Euro crisis : Euro as we know it is dead – plus – Stiglitz and Hendry head to head.

Jeff Randall in the Telegraph proclaims the Euro as we know it to be dead, despite the valiant rearguard action currently being fought by Angela Merkel

In one respect, Mrs Merkel is right: “The euro is in danger… if the euro fails, then Europe fails.” What she has not yet admitted publicly is that the main cause of the single currency’s peril appears beyond her control and therefore her impetuous response to its crisis of confidence is doomed to fail.

He gets full marks for stating the obvouis and highlighting Greece as the Euro’s weak link. Greece owes it’s place in the Euro to tissue of lies, which stated another way means it didn’t meet the onerous terms of Euro membership in good times and is unable to live with them in bad.

This is why the euro, in its current form, is finished. The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med. No amount of pit props from Berlin can save the euro Mk I from collapsing under the weight of its structural dysfunctionality. You cannot run indefinitely a single currency with one interest rate for 16 economies, when there are such huge fiscal disparities.

What was once deemed unthinkable is now, I believe, inevitable: withdrawal from the eurozone of one or more of its member countries. At the bottom end, Greece and Portugal are favourites to be forced out through weakness. At the top end, proposals are already being floated in the Frankfurt press for a new “hard currency” zone, led by Germany, Austria and the Benelux countries. Either way, rich and poor are heading in opposite directions.

True, but for now Germany continues to spend massive resources supporting the Euro. Randall sees this as it’s doom, as we have pointed out repeatedly on Slugger the tabloid German press is not particularly supportive of this situation.

Protecting the euro has become a project via which profligate states dip their fingers in Berlin’s till. Germany is taking on nasty obligations without gaining ownership of the assets. Germany’s version of The Sun, Bild Zeitung, feeds its readers a regular diet of stories about the way ordinary Germans are being taken for mugs. Trust has turned to suspicion. Next stop is divorce.

So we have grinding deflation for the PIIGS, while at the same time as cuts are made, Germans feel angry about bank rolling other nations profiligacy. How long before alternatives are seriously broached? It would appear, at least that serious plans are being made to manage default within the Eurozone.

By announcing a ban on the activities of short-sellers (those who bet to profit from falling prices in financial markets), she is hoping her decoy will avert German attention from the small print of Berlin’s support for Greece, which talks of developing processes for “an orderly state insolvency”. This sounds ominously like a softening-up process for a form of default.

P.S. I missed this video back in Feb, US centre/left Keynesian economist Joe Stiglitz goes head-to-head with hedge fund promoter Hugh Hendry on Newsnight (the Spainish ambassador to the UK also makes an appearance), discussing the Euro crisis. There is validity in both arguments, Hendry has been proved right that a Greek bailout solves nothing while Stiglitz wants greater fiscal solidarity within the Eurozone (he makes a stronger reform or die call here)

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  • Anon

    That fund manager is a smug git and had awful body language. I’m not sure that he was “proved right”.Greek interest rates have come down. The problem is not the servicing of interest payments, but the current deficit which is the point I think Stiglitz was making but got continuously cut off.

    He’s also talking through his hat when he says that speculation is a good thing.

  • Mack

    His point was that bailing out Greece with more debt wouldn’t solve the problem. So instead today we have tough austerity measures, and probably more to come in future. He said he thinks Greece will default – the bailout included provisions to help manage defaults in an orderly manner.

    Stiglitz said the interest rates would come down – he was right. Hence – “There is validity in both arguments”. They aren’t in fact a million miles apart. Stiglitz thinks the Euro needs stronger political union, or fiscal soliditary, whatever you want to call it. Hendry is calling out the weaknesses in the current system as they are. One is a political economist, who presumably likes to influence political structures, the other is pretty agnostic in that regard and is exploiting his insighht into Euro structural weaknesses to make money.

  • DC

    A timely reminder to our MLAs that they were paid from 2003-07 for attending an assembly that never met. They all gladly took the cash for that albeit at a some what discounted level of 40k or so.

    So when these cuts come all of that should be borne in mind of the MLAs and it shouldn’t leave the public’s consciousness – not forgetting the time when the executive didn’t sit for countless days during the financial crash itself.

