Friday, 19 December 2014

Has the world gone mad......

In the 10 days or so that I have been away I haven't written much as the Internet connection was so poor due to the 3rd World rural nature of where we were staying. You can therefore only imagine my frustration to arrive home to find the BT Hub's broadband light glowing Amber instead of the re-assuring Blue it normally is. My wife confirmed it had gone off the evening before and she was waiting till I got home to tell me. An hour and a half of my own, then Hub Managers, then the BT call centre's diagnostics has resolved nothing. I am therefore having to take at least half a day of for the 'Engineer' to come between 0800 and 1300 to resolve this. So I am currently hot-spotting my iPad off of my iPhone to get much the same connectivity I had in rural Africa - but it is good to be home.

So in the last 10 days Russia has hiked its interst rate to 17% which has failed to stop the plummeting Rouble. After what happened to investors chasing unusually high interest rates in Iceland, and to a lesser extent Cyprus, who would have any confidence in putting their money in a Russian bank, especially when most rich Russians are responsible for the Capital Flight that is happening. A explanation of negative interest rates is here

At the same time the Swiss bring in negative interest rates which is pretty unheard off and for very different reasons to the Swedish adopting a zero % interest rate. I think both are pretty much untested and un-modeled economic strategies, so interesting times ahead.

Cyprus is also heading for a show down and further problems with the EU bailout as report that "Well, the island nation may be in trouble again. The International Monetary Fund (IMF) is refusing to give Cyprus an €86m tranche of rescue money after the Cypriot parliament voted to suspend an insolvency law - due to take effect at the end of the month - that would have made it easier for banks to start to collect on bad loans."

The Cypriots already feel very badly treated by the EU and their government and I suspect that more problems ahead will only strengthen the support for those who wish to leave the EU, and re-establish their own currency.

UK inflation is now at a 12 year low even with pre-Xmas spending the November inflation rate is 1%. Optimists may blame this on cheap fuel, but I would have thought that this would have meant more spent on the high street. Wait until we have seen the results of the Jan and Feb figures, deflation is looming and if you want see see how deflation effects investment just compare it to  buying fuel for your car now. Why fill the car at today's prices when it will be cheaper next week before your tank is empty.

It will be an interesting year ahead.

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