We have been reluctant to post over the last week or two out of a very real fear that anything we said would be out-of-date a few hours later.
However, this does not mean that anything that has happened is at all surprising or incredible, as some in the media have claimed. On the contrary, we were not the only ones to predict that there must be severe consequences if European politicians did not face facts about the euro and Americans did not get real about their debts.
Being proved right, again, gives us little pride and no pleasure – little pride because it was all so obvious that we do not deserve much credit for spotting it, and no pleasure because it is frustrating that such an avoidable disaster was not avoided.
It is doubly depressing that the politicians still have not learnt their lesson. The response of the European Central Bank, buying debt from badly run countries, is treating the symptom not the disease. Greece must be kicked out of the eurozone. Such a display of resolution might be enough to keep other failing members in. If not, the euro cannot continue as it is. Everyone knows this.
Everyone also knows that the American “debt deal” is nothing of the sort. It is full of holes. Referring the real decisions to a committee is a politician’s way of avoiding his duty. At best, it simply postpones the problem – like kicking the ball to touch in a rugby match so that both sides can catch their breath. At worst, it means that the big crisis is yet to come: the real fighting will start when the committee reports – if it ever does.
Given this prospect, Standard and Poor’s decision to strip the United States of its AAA credit rating is fair, albeit perhaps a little premature. The politicians who are complaining about it are in a state of denial. It was rude of Mr Putin to call America a parasite on the global economy for sucking up so much of the world’s available credit – but he was factually correct. It is shameful that the USA has now surrendered the moral high ground to a past KGB Colonel.
All that said, too much should not be read into the current market turbulence. For one thing, the big players agree that most businesses are slightly over-valued by the markets, so some readjustment is necessary. It should also be noted that it is summertime, when the players themselves are away, and nervous juniors are running the office.
Things will calm down soon – but only until the players get back to their desks and find that the politicians have not done anything in the meantime to solve the problems that are now all too obvious.