    But shhhh, a cheats’ charter only belongs to Greece which spent during the good time and didn’t save!

  • Anon

    The argument they were having was whether Greece was able to service it’s debts cf “*snort* Meanwhile in the real world Greece is paying 7% interest on two year debts”. If Greece’s interest rates were 0 they would need austerity measures because they can’t keep running that deficit.

    A default is not going to help under current conditions. Getting out of the Euro might involve a default, but that is not if I understand right, the primary aim. It’s improves competitiveness, allows more inflation and means the current account deficit can be handled with less pain. But low debt to GDP and the same current account and deficit problems still means immense pain. See one Ireland, Republic of.

  • Mack

    Well, the bailout came when yields spiked up to around 20% – support from the ECB then helped get their interest rate back under control.

    A default might make things worse – doesn’t mean it won’t happen..

  • Eire32

    Agreed. What clinker-bag.

  • How anyone would wish to sit on the fence over these two men and intellectual arguments amazes me, I remember watching this and thinking how much the individual who goes by the name Hendry, epitomised the sheer nastiness, greed and arrogance of such people. He reminded me of the likes of Rhodes in the 19th century, not a moral fibre in his body, asset strippers to the core.

    He is not worthy of the name Fund Manager as that hints at a certain morality, he is Bankster of the type who make the average criminal appear noble.

  • Mack

    Speculators and speculation exists Mick, and one way or another it will always exist. From the tens of thousands of amatuer Irish property investors, to guys like that running hedge funds. It’s not a moral question, just a fact of life.

    Who is really to blame for the Greek crisis? The speculators who brought the issue to a head? Or the Greek government that lied & cheated it’s way into the Euro? That doesn’t tax it’s rich – that exempts whole industries from taxation? How about the Greek citizens, Doctors, lawyers, accountments – how fiddle their books to avoid tax? Tax evasion is endemic there. Without hedge funds going short, do you really believe that there wouldn’t have been a bigger blow up down the line?

  • Mick Fealty

    I almost agree Mick. But one of the several incontrovertible things Hendry says is the lack of transparency in the way the Greeks handled all of this.

    Similar might also be being said of Ireland, only Lenihan pulled the hand brake on, spun the car and is now taking sub rosa instruction from the IMF/ECB and any one else left with influence over a year before this stuff became so apparent.

  • IAM YUE

    None of this stuff matters.

    The Euro has recovered on the weak for two reasons; first, because of the fear of short sellers of central bank intervention as happened with GBP/CHF on Wednesday – (which caused a 150 pip spike in one min), and second, because actually, when all is said and done the USD is also f*****

    Global growth is slowing, because of contraction in Japan and China and we are facing a global debt deflation cycle.

    All other chatter is just that chatter. If you want optimism go and read the Indy on Sunday and they will tell you, and Ireland’s 13% unemployed that all is roses in the garden.

    It is all bollocks; we are on the verge of a global downturn/depression.

  • Alias

    “So we have grinding deflation for the PIIGS, while at the same time as cuts are made, Germans feel angry about bank rolling other nations profiligacy.”

    That profligacy was a function of expansionist macroeconomic and monetary policies that were devised by the ECB to meet the needs of the German economy at the direct expense of irrelvant economies whose diverse economic needs could not be met under one-size-fits-all policies.

    Separating a state’s macroeconomic and monetary policy from its fiscal policy means that the state has no control over core dynamics of its economy, so if the monetary policy is in expansionist mode then the economy duly expands by borrowing as is determined by the policy. Like the other irrelevant economies destroyed by this separation of macroeconomic and monetary policy from its fiscal policy, those states are have a legally binding obligation under the Maastricht Treaty to support the macroeconomic and monetary policy and it is actually illegal for them to offer any advice whatsoever to the ECB about what policies might be helpful to their economies or to criticise policies that are utterly ruinous to it. Indeed, their control over fiscal policy is also limited, being determined by the Stability and Growth Pact (SGP).

