First New Year New York Letter
Brown Brothers Harriman currency specialist Marc Chandler titled his article today “Backing into Smoot-Hawley,” raising the parallel between the proposed Trump discriminatory tariff plans and the way the world went into a self-defeating retaliatory tariff wars during the Great Depression. Chandler winds up reminding us that the international liberalization measures and the domestic regulatory ones of the New Deal remain in force. He writes:
“We are bullish the dollar but are concerned that border adjustment may spur other countries to do the same thing, inadvertently spurring protectionism and further weakening international trade, which has not yet recouped the decline associated with the Great Financial Crisis. In a similar vein that some of the lessons of the Great Depression, like those embodied in Glass-Steagall, were either repealed, diluted, or unenforced, so too are the lessons of protectionism seemingly lost and now hidden in mental gymnastics based on an automatic adjustment of currency values and an outdated understanding of PPP” [purchasing power parity—which doesn't really function in pricing currencies.]
Our return journey to the US was surprisingly rough as both my husband and I got tummy trouble from the supposed wholesome Icelandic cod served at lunch on our first leg, London to Rejkyavik, admittedly while both suffering bad colds. We were so ill we took a taxi rather than a subway home from snow-covered from JFK.
Then I nearly disinherited my daughter who had stayed in our NYC apartment over the Christmas holiday because the dingbat on the top of the coffee machine which tells it that the pot is in place had gone missing. High and low search failed to turn up the little pot cover with a prong into the filter holder. So I made our necessary daily drug with my smaller office coffee pot. Only when I cleared the breakfast dishes did I find the dingbat in the dishwasher for some reason. She is very keen on sterile but is now my heir again. (My husband was very firm that we have to accept our grown children and half-grown grandchildren as they are rather than setting an excessive Jewish mother standard and I had already resolved to try this in 2017. So now it was justified. The dingbat was found and our daughter is back in my good graces.)
No sooner had we left Britain than Mrs Theresa Maybe opted to tell the world that Britain was more interested in halting immigration that operating a single market with the European Union, aka “a hard brexit”. The result in London this morning was a crashing pound but good performance from UK stocks expected to benefit from more foreign sales as a result. Our leftover pounds don't amount to very much but I'm glad to say my two pairs of British boots and a stockpile of Christmas puddings, among other goods we declared to US customs last night will prove to be a better investment than cash.
Meanwhile the FTSE 100 index ran up its longest winning streak in 33 years! (NB: Of course the FTSE index is calculated in pounds sterling.More for paid subscribers follows from Britain, Ireland, Israel, Mexico, Sweden, Denmark, Finland, China, India, Colombia, and Canada.