Happy New Year...
I would like to wish everyone a happy New Year with best wishes for 2019. I hope you all had a great break. We are back in our eighth year of the Saturday Economist with great plans for the year ahead ...
Brexit Looms ... Just ten days to go to the critical vote in the Commons, eighty three days to go before the Brexit deadline. Government plans are advancing at pace. Chris Grayling, Transport Secretary is on the case. Grayling has awarded a £14 million pound contract to Seaborne Freight to boost capacity across the Channel.
The company has no experience of running ferry transport. It owns no ferries either. Seaborne Freight is a start up with a paste up website. Terms and Conditions were scraped from a takeaway restaurant apparently. Customers were advised to check "before agreeing to pay for any meal". When challenged Grayling said he would make "no apologies for supporting a new British venture"; Well no apologies for anything apparently.
The British Army has been put on standby alert. Riots in the street will be ignored as troops deliver essential food and medicines around the country. The troops will solve the riddle of last mile delivery perhaps, shooting down Amazon drones in the process.
The Foreign Office has hacked out a new role for truly global Britain. In a key speech at the end of October, Jeremy Hunt, Foreign Secretary explained how we can become "the invisible chain that links the world's democracies".
Things must be bad. The thin red line has become an invisible chain, "as strong and resilient as it needs to be, as new nations rise and the world order is challenged anew". Oh yes and Hunt explained we will have a better telephone network. "When I arrived at the Foreign Office, we had secure phone connections to the US, Australia, Canada and New Zealand. I have now added Japan, France and Germany to the list." Excellent. Unsecured lines everywhere else? Some things are better left unsaid.
Just weeks to go. The May deal looks set to founder. Tory grass roots don't like the deal. Neither does the Parliamentary Party. The outcome is becoming clear. Something will happen. Nothing will happen. There will be a variant of the two. Who said planning for Brexit was difficult ...
Pelosi takes control ...
In the USA the Democrats have taken control of Congress. Nancy Pelosi is now the Speaker of the House of Representatives. Together with Chuck Schumer, Democrat leader in the Senate, Pelosi will present considerable obstacles to Donald Trump's White House ambitions.
Alexandra Pelosi warns "My mother is a force to be reckoned with in negotiations. She will cut your head off and you won't even know you're bleeding". Trump is already struggling, the predictable, so easily out manoeuvred.
The US government is in partial shut down as Trump demands money for his wall. Actually it's not a wall. It is a barrier made from steel slats, beautiful American steel slats with a see through facility which is safer because "we can see who is trying to get in". Forced into a corner, the President can only react in one way. He is threatening to maintain the shut down for months or even years unless he gets the money. Actually it's not a shut down! The President would prefer to think of it as a "strike". Workers (mainly Democrats) refusing to work without pay in the face of intractable opposition to his plans, from elected representatives (mainly Democrats).
The adults are leaving the White House. Mattis was due to leave at the end of February. Fox news explained the resignation letter to the President wasn't flattering. Trump decided to fire the General with immediate effect. Rex Tillerson "Dumb as a rock", General McChrystal "Big Dumb Mouth" have already taken flak. More on Mattis (A Democrat) will follow.
Trump's decision to quite Syria, a place of only "death and sand" has been rolled back. Troop levels in Afghanistan, a place were the "Taliban fights Isis", will be maintained for the moment. Who needs Generals anyway. "I could have been a great General, who knows?" explained the President.
The situation will deteriorate as the Mueller investigation is given an extended life and threats of impeachment gather momentum. As we write the President is threatening to declare a National Emergency to get his way and his wall (not a wall but slats with slits) ...
Markets rally as jobs boom ...
Markets suffered a turbulent period at end of year. The Dow, NASDAQ and S&P closed lower end of year. Trump blamed the Federal Reserve, refusing to accept tariffs and tantrums had played any part in the turmoil.
"The Fed is like a powerful golfer who can't score because he has no touch, he can't putt". An interesting and novel perspective on monetary policy failed to reassure investors.
Markets had become very gloomy with fears of a slow down in the USA in 2019. Jack Ablin, Chief Investment Officer at Cresset Wealth Advisors put matters into perspective. "I don't mind being worried but panic seems extreme". So it proved.
US non farm payrolls increased by 320,000 in December. The Fed assured, they would be patient with policy hikes in the year ahead. Hopes are rising of a trade deal with China this month. The Dow jumped 750 points. Nasdaq composite was up 275 points a gain of 4.3%. Fears of recession should evaporate as traders move back into market.
Following growth of around 3% this year in the USA, we would expect momentum to be maintained into 2019.
In the UK our mid case scenario would be growth of around 1.5% with inflation, borrowing, earnings and employment held at around similar levels to 2018. No need for panic, no real cause for concern ... but then there is Brexit ... oh yes Brexit ...
That's all for this week, have a great week-end. We will be back with more news and updates all too soon!
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
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