    The ECB’s expansionist monetary policies were fully supported by the European Commission which duly tweaked the European Capital Requirements Directive to allow banks within the eurosystem to over-leverage from low tier capitalisation, with EU banks now being the most over-leveraged in the world. A safe leverage ratio for banks is 8/10, whereas no major German bank has a leverage ratio under 52. The reason these banks were allowed by the EC to borrow as much as they liked was simply to support expansionist monetary policies, i.e. using the financial institutions to increase the supply of money in the economy.

    So these europhile quislings gave sovereignty over core dynamics of their economies to the EU who duly mismanaged those economic policies, leaving those states verging on bankruptcy.

    As always with the EU, the proposed solution to ever problem created by the EU is more EU with the blame being proffered as residing with those areas of economic sovereignty that still partially reside with EU member state rather than with those vast area of economic sovereignty that are under EU management.

  • Mr Brightside

    Blaming the likes of Hendry is ridiculous, he is just the messenger, but making a lot of money in the process. It’s hard to see any other eventual outcome than rampant, if not hyperinflation from all this. Buy Gold.

  • Alias

    One other point: there can be no conflict between monetary policy and other economic policy if the state is to function not just effectively but to function at all. That is why Central Banks are nominally independent of government but are still obliged to take their economic direction from the government. It is the government, after all, who are elected to run the state and not the Central Bank. That means simply that the Central Bank must avoid a situation where the general economic policy is pushing the economy in one direction and the macroeconomic and monetary policy is pushing it in a different direction, e.g. where the government is promoting contractionist policy but the Central Bank is promoting expansionist policy. The point that folks just don’t seem to be able to grasp is that when the government has no control over macroeconomic and monetary policy then it must take its political direction from those who do control it. That means simply that if the policy is to expand the economy by flooding it with cheap credit in order to stimulate consumer demand then the government must support that policy in order to resolve what would otherwise be an unmanageable conflict between macroeconomic and monetary policies and its other economic policies. That is the core dynamic that was always in play during the boom-and-bust policy, and it is legally reinforced by treaty obligations that compel the government to publically support such expansionist policies and which make it illegal for them to in any way suggest that such policies are not in its best interests.

  • Alias

    In case that is still too cryptic: because the Central Bank does not take its economic policy direction from government then government must take its economic policy direction from the Central Bank if it is to avoid a ruinous situation where the Central Bank is pushing the economy in one direction and the government is pushing it in another. The CB being in this example the ECB, so national governments are simply functions of the ECB’s economic policy.

  • No. Definitely, Greece does not owe its place in the EuroZone to “a tissue of lies”. Greece (and other countries, too: some nearer home) use the € because the Central Bank was more anxious to expand the franchise than to impose the necessary discipline.

    Else we would all have done the decent thing and adopted the D-mark. The problem there (as the Economist and others keep saying) is that Germanic rigour went out of the window when re-unification was accepted at an unacceptable price.

    So, for the immediate future, it’s competitive devaluation. The Brits got in first. Now, it’s a head-game: how low can you go. Oh, by the way, the US are playing the game, too, especially against the Chinese yuan. So your next tank of petrol is going to be ever more expensive. Serve us all right.

  • Alias

    The EU’s predictable excuse for how its chromic mismanagement of Greece’s macroeconomic and monetary policies contribute to the economic ruin of that country is “It was like that when we bought it.”

  • Mack

    The Greeks can’t devalue against the Germans, Dutch or French, Malcolm. As such they’re not neccessarily helped by a Euro devaluation if it’s German and French goods that wind up on American shelves.

    IInflation has been falling steadily in the USA and Eurozone some economists are getting worried about deflation again (see Krugman here), but it’s still rising in the UK. You were pretty dismissive of inflation concerns in the UK back in Jan. One difference between the Eurozone and the UK is the lack of QE in the former.

    http://sluggerotoole.com/2010/01/19/finally-ireland-gets-a-break-as-inflation-explodes-in-the-uk/

  • Mack

    Uncertainity about general Eurozone inflation aside, you are undoubetedly correct about the price of petrol. It appears to be higher today than when oil was at $140 a year and a half a go.

