Never in the field of inhuman goforit have so many traders sold so much on the basis of so little.
Itâs hard at first to say what convinced Mervyn King and his fellow Monetary Policy Chauvinists to spring the âno more QEâ news so suddenly, while using the bare-faced line âThis is good news because it means we donât need QE any more, hurrah!â
Either way, the marketâs response was âMerv, we have not just fallen off a Christmas treeâ.
However, on reflection the view here at Sloggerâs Roost is that the one may have cancelled the other out: the Bank ripped up a blank cheque, and the markets saw it as a reality check.
Thereâs no doubt in our minds that the Fitch/S&P credit downgrade rumours got to the MPC â along with the worrying December inflation rate running at a 2.9% annualised equivalent. But at the same time, this bizarre exchange of blank ammunition has brought into very sharp relief the untenable position the UK is in.
In summary, more QE can only bring higher inflation and delayed pain. But cuts in spending can only bring the realisation that, right now, the UK private sector simply isnât up to it.
The mendacious Lord Mandelson can call this âtalking Britain downâ until every Vodka Palace has been dry-docked: itâs nothing of the kind: itâs talking sense.
Fascinating, I think, was the reaction of currency traders â who marked up Sterling to 1.148 to the Euro. However awful the outlook may be, even a small chink of reality is good news for those constantly sniffing for signs of sovereign default. And as not a scintilla of this reality is apparent in Brussels, they rightly felt bearish about the EUâs Toytown currency. (Reality abounds in Germany â but thatâs another story).
Of course, for the overall âbalanceâ of UK outlook, a stronger Pound is in theory the last thing we need. But theory isnât practice; and in practice, the currency exchange rate is not the problem we have in export markets. The problem there is that we have nothing they want â or simply, nothing to sell at all.
Iâm in the camp that says there remains no alternative to a long, cold winter of adjustment to our new (more humble) position in the world rankings. We could make this a shorter, milder winter â by facing facts, and starting right now to restructure our economy towards high-value techno-lines and British heritage luxury goods for sale to the East. This â along with an expanded agricultural sector â would lower our food costs, and transform our balance of payments. The problem is, I donât see so much as a glimmer of awareness of that fact among the dozy, clichÃ©-ridden elite.
You thought bonkers was supposed to be funny, didnât you? Well sadly, when the bonkers person sits next to you on the bus, itâs not at all amusing. And when the bonkers person is driving the bus, itâs absolutely terrifying.
Enjoy the weekend.