Blog 2023 Malcolm Blair-Robinson

NATO Summit

This was a success on two fronts. The first and by far the most important was the new accord with Russia following the announcement of the new style sea based missile shield for Europe, with which a relieved Russia has agreed to cooperate. Both Cameron and Obama see eye to eye with the need to end historic enmity with Russia, which is not only a natural ally of Europe, but has come to its aid three times in modern history to help defeat Napoleon, the Kaiser and Hitler. Fear of the old repressive Soviet Union creates natural suspicion among the old Eastern bloc states, but this is historic rather than real. Equally fear of NATO encirclement is the traditional fear and doctrine of the Russian military.

Moving from these out of date positions to a modern relationship will benefit everyone and gradually trust will return. Russia is also willing to assist with the NATO effort in Afghanistan, though not with troops on the ground. This brings us to the second piece of good news. Reading between and beneath the lines of the official communique and the political rhetoric, NATO now accepts that its mission is going to peter out without any decisive conclusion and, significantly, President Karzai is losing confidence in the military project. He is beginning to look to a deal with the Taliban as a way forward. Whether he will get it and whether such a corrupt and ineffective government can possibly survive with or without a deal is open to question.

The key point is that it no longer matters. From now on we have to build a strategy of containment so that whatever goes on in that tribal country and its surrounds, stays there and does not pose a threat around the world. There are many ways of doing that and none that have a chance of working involve combat troops from Nato.

Gradually events will move in that direction. The star of General Petraeus is falling. That is why he was sent there. President Obama is a much sharper cookie than the Pentagon thought.

George Osborne and Dangerous Times

The news from Ireland is two edged. The good part is that it is going to be rescued. The bad part is that although Ireland made huge sacrifices to get its economy in order, it still needed rescuing. The bad part, like an iceberg, goes very deep.

The first element is the lack of an executive government for the euro area, managing the euro economy as a whole and setting out the limits of what members of the currency can do. All the chickens flying about connected to that fundamental issue, are now coming home to roost. The Euro is in trouble. Whether it is the kind of trouble which will strengthen it in the end or bring it down, nobody yet can tell. Any who says they can are guessing or thinking wishfully.

We now find ourselves part of the rescue. As shareholders in the IMF that is very proper. To make a separate loan, described as a good neighbourly act, is not proper at all. This is because Ireland is in the Euroand it is Euroland’s  job to sort this out. Also, and more important, we do not have the money to lend. We have to borrow it first. That is utterly indefensible. We need to remind ourselves that our true national debt is £4.8 trillion and our total debt as a country including private, public and business, is approaching £10 trillion (according to PWC). When interest rates rise, as they will, this will suck out a good deal of GDP. Another £7 billion is a drop in the ocean, yes, but we cannot afford it and the last straw….etc.

Behind the Treasury thinking is the spectre that we have learned that RBS, that profligate bank, has a total exposure in Northern Ireland, which is heavily intertwined with Irish banks, of an eye popping £53 billion. If anything goes bang in the Irish Republic, the shock waves will decimate the Ulster economy and spread back to RBS with further massive losses to the U.K taxpayers who own nearly half its shares. To cover those losses more money will have to be borrowed. Suddenly things would get very difficult because when it comes to a real crunch, Britain is technically bust.

The vultures in the market may sense this and start to circle. It is to ward them off the Osborne has acted. It may work. It may not. On the face of it the Euro rescue will either work or not. £7 billion from us will make no difference one way or another. But with the gesture we earn the right to be rescued ourselves. Maybe that was the motivation in the Treasury.

Because everyone is now in grave danger. All our plans and forecasts do not take account of a further major financial implosion in the banking system and the sovereign debt sector, because we have no margin left. This is were one of the most critical figures of all looms into view. At the start of the global financial crisis the combined foreign exchange reserves of the Eurozone, America and Britain together added up came to no more that 8% of the total in the world. It has got worse since. When it comes to the ultimate crunch the West has run out of money.

No wonder George Osborne is anxious.