  • I trust I didn’t imply that intra-zone devalution was possible (though the Irish experience is that one country can rip off the rest by playing the interest rate game: borrowing at eurozone rates to finance local inflationary policies).

    Equally, Greece is alongside Bulgaria and Romania at the Euro’s arse-end of the Corruption Perceptions Index (see this week’s issue of Time). Italy and Spain are close laggards, by the way.

    http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table

  • “Blaming the likes of Hendry is ridiculous, he is just the messenger, but making a lot of money in the process.”

    If only it were so, the fact is people like Hendry in recent years have had a prime input into UK and Irish economic policy, and not only economic policy, New Labour appointed one of their number, David Freud, to head a committee to look in to [cutting] welfare benefits for the long term unemployed,etc. That these people have no political loyalty beyond their own pocket book was demonstrated when Freud seeing the writing on the wall, decamped to the Lib-cons to advise them on the very same thing. I e how to make those least able to afford it pay for an economic crises.

    Proving with these folk, everything can be brought and sold, including themselves.

    Mack
    “It’s not a moral question, just a fact of life”

    In this statement you sum up not only your own shortcomings when it comes to economics, but why you make me as mad as hell as I know you are not a bad or heartless individual.

    Slavery was once ‘a fact of life,’ as was capital punishment in Europe, sexual oppression, children working down coal mines, and Auschwitz-Birkenau. This all changed when enough people said no, this is wrong, human kind can live and prosper without such abominations against our common humanity.

    (Surly it is no accident as the clock is turned back economically, with workers having less power over their workplace situation, and with markets having been deregulated, etc, such abominations which emerged out of 19th century industrialisation and imperialism have been slowly slipping back into becoming more acceptable in every day life.)

    Economics are like all walks of life; is it possible to live a decent life without a sense of morality; of course not? So why say ‘It’s not a moral question, just a fact of life.’ What you are really saying is there is no viable economic alternative, only the current neo- liberal status quo, which is codswallop of the most immoral and cowardly kind and I think you know it.

    The one certainty to come out of the current recession is the market is not always right, it is not some self rectifying machine as the neo-liberals long proclaimed, but a bunch of often greedy men and women operating a system, mainly out of their own and their classes self interest; and to the detriment of the overwhelming majority of the worlds population.

    Periodically, whether it is a war like Iraq, or a recession like we are currently experiencing, we all have to take a moral position. [to use a ham fisted word] We either side with the people who have got us into our sorry predicament, whose only real interest is to maintain their wealth and power no matter the human collateral damage; or we use what abilities and energies we have, no matter how small, to try and check their extremism and point out a better world is possible.

    Think on, as a Yorkshireman might say 😉

    These people are part of the problem not merely a symptom, if you doubt this I would ask how the crook ending up on BBC TV prime flagship programe News-night debating with a noble prise winner like Joe Stiglitz.

    In a just society these people should be slapped down as it is in their interest to create massive fluctuations with Europe’s economies. Imagine if a trade unionist came on TV and said he intended to disrupt the economy with a continuos road of strikes, he (they are always he;) would be crucified by the MSM. but this creep was listened to with respect as if what he said carried weight, when in fact all it carried was blatant self interest and the sure knowledge who ever won the election would be in him and his elks pocket.

  • Greenflag

    Mick Hall ‘

    Good post above 🙂

    ‘it is not some self rectifying machine as the neo-liberals long proclaimed, but a bunch of often greedy men and women operating a system, mainly out of their own and their classes self interest; and to the detriment of the overwhelming majority of the worlds population .

    The German Finance Minister pointed out the other day that the ‘world’s financial sector ‘ by which he meant largely the money men who predate on currency fluctuations ‘ have not been working for the public good .

    When the FInance Minister of the EU’s biggest economy is stating that the banks have been working and conspiring against the public good then it’s time to take notice .

    The story that remains largely untold yet in this crisis is the role that Goldman Sachs played in the run up to the Greek Crisis . GS did not cause the crisis per se but they did advise the Greek Government in their financial mismanagement in the period up to the crisis .

