Dollars anyone?

Do you remember the story of the three little pigs?

Well, for those whose memory of children’s bed-time stories needs a bit of a refresh, three little pigs beat the gluttonous intentions of a Big Bad Wolf by staying inside a house built of brick by the little pig who was the cleverest, most far-sighted and hardest working of the three. Yes, s/he does sound a bit of a pain in the back bacon, but it’s meant as an allegorical fable on the benefits of planning and hard work.

Obviously the world’s financial wizards took it rather more literally as they named the collective financially walking wounded of the Euro zone (Portugal, Ireland, Greece and Spain) the PIGS, which rather messes up the allegorical message. Not content with that, the BRICs are the world’s emerging economic wonders (Brazil, Russia, India and China).

Two of the PIGS have had to have financial help this year. Though heaven only knows how forcing enormous loans at interest rates that would send the discerning home buyer scurrying off to look for a different mortgage lender immediately if not before can be described as “help”, I certainly don’t. Now where’s this helpful money for the PIGS to support their banks, ‘cos that’s what it’s for, to support the piggy banks (sorry, couldn’t resist it) come from? Well from other countries in the European Community, including non-Euro Britain. And where did they get it from? Err, well, they borrowed it; which presumably is why the UK government posted its biggest borrowing ever in November, the month that Ireland got bailed out. So Sterling dipped against the dollar, investors in Euros and Sterling having taken a bit of a fright at the sums involved and moved their money elsewhere. So I, as an ex-pat paid in dear old pounds and living in a dollar zone got poorer.

And then the BRICs got a hit. One of them actually. To be precise, the C. Since the days of Mao’s Little Red Book, China has supported its communist neighbour, North Korea. According to wikileaks, C is not too happy with NK but they go back a long way. The Koreas (NK and SK) had a bit of a spat a few weeks ago with NK being all active and aggressive, and that frightened investors in “emerging markets” – the BRICs and their satellites. They took out some of their money and put it into … Good question, where do you put money when you need a safe haven?

The traditional answer is either gold or a strong currency. Gold has had a ride like you wouldn’t believe, ever since Gordon Brown (remember him) sold off a lot of the UK’s yellow stuff at just under $300 an ounce. It hit $1,400 an ounce recently but no-one is expecting another five times growth in the heavy metal, so try to look for something better. Good time for the American economy to post a growth rate knocking on the door of 3%, so it did! And thus, for the first time since sub-prime entered the public lexicon, the green-back, aka the once-almighty dollar became attractive again. Investors went in and the dollar rose in response. So I, as an ex-pat paid in dear old pounds and living in a dollar zone got poorer. The Swiss franc is the other star when it comes to defensive investing, so no surprise that that hit a record high last week.

Now it’s pretty clear what all this means to me, I’ve said it twice and that’s enough, but what about Lebanon? Enough for one day, I’ll put that up tomorrow. Anyway it’s lunch-time, roast pork anyone?