sterling disappeared into a hole, losing more than 5% of its value against most other currencies including our own battered runt. Dropping interest rates would appear to be the only remedy occurring to central bankers when they watch with horror as people stop spending and start saving. The concept of punishing the wise and encouraging the profligate is rather cruel and unusual and I think that somewhere there are rules against that sort of thing.
But rules are discarded when the leaders sense that they are in great danger of it being found out that they really are powerless against the momentum of the approaching recession. They will of course deny that they and their predecessors of the last few decades were responsible for the endless and numerous small tweaks of policy that have slowly accumulated until the present crisis became inevitable.
My opinion that the political allocation of resources is unsustainable is now getting tested. Suddenly several of the world’s most important economies have reached the point where too many citizens were benefiting while too few were contributing. It is simply not possible for everyone simultaneously to ignore the boring old saws like “neither a lender nor a borrower be” or “ save for a rainy day” or even “buy cheap and sell expensive, but not necessarily in that order”. It is of course simply splendid if you are one of those who can travel upstream against this wisdom for a while and to do so is one of the great benefits of entering a career in politics.
But now the contributors are losing their jobs and their homes and that will mean that the beneficiaries will soon also start to feel chilly which is why they are frantically yelling at people over at the central bank to turn up the heat. In the USA the president-elect appears to have given Governor Bernanke instructions to get the engines on the helicopter warmed up and the sacks of money loaded. Inauguration Day in Washington will see the crowds showered with dollar bills. No wonder it is a sell-out affair.
Although it might feel as if the JSE has been indulging in a bit of a recovery the truth is that it has been a bad week for most of the big names. The all share index is hovering about midway between its recent high and low points. There is no reason to believe that the bear has been banished to his lair. With next week’s interest rate announcement by Governor Mboweni and futures close out a week after that there are still several matters available in 2008 for investors to fret over. Share volumes have not yet really displayed any sign of slumping into their holiday trough. Stockbrokers are obviously still making a decent living.
The elderly are, however, battling in this environment. Why else would Mr Roderick Stewart be strutting around a large stage last night rasping out his greatest hits? It was wonderful to attend a gathering at Kings Park where the star was older than me but I did rather worry about him slipping on the wet stage and breaking a hip or something as he scrambled about collecting the female undergarments being thrown at him. Given the average age of the audience some of the flimsies looked rather stouter than he might have wished.
This weekend’s ball sport is golf from Sun City. I shall watch if only for the sight of blue skies and the great yellow orb. This Durban overcast weather is getting tiresome.
James Greener
5th December 2008.
