Parallels with a Wretched Currency……
How long for low interest rates……?
Earlier in the week, one of the leading forecasters predicted that the current low level of interest rates is here to stay until at least 2016, and that the economy has pretty much ground to a halt. That might prove to be optimistic if the euro zone goes through a controlled break up, with Capital Economics saying “the crisis could knock some 3% to 4% off UK GDP over the next two years”. Given that the present austerity plans envisage the economy having forward momentum; this would be a big setback.
Time to pay off war loan….?
One of the unintended consequences of these low rates is that War Loan paper almost trades at par. This was originally issued in 1917 with a 5% coupon, but in 1932, the coupon was reduced to 3 ½ %, with no final redemption date. Others have argued that this was tantamount to a default, albeit that present day holders of Greek debt would happily accept such a deal. Indeed, it would be cheaper for the government to pay the loan off, since it can borrow at less than 3 ½ % in the markets. Will it do so?
A peripatetic passage plan……
There has been much discussion about the sunken Italian cruise ship, its peripatetic passage plan, and wayward captain. Maybe this could have been foreseen; the Costa Concordia was named in honour of “continuing harmony, unity and peace between European nations”, but ominously the traditional bottle of champagne failed to break at the launch. The parallels with the wretched currency are all too obvious.
Independence or ‘devo max’……?
Closer to home, the campaign to build a new Royal Yacht seems to be gaining momentum, not least because Nick Clegg immediately opposed it. The idea is not so much to have a floating platform for the first family, but more a showcase for UK plc, as we seek to ramp up our exports.
Of course, we will have to decide what to do with the last one, currently in Leith, if Scotland votes for independence. Whether it does or not seems to hinge on what questions are posed, and who gets to set them, but the most likely answer seems to be “devo max”, which is everything bar total independence. Interestingly, a poll shows that the inhabitants of Shetland are not in favour, which is where a lot of the oil and gas comes ashore.
Problems for retailers……
Finally, the retailers are beginning to release their Christmas sales figures, at least those that have survived thus far. Perhaps the biggest upset was from Tesco, where sales fell 2.3%, but they were not alone with Argos, Homebase, Halfords, Thornton’s and Mothercare all having problems. Winners included Aldi, a low price supermarket, which is benefiting from the new trend to double shop; you start there, and anything they don’t have, you pick up at Tesco on the way back.
Maybe the problem is the prices they charge. You can buy a 25 kg sack of potatoes for £5 locally, and yet a 1kg bag will cost you £1 in the supermarket, a massive mark up. Their annoying strap line “Every little helps” is somewhat of an oxymoron.
CDO
22nd January, 2012
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