Somber look at 4 Western lands by a financial pundit
J. Anthony Boeckh, a Montrealer, charges some $385 a year for his views in a monthly publication named austerely The Bank Credit Analyst. It is widely read by investment managers and others interested in such topics as the economy, interest rates, the stock market, gold, and currencies.
Here, for free, are some of his strong opinions, expressed in a recent interview:
On France. Its new Socialist government, following in the footsteps of the regime it defeated, has stepped up efforts to pump up the economy through more government spending and easier credit.
''They will get some pretty good growth for two or three years and then inflation will go berserk,'' says Mr. Boeckh, who was in France recently.
The government this fall ruled that its citizens could no longer buy gold anonymously. Their names must be registered by the financial institutions selling the gold.
Boeckh says, ''This is indicative of the mentality of the government and the way it's going to go.'' Coming up will be devaluations of the franc and more controls on foreign exchange and imports. ''There is a very clear trend toward protectionism.''
Boeckh guesses the French stock market will do ''rather well'' for a while, despite the planned nationalization of the nation's nine largest industrial groups. That will diminish the volume of French corporate stock available to investors.
French bonds, he suggests, should be avoided as inflation moves up from its current 13 percent rate to more than 20 percent in two or three years. ''The real trouble is coming in three or four years.''
On Britain. ''Margaret Thatcher has got to change her policies. She has a situation which is an unmitigated disaster.''
Boeckh figures that her experiment in ''monetarism'' has not been carried through, with the money supply increasing at a 25 percent annual rate in the last six months.
As a result, he expects inflation to start heading up again from its current 12 or 13 percent rate. He suspects Mrs. Thatcher will also introduce a package of import controls to try to lower the high unemployment rate.
Boeckh maintains that the prime minister made a bad mistake in raising wages of employees in the public sector some 50 percent during her first months in office. Moreover, he notes, prices in nationalized industries have risen some 20 percent in the last 12 months, compared with 4 percent in the private sector.
The economy has stopped falling, he admits. Nonetheless, the hard-nosed analyst maintains that the British situation ''is going to get worse - not better.'' The British pound has dropped from a value of $2.50 to $1.80, boosting the cost of imports. He says unemployment could go to 6 million. High interest rates and poor sales are ''wiping out'' heavy industry, such as the autos and steel.
The unemployed are starting up many small new businesses. But, he notes, it will take a lot of these to compensate for the failures among the big industrial companies.
''We will see some pretty big changes in policy.''
On Canada. The Bank of Canada has tried to follow a policy of ''monetary gradualism,'' slowly bringing down the rate of growth of the nation's money supply to trim inflation without too much disruption of economic growth.
But Boeckh comments: ''The only problem is, inflation is going up.''
Narrow measures of the money supply show some reduction in growth. But broader measures show an increase in growth.
As in the United States, high interest rates have hit housing hard in Canada. Mortgage rates went as high as 22 percent last summer.
Boeckh is highly critical of the Liberal government, which he says is ''very interventionist'' in economic affairs, ''dogmatic,'' and ''hostile to business.'' He adds: ''They (government officials) totally disregard views from business people.'' And he disapproves of the federal budget deficit of $12 billion - equivalent to $120 billion for the United States. (The new government budget says the current deficit will be $11.17 billion, dropping to $8.82 billion in the next fiscal year.)
He expects Prime Minister Pierre Trudeau to be out of office within a year, once the problem of the national constitution is resolved. Mr. Trudeau has already been renovating a home in Montreal, he notes.
On the United States. Mr. Boeckh takes the view, now fading fast in Wall Street, that interest rates will ''go through the roof'' again once the current recession is past and demand recovers. This view is based on the premise that the federal deficit will be so large that it will crowd out private loan demand from the money markets.
He doubts that interest rates will develop a ''positive yield curve'' - short-term rates lower than long-term rates - long enough for corporations to make much improvement in their financial structures, now heavily reliant on short-term money.
The way out of the ''box,'' he argues, would be a boost in taxes to reduce the deficit. But this is politically difficult during a recession.
The current economic mess, he says, has been 40 years in the making. ''It is hard to escape from this situation very quickly. Perhaps it can be done in 10 years - with no growth that long. I don't think you can do that.''
Those are gloomy opinions, and many other economists do not share them. The forecasts may not pan out. But his tough, detailed analysis of the economic facts in the US and elsewhere still attracts many influential subscribers, mostly in the US and Canada, but also in 45 other countries.