    Greece was the soft ‘underbelly ‘ of the EU for the speculators to attack the Euro and make a huge killing in the currency markets . It will be interesting to see where they attack next – it may even be a neigbouring island which has just undergone a change of government and where there appears to be some indecision about future fiscal policy .

    I ‘ll have a look at the Stiglitz video over the weekend .

  • Greenflag

    In 2000 the year they joined the Eurozone the Greeks were at number 35 on the Corruption Perception Index . Eurozone membership has not improved matters They are now at number 71 .

    Ireland has maintained it’s position at number 14 alongside the Germans with the UK at 18.

  • Anon

    US has had bundles of QE and is still heading towards core deflation.

  • Greenflag

    ‘Who is really to blame for the Greek crisis? ‘

    1) Those who decided that the wider financial sector could be trusted to behave responsibly in terms of NOT subverting the public good .

    2) Those elected politicians and governments in particular in the USA who decided that what was good for Wall St and their own re-election campaigns would be good for Main St.

    As for the Greeks ? They made the mistake of accepting the gift of ‘cheap money’ and in that respect they are no different than the Irish or Spaniards or Brits or the residents of California , Florida , Nevada etc .

    As Niall Ferguson put it

    The PIGS are US ( USA + UK) .

    The Greeks were just an easy target for the Goldman Sachs of the world an their ilk . They’re already looking for other ‘targets’.

  • Greenflag

    ‘we are on the verge of a global downturn/depression.’

    The oft mentioned double dip recession turning into an abyss . It’s not impossible and if the Euro were to unravel that would be it .

    But don’t expect just a simple return of the 1930’s and it’s attendant wars, genocides and misery . There are now 7.5 billion people on the planet and they can’t eat gold but a nice fat juicy western banker or hedge fund manager grilled on a spit would have enough at on board to provide ‘nutrition’ for a few days for at dozen starving families .

    In extremis never underestimate what human beings are capable of doing to each other . We’ve seen what the greed of Wall St has wrought and in Ni they’ve seen what a little local sectarian and political discrimination can deliver in time in terms of death and destruction.

  • Greenflag

    ‘Separating a state’s macroeconomic and monetary policy from its fiscal policy means that the state has no control over core dynamics of its economy’

    So how is the USA doing with it’s non separated policies fiscal , monetary and macro ? Are they still ‘independent ‘ of Chinese held T Bills ? Has the UK increased it’s interest rate to reduce an exit from sterling ?

    There are no sovereign economies any more . The world is too interdependent and financial capital is worldwide and owes no allegiance to any so called sovereign state .

  • Greenflag

    ‘Buy Gold

    Too late -Hold on to your property/properties . While I’ll admit that inflation is a likely outcome particularly for the USA and UK whether it reaches hyper status is at least debateable . Deflationary pressures around the globe are still strong ‘

    Another word for current gold bugs is ponzi builders . They’ve run out of openings to mass loot the American middle class -there’s nothing left to loot . Scaring them into gold purchases is just another scam . Some will buy but they’ll find that they’ll be left holding the shine when the price drops dramatically when enough eejits have climbed on board 🙁

  • Greenflag

    It looked to me that Hendry was sitting on a hedge that was increasingly burning his rear end sorry his investors rear ends .
    Perhaps he ‘s one of the frogs that’s been notified too late of German Finance Minister Schauble’s swamp draining 😉

    Greece makes up less than 3% of the EU economy . We should’nt overestimate it’s impact . Now a run on the pound sterling is just what Mr Osborne doesn’t need right now not that Hendry and Co would’nt put the boot in if there was a chance of a killing

  • Mack

    Slavery was once ‘a fact of life,’ as was capital punishment in Europe, sexual oppression, children working down coal mines, and Auschwitz-Birkenau. This all changed when enough people said no, this is wrong, human kind can live and prosper without such abominations against our common humanity.

