Friday 25, February 2022

Wrap

Money flowed from commodities to equities. In FX, investors sold USD for riskier currencies. Bond investors remain calm: the US 10Y is 3.5bp below 2%. Commodities sold off, apart from silver and copper, dragged down by oil, which had spiked on early news.

Main news was more fighting in Ukraine, sanctions to be imposed by the USA on Putin and Lavrov, the foreign minister. Still no decision on SWIFT.

General tone is risk-on. The Moex (Moscow exchange) bounced 20%.

“The Decade the Rich Won”

The BBC has a new two-part documentary about the aftermath of the Global Financial Crisis. It’s worth watching, but I feel it misses the point. The conventional wisdom is that governments manage the economy. The narrative is crafted to make people believe that without active intervention by an omniscient chancellor, the economy will grind to a halt. The reality is, of course, totally different, but it does not suit any politician to tell the truth. Governments love to talk about spending money, supporting industry, the poor, the dispossessed, jobs, high-tech industry, training etc. etc. But what they really do is transfer real resources from one group to another, from one individual to another. Political parties need to be elected, and for that they need to control the narrative. To control the narrative, they need resources, the support of powerful men. It is no coincidence that Jeff Bezos decided to buy a newspaper, and to build a streaming behemoth. Politicians have learned that whatever they do, they must retain the support of the elite. Most left-wing commentators put this down to some sort of secret deal between politicians and the rich. I feel this may be a teleological fallacy. I rather think that any party that does not do this instinctively has simply become extinct through the normal operation of politics, whether democratic or otherwise. Maybe I’m too cynical, but what is clear to me, and probably to anyone who watches the documentary, is that Labour would not have done anything very different to the coalition government of 2010.

History is nice, because no hypothesis can be disproved. Science is so awkward and difficult.