Don't sell Germany short

...and what will eventually happen as a result is another round of banking crises.

Major European banks that received government bailouts have time limits to repay their state debts. Selling assets in such a climate will not help to raise capital and revenues are not likely to increase.

So eventually, in a few years, the end result will have to be a bailout of those big losers in Spain and Portugal through state intervention in private debt, which will have to take place through the banks, which in turn will become increasingly state owned and/or regulated.

Amazing how "the markets" will cry "foul" as soon as one of their fiddles is stopped. Caledonian Comment

Sooner or later the Eurozone will fragment.

If I were a (spit) hedgie, I'd be betting on it right now.

Forget the rest of the world, the Eurozone needs more domestic demand in the Eurozone! Especially from Germany.

Paul Krugman points out that the countries on the periphery need wages to fall 30% relative to Germany to become competitive.

Germany wants it all there own way and they're stuck in their ways. They don't want to inflate, so the periphery will need to deflate and it will be painful for those people. This will take years of suffering with high unemployment and over burdening debt for countries on the periphery.

The "speculators" are right to ask how this adjustment going to work out. Germany has no answers.

I don't blame Merkel for fighting her corner but it up to the rest of Europe to stand up to German stubbornness.

I thought the original euro was a good and practical idea, which also originally included a fairly durable international credit standard as agreed upon by the several advanced nations which created the euro.

Yet, apparently EU politicians then largely ignored such a strict credit standard, for a political end.

Therefore, in this current situation I believe Germany is doing exactly as it should as an effort to return to a high euro credit standard as was once agreed upon by several nations.

It just doesn’t seem to make sense.

They want to raise €440 billion Euros to bail out Club Med.
This going along side the IMF’s $320 billion contribution.

But wait a minute, hasn’t the American Congress just voted 94 : 0 against the IMF bailing out countries with a debt in excess of 100% of GDP (Greece is up to 130%).

And the US is the biggest shareholder in the IMF, and it can veto aid packages.

And if Greece isn’t bailed out, there are going to be some Germany banks in trouble.

And the German short selling ban came directly after the Congress vote.

Something doesn’t quite add up.
Perhaps it’s all a coincidence.

The Euro zone seems to me a bit like a lads night out at a curry house.

The Southern Europeans have been ordering more poppadoms, lots of side dishes and quaffing the beer like it is going out of fashion. The sober sensible Germans who are driving home, after all it saves money on a taxi, have had a couple of glasses of water and no starter.

Now it comes to settle up the bill and one of the Southern Europeans has suggested that they split the bill. The Germans look annoyed but these things happen with mates and already they have had grief about moaning about always seeming to be the first to have to buy a round.

To make things even better for the Germans the Greeks have just said they forgot to go to the cash machine and could someone, i.e. the Germans, sub them for the meal and they will pay them back next time. Honest!

And we still wonder why the Germans are in a mood?

1. The naked short selling ban in Germany ONLY applies to institutions regulated in Germany.

2. The majority (80%) of the trading in this kind of 'securities' gambling is done in London.

3. It is already banned by the SEC in the USA and had been for a number of years.

4. It was banned in the UK for a while during 2008/09 in London.

This is a game of catch-up. Of course it outrages the gamblers in London and as they can buy as much publicity as they want they are making a lot of noise.

A simple change that said that financial institutions are bound by the highest (i.e. most restrictive) rules in any country in whose bonds and debt they trade should do the trick.

We must remember that this from of financial gambling employs very few people - actually generates little tax take and is also highly destructive of the real economy.

We can well do without such trading in London - permanently.

If the Government is serious about rebuilding a manufacturing economy in the UK here is an excellent place to start! Indeed if they do not crush these gamblers it must be taken as a very serious indication that they do not intend to help the rebuilding of manufacturing.

(It is also true that the trans-border currency flows need to be curbed to stop fake transactions transferring deals to uncontrolled countries. We will have to have Exchange Control!!!!)

Is the short selling ban a reaction to the problems of the Euro Bailout?

Because up to press the bailout is supposedly going to be funded by:

Some countries that can’t afford it.
and
Some other countries that don’t want to pay for it.

Is it really going to happen, and what happens if it doesn’t?

Have we finally reached the point where common sense will prevail and bad debt gets written off?

Or will the pass the debt parcel game continue for another season in the hope that all those who made hopelessly flawed lending decisions can survive intact?

Lets not get carried away with the notion of the German's being maverick. Our own FSA is in the process of imposing liquidity standards on all UK branches of foreign banks in a one size fits all solution; the two options for such banks are 1] allow the FSA to become a global shadow-regulator, allowing it wreak havoc world-wide, not just in the UK or 2] foreign branches become stand-alone from their Head Office and pour tons of cash into the UK gilts market. The FSA, in trying to bolt the stable door long after the horse has bolted, has only managed to isolate itself, rather than wait for global consensus on bank liquidity which will arrive later this year.

THIS IS A COVERUP.

It's about German (and other Euro) banks not soveriegns.

See my item on Roberts blog on the other side.

...and here we have the first act of stupidity from our new coalition Government.

