Happy New Year

 A Happy and Prosperous 2009 to everyone. I hope you all have a great new year.

At this stage though it looks gloomy. It’s raining outside and very miserable and the euro continues to get stronger against the pound day by day. The stock market crash has not only reduced my investments by some 60% (thanks mining companies) but my pension fund, out of which we were hoping to build a new house at the bottom of the garden, has also fallen by some 20% - not bad when you consider the Footsie has dropped by 31% but a blow nonetheless. My pension has also dropped by around 25% per month as the euro has grown stronger and stronger but luckily I took a bet on my pension some months ago and am still getting €1.25 to my pound. Eventually, that will change though and I’ll be in the same (sinking) boat as everybody else.

J and I will undoubtedly weather the storm and we should be able to ‘muddle through’ until the euro falls when the European Central Bank eventually decides that its member states are in the same mess as everybody else and it reduces interest rates down to a much more reasonable level. The problem is that J continues to spend and therefore the French economy looks strangely strong when, in fact, it’s as bad as the UK’s. I keep telling Sarkozy that he’s got a false picture of his country’s economy, but he wont listen – he’s still besotted by his model wife an only has eyes for her – not the population struggling to get along.

The French mortgage system is also not helping the overall picture. In France, as long as you can show some sort of income, virtually no matter your age, the banks will lend you money to buy a house confident in the knowledge that your heirs will pay off the loan when you pop your clogs. Consequently, most French people can afford their loan repayments and there are not the repossessions you get elsewhere.

The ‘live-by-credit’ culture does not seem to exist here. Non-housing loans are quite difficult to get and the banks keep a close eye on your accounts so defaulters are not so common.

The overall picture to the French Treasury therefore is one of ‘it’s tight but not at crisis point’, and so interest rates have remained high. It’s only the manufacturing recession in Germany and Italy which will force the bankers to reduce rates and hopefully, that will be later this month. Once that happens, the Euro may become weaker and the pound will rise.

The main losers are, of course, the pensioners who choose to live here but have their UK pension sent over month by month. They have seen their monthly amounts reduce by some 25% over the last few months and there’s absolutely nothing they can do about it. The less than sympathetic commentators who say that these people chose to leave the UK and therefore need to ‘struggle along’ don’t take heed of the fact that many of these people have been here for over twenty years and are now at the stage in their lives where re-locating back to the UK is not really an option. These are the people I am sorry for but hopefully, in the next few months we’ll be back to maybe 1.10 or 1.15 but only after the currency speculators have managed to achieve parity. The halcyon days though, when you got €1.64 for each pound, are long gone.    

To some extent, I support the decision of the UK Labour Government (and the Tories before them) not to join the single European currency because if they had, the Bank of England would not have had the chance to cut interest rates to 2%  - they’d be at the higher ‘European’ rate. On the other hand, if we’d been in the single currency, maybe the European Bank would not have allowed the UK to get into the credit boom mess it’s in now where people regularly sign up for a new loan simply to pay off an old one.

But hey – it’s a new year and the stock market is a fantastic buying opportunity right now. I suppose nothing will curb my capitalist instincts!