Markets this week

A much quieter week, without a G20 summit or anything else to create havoc.

No major bank collapsed or anything, it is almost as if everything has calmed down.

Anyway, here's the week-on-week changes:

FTSE: down 45.96 (1.14%)

DOW: up 65.79 (0.82%)

£: down $0.0181 (1.22%)

£: up €0.0126 (1.15%)

Oil: up $0.59, £0.85 or €1.40 (let this highlight the difference between commodity and currency fluctuation).

Gold: down $25, £9.52, €2.92 (so the dollar moved dramatically as measured in gold or €, whilst the €price hardly changed.

A final thought - there is a good reason why news reports mention the percentage rise, as well as the points rise of financial markets. Here is a display of the FTSE and the DOW (revalued into a common currency, in this case £ sterling). It shows their performace since the beginning of December 2008, re-indexed so that their recent peaks at the beginning of the year appear as 100. Again, as always on this blog, data is recorded weekly, not minutely or daily.

I feel that this shows how similar the performance of the two markets have been, in performance, when measured in a common currency. Since early March, both have recovered most of the losses experienced in February.

Irish cancel Christmas

The Irish budget was annoucned yesterday, and as usual for Irish budgets, it got little coverage in the British news. Compared, say, to a UK budget. This is entirely reasonable.

It is generally very contractionary, which makes sense only if Ireland believes itself to be near bankruptcy. One feature I found less than friendly was in the social welfare expenditure section. A €171m saving is being made by:

Removal of provision for a Christmas bonus payment in 2009.

Which, to me, amounts to cancelling Christmas.

Circuit guide/bad joke

ITV-F1 have a video guide to the Shanghai circuit (shaped like a Shang character in the Chinese alphabet, apparently). It involves a blindfolded Nico Rosberg decribing it, whilst tracing (or attempting to trace) the circuit. All well and good but not very interesting. The only reason I mention it is, in case of Nico off-roading, I want to pre-empt anyone making the joke: you're meant to follow the actual track, not the one you drew blindfolded.

Half a US Great Depression, every bit a world one

The first half of the title comes from Paul Krugman, in his comparison of this recession against the Great Depression, finding it half as bad (how big does something have to be to acquire capital letters?). It should be noted that the peak date presaged a long slow decline, which is important for comparing the implications with those below).

The second half of the title comes from this report, hat tip to the Economist's Free Exchange blog.
In summary, for the world as a whole, industrial output is falling in just the same way that it did in 1929-30, the stockmarkets are falling FASTER as is the volume of world trade (albeit from a higher base, but without the help of protectionism). They also assess the policy responses of leading economies and find that central banks were equally slow (6 months after peak industrial production) to cut rates, but that they have cut them further, despite starting from a lower base (this uses the Fed, Bank of England, ECB and the central banks of Japan, Sweden and Poland, and although it doesn't explicitly say it, I must assume Germany and France for the earlier response details - it says 7 countries). It predicts that policymakers won't repeat the 1931-2 error of hiking rates to maintain gold parity (or these days, dollar parity). It shows also that the money supply (this time across 19 countries, I assume this disparity is due to data availability) had risen far faster over the period 2004-08 than in 1925-1929. They believe that the money supply has continued to rise (despite quantitative easing, this is not automatic, since most money is created through lending, not printing) which it didn't in 1929 (before catastrophically collapsing in 1931). Finally, they show that fiscal stimuli offered by governments have been much greater than they were.

Basically, they summarise that the situation is FAR worse than 1929-31, but that our collective response has been much better, so things might end up worse, or not quite as bad as the 1930s.

My view: we're doomed (but then I'm not very good at prediction).