    Speculation is more akin to recreational drug use (including the use of legal drugs such as alcohol) I think. And I don’t think that can be stamped out either. Along the points where they iintersect it is impossible to separate speculation from genuine investment (many Irish property speculators thought they were investing for example) – just like it’s difficult to separate socially beneficial drug use (a couple of beers with friends) from socially harmful drug use (it’s ease to over indulge). It’s easy to take the anology further – both are regulated (speculation regulated too lightly) and their are prohibitions in place that are easily circumvented (e.g. the headshops). If you doubt it’s ubiquity – consider that even communist governments such as the USSR speculated (for example by controlling oil production not so much to meet the needs of it’s citizens – but to earn dollars (a hard currency). When the USSR was the world’s largest oil producer – oil shortages were common within the USSR itself.). And everybodies favourite social democrats – the scandinavian regional governments – even got caught up in the subprime debacle by taking a punt on mortgage backed securities.

    You have an idealistic and utopian view of the world, I appreciate that, but it’s unlikely that we can change some of iit’s fundamental tenants. However much, Zebra’s on the African savanah may hope the Lion decides to become vegetarian – it’s unlikely to happen.

    That said we can do better, but there are limits..

  • Mack

    Hendry is small fry – a great media performer – but his fund is tiny. I’d be more worried about the funds taking a punt against Ireland mentioned into today’s Indo.

    Bought Roubini’s book on the crisis today. Steep at £25 (UK inflation?). Will report back.

    Despite the title, and heavy emotional populism, thought Capitalism : A love story by Michael Moore on Channel 4 yesterday was very good. If you join the dots from that to the Deep capture allegations (tin foil hats ahoy) to Simon Johnson’s Quiet Coup – you could get very, very worried!

  • Mack

    If only Speculation was more akin to recreational drug use I would be all for legalising it, oh, silly me it is already legal.

    Of course the main difference between financial speculation and the use of illicit drugs, is when people take illicit drugs and things get out of control, they mainly damage themselves. (with a little help from the State). Whereas when the speculators become out of control, they rarely foot the bill themselves, leaving it to society as a whole to suffer hardships and pick up the tab, whilst they catch the next flight out, or plot and hide down their rat hole.

    By the way mack, this has nothing to do with my having an idealistic and utopian view of the world, although even if I did I would not see that as a bad thing, as we always need people to look to the stars.

    Sadly life knocked utopian thoughts out of me long ago, I would guess I have seen far more of the harsh side of life than you, I hope so, as I would not wish some of my experiences on anyone.

    You seem to recognise financial speculation is a curse, but instead of saying it is wrong and must change, you throw you hands in the air like a puzzled child and say such is life. It is only the way of life because greedy, stupid individuals, with no thought for anyone but themselves, made it so. What man makes, man can unmake or change for the better, that is the real way of the world.

    Even a ridged conservative chap like you understands that fact, surely? The differences between us has nothing to do with idealism or utopian thought, but this. You look for answers from the rich and powerful, the establishment, for want of a better word. Whereas I see only more of the same coming from that direction and thus I look to ordinary people to bring about change for the better. Sure I am often disappointed; and even when this occurs it often results in a two steps forward one step back type of societal mobility, but at least by and large life improves socially and economically, all be it gradually.

    all the best

  • Mack

    Of course the main difference between financial speculation and the use of illicit drugs, is when people take illicit drugs and things get out of control, they mainly damage themselves. (with a little help from the State)

    That’s not true Mick. An alcholic damages his family, a heroine addict their community (through crime). There are economic effects as well. Then think about the tobacco companies or lLatin American drug cartels. This is why I see parallels. Drugs one way or another can cause terrible problems – just like speculation.

    But like I said there is broad area where investment and speculation intersect, from which they are inseparable. So there are two issues

    ‘#1 Any attempt at wiping out speculation would probably be as successful as the war on drugs, would require more resources, – and would run into the same issues (including the growth of organised criminal empires – see USSR black market)

    #2 A successful attempt (impossible imho) would involve irreparable damage to investment – as such the cure would probably be worse than the disease.

    FWIW, I take a broadly liberal view on both i.e. respect freedom of others to engage, many speculators don’t damage others but do enrich themselves but recognise that there are limits to those freedoms because of the damage it can cause society. But I’ve no easy answer on how to reconcile those competing forces..

  • Mack

    For an extreme example of drug related issues – see the Anglo-China Opium Wars..

