Signs of overheating in the last great stronghold of steam traction
China is the last great stronghold of steam traction, so it is suitably cast as the world's locomotive. We certainly need one. The Eurozone is stuck in a siding, while Japan still labours on the gradient and the Anglo-Saxon economies go coasting downhill without brakes. Borrowing and spending can take them only so far. The Chinese locomotive has been propelled by investment and exports, but it has been showing signs of overheating — China even has its own property bubble — and the controllers in Beijing are now signalling for a slowdown. Like the Chinese themselves, Sir John Bond, HSBC's chairman, takes the long view. China, so he was saying this week, may be only twenty years into what could be forty or fifty years of extraordinary growth. For most of recorded history, this was the biggest economy of all, and he can see it reclaiming its position. The flows of money which are now channelled through New York and London may begin to bypass them, finding their way through financial centres in Asia. As Sir John did not say, there must be scope here for a business which is still, at heart, the Hongkong and Shanghai Banking Corporation. He was giving the K.C. Wu Lecture, established by the Guild of International Bankers in honour of the Bank of China's man in London who served for half a century and was a regular fixture on every City occasion. If the City could get to know China half as well as K.C. knew the City, it might learn something to its advantage.
Consolation prize
The ashes of John Maynard Keynes were scattered on a Sussex hillside, which is all that now prevents him from turning in his grave. The International Monetary Fund, his invention, 60 this year, has become a consolation prize. The managing director's post is vacant, convention reserves it for a candidate from Europe, but Jean Lemierre is staying on at the European Boondoggle for Remuneration and Disbursement, so that only leaves — Wim Wimp? JacquesAnonyme Enarque? Rodrigo Rato, known, if at all, as finance minister in a government thrown out a few weeks ago by the Spanish electorate? Ooh, you guessed. Candidates should have been asked what they thought the IMF was for, now that Keynes's original hopes have flown out of the window. They would have been invited to parse its $300 billion balance-sheet, and to comment on my first law of international finance: never lend to Argentina. As any examiner can tell you, the way for an ambitious institution to get better grades is to field more Chinese candidates. K.C. would have been perfect.
Shell explodes
A new entry for my Bad Investment Guide. Last year I was looking for boring shares in solid companies which could be expected to plug on through bad times and good: 'If there are bargains, this is where to find them.' So it was, but I should not have been so sure of Shell. After decades of elevating boredom into a corporate art-form, Shell is displacing the Beckhams from the headlines, with its reserves and directors evaporating in a cloud of embarrassing e-mails: 'This is absolute dynamite and must be destroyed.' It wasn't, of course. Experience suggests that e-mails never are. I suppose the culprits will plead that they were only trying to spare us excitement. Well, thanks.
Improving the offer
When you go into a shop and cannot find what you are looking for, the merchandisers have been at work. They call this improving the offer. On this principle, Boots used to hide the toothpaste and hope that we would pick up a hot-water bottle on the way round, and a general post seems to have been ordered on the shop floor at Marks & Spencer. I took this as a panic signal and the figures, last week, bore me out. Now a pair of ambitious retailers want to improve dear old W.H. Smith by making an offer for it. They will need to work out what we might be looking for in those long-established High Street shops but cannot, just as cheap ly and easily, find somewhere else. Not candles, which was the previous management's answer, but perhaps, by now, there isn't one. I suspect that this company has become a wholesaler of newspapers with a property portfolio thinly disguised as a retail business. To avoid such a fate, what M&S now needs, as much as anything, is leadership — which is scarcely to be expected from a part-time chairman whose mind appears to be in Belgium. Simon Marks knew better. Someone else will have to tell the merchandisers to stop panicking and leave the fishcakes where they are.
Nothing is as good
I am sad to see gold coming off the Rothschild standard. In 1825 — only yesterday. really — Nathan Meyer Rothschild was pumping gold into London to keep the Bank of England going. Now his successors have decreed that gold will no longer brighten their doors. In the upstairs room with the letter from Disraeli where the market's leaders met to fix the price of gold by flag signals, dust will now settle. (I urged them to open it up to spectators: price of admission, one Icrugerrand.) To their hosts at New Court, with a client-list crammed full of central bankers, gold was a rewarding business. Now, though, Nathan Meyer's descendants have made way for a new line of French Rothschilds, who may think that taking up trading positions is a game for banks with bigger balance sheets, or even that gold is out of date. Gordon Brown thought so when he put half the nation's gold reserves up for sale and got a knock-down price for them. (Disraeli's bankers would have served a British government better and handled the sale with more tact.) Gold has been around for even longer than the Rothschilds, and they ought to know by now that nothing is as good.
Negroni, Berlusconi?
The resourceful Silvio Berlusconi plans to give Italy a top tax rate of 33 per cent, which would be the lowest in Europe. This, he hopes, will encourage his countrymen to break the habits of their lifetimes and submit to paying taxes. If they did, Italy might fit into the Stability and Growth Pact without too much creative accounting, but if not, its public finances (and the Pact) will be even more precarious. Where will this leave the Negroni Index, always my benchmark? More research is needed.
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