Now that is simply amazing. The main men and women of the world got together in London this week and came up with the number of $175.00. This is the amount, which if given to each and every living soul on this planet, will make the world’s financial problems disappear. I haven’t yet got to the part in the news story about where this money will come from, but I did note that Treasury Secretary Geithner warns that “progress is going to be uneven”. By this I suppose he means that the million million dollars will be handed largely to cronies and crooks who have already confirmed a cavalier and careless conduct when caring for cash. Those of us with savings and a tax number should probably not be watching for a cheque in the post. Rather we should prepare for ever more evil methods to use the latter to white-ant the former.
London was also the venue for anyone with a cause, a silly face mask and time on their hands to run about the streets of the City looking for golden geese to slay. I think that it is something of a duty to society for those with time between lectures, which the public have helped to pay for, to raise awareness about issues that someone else is trying to deny or obscure. For example, Deputy Finance Minister Nene has told us that he was met by a limo and cold champagne on his recent visit to our northern neighbour. A placard or two drawing his attention to the plight of the Zim refugees ought to remind him that his lavish welcome in Harare was definitely unusual and not unrelated to the possibility that he was arriving with a sack of real money.
Nonetheless the sight of the great and greedy greeting each other so warmly and nodding at each other’s speeches sent the bear into hiding. The JSE along with most exchanges enjoyed a spectacular week with some excellent volumes and excitable analysts declaring that the bottom is passed. The frightening facts however, continue to accumulate. Businesses are shutting down; jobs are disappearing and about the only consuming taking place is of borrowers by their debts. The bear will certainly return.
Despite an upbeat announcement from National Treasury, the raw and simple numbers show that government revenue collections are slowing down very quickly while expenditure is accelerating. The price of votes these days is terrible. The demand for bond finance is going to surge (Anglo American bagged $2bn in the US this week) and I think that means that long bond yields will have to rise. If you have money, be wary about lending it to anyone long-term.
Inexplicably but gratifyingly for some, the rand is very near 6 month highs against most currencies. As a result, rand hedge shares have been particularly disappointing and mostly failed to participate in the current euphoria. Those who believe this strength will be reversed by the election of a president with such finely tuned race detectors that he can tell how many passports each citizen owns, should investigate the New Rand exchange traded fund.
The IPL cricket circus to be held here in SA might be a good time to run an economics experiment and to offer the various prize winners gold coins instead of US dollars. The sub-continent’s citizens are famous for their interest in the metal. A gold mining company used to offer a krugerrand to batsman who smacked a ball directly into their advertising board at the Wanderers. Sounds a whole lot more attractive than a thousand sheets of Mr Bernanke’s newly printed paper.
James Greener
3rd April 2009.