  • A “heroine addict”! What a way to go! Do I get more than one? I’d take my chance with the likes of Becky Sharp. You can have your pick of those acerbic, if supine Austen girls.

  • Anon

    A tobin tax on transacions would dampen down speculation no end, Mack

  • Mack

    Ireland has a 1% charge on all share purchases, and a transaction charge of up to 9% on property. Those charges almost certainly dampen short-term speculation but not the type of speculation that has just spectacularly blown up and taken much of the Irish economy with it (betting on bank shares, property speculation, shorting-bank shares – all still occured).

    One of the things is – once speculation exists – particularly long only speculation, having a mechanism whereby market participants can bet against long-only imbalances (i.e. short-selling) may actually help limit the size of the imbalances. You get greater volatility, and even possibly more blow-ups, but less absolutely massive blow ups. Nassim Taleb argues that systems that are prone to periodic shifts / collapses/ rebalancing are more robust than systems that remain in the same state for long periods of time (IIRC he compared the Italian political system, with that of his own country The Lebanon). Robert Shiller, no right-wing idealogue, argued that having some mechanism to short-sell property would prevent bubbles of the same scale occuring again in future.

    Also worth reading Simon Johnsons critisms of a Tobin Tax – that the cost would be born most heavily by ordinary workers through higher charges lower returns on their pensions etc. Though I think IIRC Krugman recommended something along those lines to damp short term currency speculation (again not sure if it would ‘help’ in this particular case, help in inverted commas as I’m off the opinion that the speculators are in the right here..)

  • Greenflag

    The mood in America is taking a dive with foreclosures once again on the rise and with negative equity still affecting some 25% of mortgages

    Here’s a comment from an astute harbinger of the easy way out . If a critical mass of Americans take this position then entire property market in the USA and it’s banking sector will go under and there will be no bailing out .

    Here’s the mood sample – It’s that second last paragraph that’s ‘explosive’ . Alas the writer’s notion that ‘integrity ‘ is a two way street is sadly naive ‘ For many Goldman Sachs executives ‘integrity’ is a word and ethic that has no meaning.

    I quote

    ‘The whole system seems to be founded on lies. Just look at what the rating agencies did to Europe: they let the banks package pure rubbish, put gold stars and an A+ rating on it and SURPRIZE! their banks woke up one day holding a huge bag of muck, enough to send the euro reeling.

    Packaged LIES.

    Then you have Goldman Sachs intentionally playing both sides of the market, selling their famous “s _ i t t y” deals.

    So, homeowners, now that you fully realize that you’ve been totally abused, fooled, lied to, plundered and swindled, do like the good Scouts you are and respect your engagement. Pay your taxes, your mortgage, let your job get outsourced and globalized so that a couple of CEO’s and astute traders can make millions off your company while you languish in sub-employment or no emplyment at all, put your hand on your heart and sing “I pledge allegiance to the flag…” praise Providence and country, never take a holiday, keep consuming… After all, isn’t that what makes America great…?

    Or you could send your keys to the bank. Take a walk and smell the flowers and let the whole system crater under the lies of self-serving thieves in pin-striped suits.

    Integrity is a two-way street, folks.

    End of

  • Greenflag

    Hendry is unusual among the hedge fund money movers in that he is a media attention junkie . The big fish don’t like the media and prefer to keep well out of the public eye .

    Moore’s ‘capitalism’ has come along about 20 years to late after the horse has bolted at least for states like Michigan .

    The exit out of this crisis for the USA will include a mix of economic growth and printing money i.e devaluation of the dollar . Neither of these will be easy given that much of US industry has gone overseas and will not benefit american employees and allowing the dollar will only result in the Chinese and other foreign holders of US T Bills to ahem ‘bail out’ of the dollar thus driving further devaluation .

    For the UK it’s public sector cuts -more cuts and more cuts plus further sterling devaluation .

    Roubini’s on my list once I finish Dawkins’s latest missive on the evidence for evolution 😉 Just as well Dawkins is focusing his search for ‘evidence’ in the natural world and not on Wall St 🙁