Blain's Morning Porridge Jan 25th 2018 - The Dollar - is it a good thing for everyone? where'
Blain’s Morning Porridge – January 25th 2018
“Prince and Lords are but the breath of kings, an honest man’s the noblest work of God.”
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Tonight, Scotland celebrates Burns Night – the birth of our national bard Robert Burns, a poet famed for his celebration of the common man. He has long been the darling of left wing revolutionaries for his sense of social justice, mocking the hypocrisy of the higher classes, disdain for those seduced by the trappings of wealth and their loss of humanity. Read his stuff, and it’s a great antidote to the “Outlander”/“short-bread tin Scotland” romantic nonsense! Read it and understand why socialism was invented in Glasgow, and where Nicola Sturgeon et al are coming from…
So, this morning I wonder what Burns would make of Davos? There is a great article on Bloomberg about the glitzy parties we never hear about. If Donald Trump is the genius he claims to be, maybe he can explain what this year’s theme: “Creating a Shared Future in a Fractured World” means when the World’s 42 richest people own more than the bottom 50%? (That curve has gone parabolic in recent years – fewer and fewer folk own more and more.) Doesn’t sound like there will be much left for the rest of us to share after the top table has hogged the trough?
As Burns said: “Gie fools their silks, and knaves their wine.. their tinsel show. The honest man, tho ever so poor, is king o’ men for a’that.”
But, I can’t help but be struck by the curiously aligned asymmetry of the Davos GabFest where every panel is chaired by a woman, and the revulsion across the UK press at the stories of The President’s Club Charity Dinner. Jaysus wept. Have none of them daughters? Have any of them worked out we’ve moved on since 1980? Its like something out a Dickensian Novel. It was a good cause – raising money for a kids hospital… I am sure 90% of the attendees are essentially decent men and will be hanging their heads in shame.. 90% of any stag night, or a political party are essentially decent people.. Unfortunately, shit tends to float to the surface.
Doing nothing when something is so obviously wrong is tantamount to condoning it. Next time.. stand up and walk out.
Enough of the moralising..
This morning its’ all about the dollar. Interesting quote from HSBC’s new Chairman, Mark Tucker: “I don’t think the US dollar’s position at this point is anything but dominant.” NSS Sherlock award winging its way his direction. US Treasury Sec Steven Mnuchin’s “weaker dollar is good” comments has seen the greenback tumble and set the finanocracy a’flutter with concern. The White House press tried to mumble-swerve Mnuchin’s comments into considered talk of “Stable” dollar, but the message is clear.
Bottom line: everyone wonders what Trump will say. They expect the worst; threatening Davos with “America First”, “trade wars” and thinly veiled threats of “protectionism”. He can say whatever he likes – the message has already been delivered. He doesn’t have to do anything else – but I am sure he will.
Its’ like a lightbulb on the forehead moment. What’s the problem with a weaker dollar? It’s far more effective than any other currency trying to scrabble to the bottom. A weak dollar drives the US economy, which in turn fuels global growth. Its’ great news for emerging markets – which are in recovery, and while a bit of rate tinkering will be required, the dollarized global economy takes a boost.
Attached this morning is a chart and outline of US FX policy these last 40 years from my Macro Economist, Martin Malone. Should we worry about funding the deficit – if you can show me somewhere else to put all that cash? Should we worry about trade wars and protectionism? Sure, but sometimes a bit of pragmatism is needed, alongside confidence it won’t deepen into recession. What happens longer-term will be interesting…
Finally, great article from Marcus Ashworth on Bloomberg about a new Tier 1 deal – “That shows credit markets have lost the plot”, he writes. Read it on: https://www.bloomberg.com/gadfly/articles/2018-01-24/how-can-a-russian-bank-bond-yield-anything-close-to-ubs
Sorry for being late again. No comment tomorrow. Busy in morning, and the quacks want some of my blood.. ouch. Have a great weekend!
Bill Blain