I’m not supposed to be in the office today but, thanks to the miracles of modern technology, home works just as well. How could I lie in while the British broadcast media were wall-to-wall on the Scottish referendum.
Well, now we have it. 45% Yes to 55% No. Not a thumping but a clear No. Of course, had it been a 55%-45% outcome, it would have been described as overwhelming and crushing. Well, that’s politics for you.
Sterling has got off to a decent start with it rallying from the high US$1.62s to the mind US$1.64s. Forget the hyperbole. It was at US$1.66 and change when the famous YouGov poll came out in the Sunday Times which had Westminster in panic but not the markets. As was pointed out to me, the bookmakers have a much better record on calling outcomes than do pollsters. Betfair paid out on a No victory on Monday.
I will desist from speculating on the next set of moves on the constitutional front; with David “call me Dave” Cameron in charge in Westminster, anything is possible, even the unlikely and especially the unconsidered. I can’t see the largely 19th Century structure of Britain’s parliamentary system being swept away in one, but there will be plenty of initiatives to decentralise this country. Personally, I’m not all that fussed.
We here have a privilege enjoyed by few, namely that we live in a democratic society and democracy, in my book, is protected not by lots of referenda (or referendums if you insist) but by a healthy collective disrespect for authority. That is not the same as chronic disobedience. It is about not blindly following political leadership when it goes into self-congratulatory hyper-drive.
French mediocrity
Talking of which, today sees Moody’s latest report on a number of sovereign credits. The rabbit in the headlights is France which is widely expected to be downgraded. President Francois “Qui? Moi?” Hollande has already criticised the outcome before it is known by stating that it would be wrong to reduce deficits at a forced pace. Huh? Competitiveness is, according to what can only be described as Hollandenomics, more important than deficits.
France has created for itself a model of self-satisfied bureaucratic mediocrity which for decades was funded through the filter of EU grants by a guilt-ridden Germany. Anyone who believes that President Charles de Gaulle’s enthusiasm for the Common Market was driven by anything more than the desire for reparation without the evidence of a repeat of the Versailles Treaty has a lot to learn. Hence, in the early 1960s, his fervent objection to Great Britain joining in. No way was he going to let the perfidious Anglais anywhere near the trough.
For half a century, from the mid-1950s to mid-2000s France’s lifestyle had an implicit guarantee from the idiots in Bonn. That is now gone and Hollande, one of the old style ENA educated champagne socialists, missed the inflection point and seemingly regards the new world economic order as something of an Anglo-Saxon conspiracy to undermine French culture. Of course, that McDonald’s largest market outside of the USA is France, doesn’t count.
The French downgrade is already pretty much priced into the OAT curve and I’d expect little if any immediate market reaction to the news, should it emerge. Do, however, look for something of a relief rally if Moody’s decides not to act. The UK is also up for review, but as it is currently shining as best of breed, deservedly or not, there is nothing nasty to be expected on that front. Fitch is also to publish today, albeit on the USA. Again, no nasties to be forecast.
—————————————-
Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful week-end. It looks grim and grey out there and I can see myself settling down tonight with a wee dram of God’s own. Bill Blain, a proud Scot, regards my personal choice of favourite whisky as “girlie”. He can do, when he’s in his chequered skirt. Welcome home, Scotland.
