Britain at the crossroads

The standoff between Britain and the rest of Europe at the financial summit held on 8 and 9 Dec marked yet another bitter departure of the UK from Europe.

Continental Europeans may blast Britain for being opportunistic – turning away in time of economic woes faced by the union and siding back when it sees benefit from solidarity necessitated by cross-continent negotiations.

Declining to sign the fiscal treaty at the hardly fruitful summit is just a move consistent with the opting out from the Maastricht Treaty in 1992.

Sometimes strained and sometimes amalgamated, the relations between the UK and the continent, of course, has its historical root grown largely out of their geographical separation that had emerged before history began.

While it is in Britain’s national interest this time for its prime minister Cameron to reject closer fiscal integration, such an interest could be jeopardised next time, most likely a couple of years later, when the unified Europe’s economical health is again back on track.

Hopefully, ex Tory prime minister Margaret Thatcher who was pulled out of power by agreeing to the Maastricht terms would be able to see this day coming?! (the iron lady is reportedly approving plans for her state funeral)

So, saying NO to the call to enforce more fiscal discipline in the capacity of a member of the European Union and a non-member of the euro area will be a big bet for Cameron, the rightists of the Conservatives as well as Britain.

Monies are smarter and more rational than humans. So are some bold investors! Retiring but untiring hedge fund manager George Soros has led how money by announcing his purchase last week of $2 billion worth Europe’s debt assets held by the defaulted MF Global. Soros made windfall gains from speculation of sterling in early 1990s.

If history is any guide, follow it! Even though the road to winning may be long.

Still far from real job recovery

The market was thrilled by the sudden drop of unemployment rate to 8.6% in Nov from 9% in the previous month that followed the coordinated efforts of six nations to add liquidity to the US dollars.

It seems to suggest while Europe is soaked in boiling water, the US may be gradually bottoming out. True, I doubt.

When one unwraps the gift paper, the so-called positive American job figures would be found to have confused the market as much as when they were negative. Over the past tens of months, the figures ebbed and flew like waves, misleading the market again and again.

Taking a closer look this time, the slash in unemployment actually arose from a shrinking pool as a result of more people giving up the search for a job.

About half of the 0.4 percentage point decline came from 300,000 plus people leaving the work force. The work force participation rate had fallen further by 0.2 percentage point in November. Of those considered as officially employed, the portion of the prolonged jobless climbed to 43%, indicating that the US will lose certain types of jobs, for good.

With just one eye rather than two opening wide, one can expect more “good” news about US employment in the upcoming months and therefore blow the proclaim that the world’s largest economy will be safe again.

Apart from job shortage, not to forget about America is also a long wish list: Cutting huge fiscal expenditure, adding tax, regaining trade imbalance and hence borrowing less and repaying more.

Nevertheless, the temporary instillation of illusory report on job prospects at least has cooled people’s expectation of QE3 that went high when the debt crisis pushed Europe to the brink weeks ago. The weapon, if used, would best serve to help the incumbent administration in seeking a re-election.