The Templars at War
Religion, politics and sex are not fit subjects of conversation for a dinner party, an old saying has it. To add sparkle to my blog – which today deals with PIGS, BRICS and taxes – I have ensured they are all alluded to in this post.
The imagination of financial market participants is often captured by absurdly named arbitrary groupings. PIGS is one of them. Portugal, Italy, Greece and Spain are all very different countries, even in their debt levels, deficits and economic capacity.
BRICs is another misnomer. Coined in 2001 by Goldman Sachs to stand for the high-growth emerging economies of Brazil, Russia, India and China, the thesis is that by 2050 their combined economies could be larger than those of the current richest countries of the world.
Over a Klosters skiing weekend, a fellow houseguest lambasted this notion.
“Emerging markets still have a long way to go. Despite the fact of new IPOs and a strong market performance, China’s market cap is only $581bn. France has got more than $1 trn! Even more striking are the US-Numbers. The US counts for 35 % of World GDP, but for 48 % of market cap of all stock markets,” said Dr Christian Falschle, a former journalist and now a consultant.
“I wrote a book about Emerging Markets in 1996 when everybody was saying that the 5 Asian Tigers (Singapore, Thailand, Malaysia, Philippines and Indonesia) would combined outweigh the US in the next 25 years (2021),” he said.
“Fact 2010: the market cap of Thailand is $43.5 bn US-$, while the market cap of Google alone is more than $150 bn,” he concluded.
Religions develop differently but often start off on parallel paths.
Take this quote: “The company of women is a dangerous thing, for by it the old devil has led many from the straight path of Paradise…We believe it to be a dangerous thing for any religious to look too much upon the face of a woman…”
Which monotheistic religion does this come from?
Islam? Christianity? Judaism?
The excerpt is actually from the first set of rules to do with the founding of The Templars, the order of fighting monks who were key to the Crusades in the Middle Ages.
In 1128 Abbot Bernard de Clairvaux wrote a treatise for them. It made the point that pure motives transformed homicide, which was evil, into malecide – the killing of evil – which was good, according to Piers Paul Read’s outstanding history of the most powerful military order, The Templars.
St Bernard, as he became, also wrote: “How glorious are the victors who return from battle! How blessed are the martyrs who die in battle!”
They say that if you owe a bank a few thousand that is your problem. If you owe them a few million, that is theirs. What happens if the debts are measured in billions and trillions?
That came to mind when I read that the Chinese were trying to pressure President Obama not to meet the Dalai Lama. He did so on February 18. Zhu Weigun, a vice minister who handles China’s contacts with the exiled leader, said the meeting would undermine trust between the countries and, in a deliciously disingenuous tone, added: “how would that help the US surmount the current economic crisis?”
China sold $34.2bn of US Treasuries in December, making Japan again the biggest holder of US government debt at $768.8bn. (China had overtaken Japan in September 2008).
Meanwhile, it holds $1.205 trillion worth of U.S. long-term and short term securities, including Treasuries, as of June 2008, according to the Treasury’s latest annual data on foreign portfolio holdings.
Perhaps, though, this situation is more akin to mutually assured destruction, or MAD, the reigning doctrine during the Cold War between the US and Russia, whereby the use of nuclear weapons by two opposing sides would effectively result in the destruction of both the attacker and the defender, thus ensuring no action is taken.
For the US may tremble at any statements that hint at a sell-off by the Chinese of US Treasuries, but so does China at the thought of how this would sink the value of their own reserves.
Gordon Brown is hanging onto power in the hope of a “Falklands moment”, I was told. After all, Margaret Thatcher had one – the election that looked likely to be lost was won on the back of victory over Argentina in 1982.
Although my interlocutor did not literally mean war over Las Malvinas, as the Argentines call them, I note that mid-February the Latin nation prevented a ship from loading pipes for drilling oil and gas in an area near the islands. They continue to claim the islands are “illegally occupied” by the UK.
But with the tragic death toll from Iraq and Afghanistan, foreign adventuring would be neither electorally viable nor affordable.
Still, no harm in speculating. Especially as the Kirchners, Nestor and Cristina, who run Argentina, are low in the polls and could well see some benefit in declaring war as a distraction from their efforts to seize control of the central bank’s foreign currency reserves and their general mismanagement of the economy.
One hopes they have learned from history. The ruling military government fell on the back of its surrender to the Brits in 1982.
It is a truism that tax avoidance rises when tax rates become unjust. And the populist 50% income tax on high earners in the UK is definitely that.
Seventy of the FTSE-100 companies are considering whether to stay in London or move their main operations outside the UK, a senior executive of a Big Four accountancy firm told the FT. Even assuming 95% of them are posturing, there is nothing negligible about the jobs and tax revenue that could be lost.
I just heard of the latest – legal, I note – move recommended by some accountants and applied by a small firm. As the 50% rate does not kick in till April, pay the salary a year early and have the employee lend the cash back to the firm. Meanwhile, other firms like Hargreaves Landsdown are accelerating the firm’s dividend pay-out.
It would be interesting to know how many large firms manage this as well.
Sadly, it looks unlikely the Conservative Party, assuming they make it into government, will repeal the tax in the short term.
I used to think I could not be bought. Or that my price would be measured in billions, like US treasuries. But we all have a price – political power in the case of Gordon Brown, Paradise for others, a good week’s powder skiing in mine. For those of you on the pistes this week, enjoy. My week comes next.
Tags: BRIC, China, Christian Falschle, emerging markets, PIGS, Saxton Bampfylde, tax, templars, Treasury bonds, US