On May 8, 12:36*am, Tony Bryer wrote:
As any intelligent Daily Mail reader knows, choose your dates carefully
and you can 'prove' almost anything. Under Mrs T's reign the pound to
US$ rate fell to something like 1.03.

Which was as much a function of interest rates & weak USD policy - not
strong UKP policy per se.
1980+ is marked by 2 periods of record high interest rates, something
that should have repeated in 1998 but was not so permitted a housing
asset bubble to inflate and then take off USA-side 2003 (which
amusingly the Fed can not explain) and UK-side 2005 (which Gordon
Brown leaning on BoE can explain).

1980s in particular saw the peak in interest rates, trough in bond
prices - a rally which may soon be ending.

Germany needs the Euro because otherwise its currency would explode
destroying its manufacturing export capability.

USD has stayed strong primarily through 1) Japan carry trade (most
pensioners have 1M$ in their name and with Japans zero interest rate
policy bought USD for the yield) 2) China carry trade (China lends USA
the money to buy Chinese goods) 3) USA requiring banks to
recapitalised in safe assets thereby buying LT debt - and overbuying
LT debt by borrowed at exceptionally low ST rates.

That last point #3 is exactly what the UK is doing - manufacturing
buyers for Gilts when the UK is not a reserve currency and when the
BoE Quant-Easing was busy buying gilts back from foreign investors
(doing more to help foreign economies that ours ironically). Pension
funds likewise are desperate to buy index linked debt, along with
banks. I suspect a lot of future economic & social care policy will be
about the same - in effect forcing UK people to buy government debt.
If the UK can not hold up gilt prices, hold down yield, the housing
market (rates) & economy (interest on debt) is stuffed.

The commodities cycle has a way to run, so Australia is in for an
interesting ride. The housing bubble there is prolific and will
eventually fall sharply when the commodity bubble has a blowoff.

Since commodities are priced in USD, the USD must be bought throughout
the world - it is an oil backed currency thus provides a reserve
currency in perception akin to gold backed. That the Fed can print the
stuff willy-nilly is as yet not considered a problem, until the bond
holders (China 1T$) get fed up with the escalating deficits.

The West is riding on a debt-wave to hide the trough of declining
economic leadership & standard of living vs East.
Based on current projections of 2020 2030 2040 re some default (Japan
re aged & deficit), 20% junk status, then 80% junk status (USA, France
UK), interest payments will eventually cause a crisis.
Once deficit hits 90% of GDP interest payments cost 1% of GDP - which
is on top of the West's diminishing GDP that is so heavily reliant on
1) consumer debt expansion 2) housing price expansion 3) gov't debt
expansion. It is a secular recipe hence China's contempt for UK-
Sterling and growing contempt for USD inviting anyone to a blackboard
with chalk to explain how the deficit will come under control. The
answer from America is of course "when someone owes you 1T$, the
problem is yours".

The interesting bit 2015+ will be China military spending vs USA
military spending, I often wonder how much of the "anti-terror
spending" and "Unmanned Flying Object" and "Unmanned Armed Boat /
Bomber / Tank" that is currently hidden under non-Pentagon spending
(port security, base security) is actually about military spend hiding
and robotised one-to-many military tactics. Removing your soldiers
from the battlefield and multiplying their number by smart roving
military devices is an effective way of countering China's "benefit of
numbers" (WW-II Sherman & T34 showed it is quite effective :-)


So far we do not have a prime minister.
I vote for the red muppet on ?Virgin-1? - comforting colour to many,
or of course we could just have Merkel as a consultant... although she
might want us to buy Greece.