On tonight’s late news we have France and Austria, Italy, Spain, Portugal, Malta, Slovakia, Slovenia and Cyprus downgraded by S&P – Portugal is now at junk status. Greece now looks certain to default, probably in March. S&P put 14 euro zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A rated Finland, the Netherlands and Luxembourg (source: REUTERS).
I think we will be relatively OK in Jersey for a while because we are sufficiently “outside” the EU but I don’t see any way that a wounded and staggering Europe will not be forced to crack down on the insufficiently governed nature of international finance (I don’t mean political government here, more the engineering government - click for Wiki article - of negative feedback that stops events getting out of hand in machines). At the very least, some variant on the Tobin tax (Robin Hood tax) looks likely. This would eventually impact on the City of London and thenceforth Jersey. Hedge funds and investment banking generally would shrink (understatement like this is so cool, no?). The dollar premium might even come back – this was a system, abandoned by Britain around 1979, which prevented the easy and fast movement of capital from country to country.
The focus of attention is now off the USA, and there have been a few misleadingly promising statistics published recently there on jobs etc, but the underlying reality is still catastrophic. Like Wile E. Coyote running off a cliff, gravity seems suspended until the unfortunate coyote looks down. The world has gone further and further over the edge with each successive bailout and quantitative easing etc. You cannae change the laws of physics, Jim! Try to ignore what some vandal has done to the original looney tunes soundtrack in this clip.