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Looking back at 2017, looking forward to 2018

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Patrick Kelliher

I have been meaning for some time to post a blog on how the risks I called last year matched up with reality. I appreciate it’s a bit late in the day but I would cite work commitments and the fact that events continue to develop. As that old Chinese curse goes, we live in interesting times.

Speaking of China, the first risk I called out was a trade war between China and the US [1]. Thankfully this has not come to fruition, partly because the US needed Chinese help to put pressure on North Korea, but this is still a live issue. There have been American grumbles about sanctions busting by Chinese companies, while attempts to cut Chinese companies with ties to North Korea off from the US dominated global financial systems were only rebuffed by China applying similar pressure to US firms with operations in China. It may be that we are in a “phoney war” phase just now but this could get hot.

As it is, US trade relations with the EU are going through a rocky...

General Election 2017 - the Fog of War ?

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Patrick Kelliher

At the end of August 1914, the French Army was in disarray. Its disastrous Plan XVII offensive had cost it over 300,000 casualties in one month, its bloodiest toll in all of WWI. The German commander Helmuth von Moltke the Younger sensed the possibility of a rout. Putting aside the detailed Schlieffen Plan they were supposed to be following, he gave two armies the command “Pursue Direction Epinal” for them to chase the beaten French towards the town of Epinal. The counter-stroke was an abject failure with the Germans suffering over 60,000 casualties in the following weeks. Many historians feel this diversion may have contributed to the failure of the Schlieffen Plan and the prospect of a quick victory on the Western Front.

So where am I going with this says you ? well I was put in mind of this by the recent snap election decision by Theresa May. Like the French Army, the opposition Labour Party is in disarray. Just as von Moltke sensed a modern day Cannae, no...

New Year predictions #3 – How might Brexit pan out ?

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Patrick Kelliher

OK, we are well into the new year, but I have had to re-write this blog twice in this fortnight: the first time when Theresa May announced last week that the UK will be leaving the single market, and now after the Supreme Court ruled yesterday that Parliament must vote on Article 50. I will go out on a limb and venture that yesterday’s judgement doesn’t change anything – the House of Commons will back the government and, despite its anti-Brexit sentiments, the House of Lords will shy away from a constitutional crisis by blocking this. The one major “fly in the ointment” was if the Scottish parliament was given a veto but this hasn’t happened.

Last week’s rejection of the single market is significant however. It has removed one possible path for how Brexit may pan out, but unfortunately the path with the least disruption to trade. The UK government is still keen to have a free trade pact with Europe but whether they will get it is another...

New Year predictions #2 – Grexit or the Greenback ?

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Patrick Kelliher

I have been meaning to write on Greece for some time now. In some ways, Grexit seems old hat compared to the risks posed by Brexit, Trump and China’s debt bubble, but while there may be less column inches devoted to the stand-off between Greece and its creditors, the threat that this could spill over into a disorderly default by Greece remains. Last month, creditors suspended short term debt relief for Greece after the Syrzia government used higher than expected tax revenues to give pensioners a Christmas bonus and defer VAT increases on islands at the forefront of the Syrian refugee crisis [1].

Personally, I think the troika of the IMF, EU and ECB should have given Greece a break. For one thing Greece has had to bear a disproportionate burden from the influx of Syrian refugees. To criticise VAT relief for the main islands affected is churlish. German talk about solidarity and sharing the burden of refugees ring hollow in light of this begrudgery.

More importantly,...

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