Just when you thought it was safe to go back in the water… Late last year, a range of forecasts suggested that the likelihood of recession in the US, with knock-on effects for the rest of the developed world, had significantly diminished. Last summer, many economists were putting the chance of a substantial downturn at 50 per cent but by November, Goldman Sachs had marked it down to 24 per cent and Morgan Stanley to ‘around 20 per cent’. Underlying this shift were strong corporate earnings and consumer spending, plus rising hopes of a settlement of US-China trade tensions. Last month saw a sell-off of safety-first government bonds reflecting the mood, and the FT’s end-of-year forecasts included a confident ‘No’ to ‘Will the US go into recession?’ by Gillian Tett, though she wisely added that ‘the question haunts the markets [and] the White House’.
On the same page, Middle East editor Andrew England also answered ‘No’ to ‘Will there be a war with Iran?’ on the grounds that Donald Trump had ‘displayed reluctance to take muscular action’. Well, we all predict at our peril: five days later, a US drone killed Qassem Soleimani, oil and gold prices leapt and stock markets trembled as the world waited for Iran’s retaliation. In today’s more efficient and diverse energy world, oil price spikes are not the economic threat they once were — but a closure of the Strait of Hormuz (though which a fifth of world oil supplies pass) would drive inflation up, optimism down and forecasters back to the drawing board.
The Mandarins’ man
My man in a pink tailcoat who serves the governor’s soup at the Bank of England rings to tell me he has decided not to retire after all, because he’s so pleased with the appointment of insider Andrew Bailey to succeed Mark Carney in March. Bailey has been the blue-eyed boy of his Bank cohort since he was private secretary to governor Eddie George in the 1990s, and my man had money on him at Betfair but says it was a close finish.
Word in the smoking hut was that Boris lobbied hard for his City economist chum Gerard Lyons, while Bradley Fried, chairman of the Bank’s court of directors, argued for a candidate who wasn’t a white male, of whom the frontrunner was Egyptian-born former deputy governor Minouche Shafik. An American, Kevin Warsh from the Federal Reserve, was in play too, and after the election came fears Dominic Cummings might lob in a fresh list of ‘weirdos and misfits’.
So there was relief all round when the Treasury (backed by Chancellor Javid) flexed its muscles and insisted on Bailey —the Mandarins’ man all along, having made his mark when he headed the Bank’s ‘special resolution unit’ after the financial crisis. Whatever monetary challenges loom, Bailey represents a return to the status quo ante in the Bank’s innermost parlours after the anomaly of Carney, the supposed ‘rockstar central banker’ from Canada who never looked at home here. There might even be time to save the Bank’s Roehampton sports club, which Carney put up for sale last year, and reinstate the governor’s annual cricket match. My man is oiling his bat.
When the former Nissan and Renault chief Carlos Ghosn was arrested in Tokyo in November 2018, I recalled an expression from my own experience of working there: ‘The nail that stands out gets hammered down.’ That’s certainly how the authorities proceeded to deal with the French--Brazilian-Lebanese executive who had done so much to revive Nissan’s fortunes but offended the Japanese corporate establishment by tabling a full merger with Renault, Nissan’s alliance partner, that would have come under his own autocratic command and made him even richer than he already was.
What followed were allegations of understating his income in official documents (which looked more like a corporate governance issue than a criminal one) followed by heftier charges of diverting Nissan funds for his own benefit. After 129 days’ detention he was released on bail conditions that forbade him from seeing his wife, while access was denied to evidence that might help his defence, and his day in court was deferred until at least late 2020. Trapped in a justice system with a 99 per cent conviction rate, with no diplomatic support from France or anywhere else, no wonder Ghosn opted to have himself air-freighted to Beirut — leaving his prosecutors with the worst that can happen in Japanese public life: huge mentsu wo ushinau, or loss of face. If he evades trial, we’ll never know whether Carlos was wronged or a wrong ’un, but the world is agog to hear how he made his escape.
In France at New Year, I found railway workers on strike, refinery blockades threatening petrol supplies, almost everything shut and what I can only describe as economic defeatism in the air — so all I can offer as a restaurant tip is La Panetière, a drive-through café-bakery on the Cahors bypass whose croque monsieur was the only alternative to McDonald’s or KFC.
Still, the French do some things much better: I’m told Paris’s midnight fireworks far outshone London’s, which were largely lost in smoke. I’m impressed by Airbus, the Toulouse-based pan-European aircraft maker, which delivered a record 863 new planes in 2019 (Boeing, stricken by the grounding of the 737 Max, had knocked out only 345 by the end of November) and is aiming for 1,000 next year.
And in my opinion the French even make the best TV these days. Having devoured all 76 episodes of the police thriller Spiral, I’m gripped by Le Bureau, about undercover agents in the Middle East: superb drama apart, it’s a crash course in the murderous complexities of Syria and Iran. Too late, perhaps, for Donald Trump to tune in.