Read through all these proposals and not once does it mention anything to tackle the greatest threat to us all - Globalised Corporatation.

In fact, while the policies are written up as 'helping small businesses' - the tax regime being offered is to further sweeten the pillaging of our natural resources by corporations in order to sell them back to us at a profit.

https://news.bbc.co.uk/1/hi/uk_politics/8693832.stm

Once again - we see who is in control.

" But outside Germany, the worry is that the big losers in all this won't be speculators - but ordinary citizens in countries like Spain and Portugal who find they cannot combine massive budget cuts with decent economic growth.

Make no mistake, the UK and the rest of the world will suffer as well, if the conclusion of this crisis is a eurozone based on the same export-led growth model as Germany."

So, what's better - a debt-burdened import-orientated consumerism fed by high borrowing government demand aided by finacial innovation? I think that's failed. Let's stop bemoaning Germany.Let's take lessons from them on what they do well, mix and match and go our own way. If Germany set down rules we dont want, we dont play. Not sure why this alarm-bell keeps sounding, really.

Germany clearly knows there is something bad 'coming down the line' pretty soon and this move is designed to protect German banks which is why the French are so miffed about it - 'first mover' advantage and all that.

In answer to the question in your headling though - the markets of course (and a handful of very powerful elites).

Micawber moneynomics is assuming Tsunami proportions and the persuit of 'tough' fiscal policies will expand the pressure on government debt as it either disables growth or sends it into reverse.

Again another example to me of the conflict between nation states trying to run their economies, and multinational systems on which nations depend.

Most nations proudly comprehend their sovreignity, pretending that finance is a kind of conduit that somehow joins or passes through them, a nuisance that has to be borne.

Well it ain't like that. The big finance multinationals run the world. They don't care about nations as long as they don't lose out. And people will always bet when they think the odds are clearly in their favour. Only suckers take up the losing side of the bet. Merkel will not stop hedging, CDSs or even "short selling". I mean, what's to stop me selling my shares when the market's on the turn then buying them back when it bottoms out? That isn't short selling, it's astute business practice.

Merkel's just playing (necessary) politics. She likes the idea of bailing out Greece no more than any other German; but if Germany wants to retain economic power in Europe the Euro has to survive. It's the Deutschmark by any other name.

I sympathise even while I disdain these premature, ill-considered regulations. What nations/people/politicians don't understand is that a united europe is about the only hope of having some say in the control of the multinationals, finance, corporations that operate on a global scale (initally courtesy of the Americans who also won't like these regulations).

It's all part of the Friedman vision of the world. Some decades are good, some are bad but (so said Friedman mistakenly) markets tend to equilibruim. No they don't... this is how these hedgies and private investors on the casinos make their money.

I don't think the Euro can survive much longer unless Europe finds a greater unity than just its currency. And keep inviting or promising more nations membership of the EU doesn't help at all. 27 nations with heaven-knows how many languages, cultural differences, with a single currency loosely holding about 16 of them together? It's a nonsense.

I like Ms Merkel, feel her pain, but hystical reaction to solving what might be the wrong problem won't help anyone.

Well there is plenty of evidence that quite a few governments havn't been running their economies and finances very effectively.

The markets are merely reflecting this. Governments may not, perhaps understandably, like the way at least some elements of the market behave but one has to ask in return why governments have created the economic conditions where they could.

The regulations they are proposing are merely papering over the cracks governments created to try and stop things falling through them. The cracks are still there and the paper will split sooner or later.

The Masters of the Universe are being mastered by a woman.

Is it not understandable that a country that actually makes things has little sympathy for spivs and gamblers. I apply these terms to the extremists (economic terrorists) who use CDS and 'naked' short selling to destabilise and achieve an end by any means; short selling and hedging used responsibly has a role to play in the markets (price smoothing, hedging, liquidity). The notion that one can insure against the debt of an unrelated third-party and then manipulate the market to achieve an end is clearly 'economic terrorism' period.

Though it was unfortunate that BaFin action leaked out before Merkel could consult with her fellow leaders in Europe. Though this may have a deliberate shock tactic on the part of the German government.

It will be interesting to see how this pans out and whether our new Chancellor (Osborne) has the vision to see that something significant is happening.

All this user's posts have been removed.Why?

#8
If the Government is serious about rebuilding a manufacturing economy in the UK here is an excellent place to start! Indeed if they do not crush these gamblers it must be taken as a very serious indication that they do not intend to help the rebuilding of manufacturing.


Agreed.

This is the first real test of our new coalition. This is big and far more important than scrapping the ill-conceived HIPS.

Will they be up to it.

You have to feel sorry for the German taxpayer. The have been spending the last 20 years financing the results of unification, now they are expected to bail out countries that, frankly, should never have been admitted to Euroland in the first place.

The admission of Greece in particular had more to do with politics than economics, since they (the Greeks) couldn't run an inebriation party in a brewery when they had the drachma, and nothing has changed since.

The Euro should have been set up as a currency limited to those nations that pay their way in the world, and in that respect, the UK should have had the door slammed in it's face had it applied to join!

I believe the future lies in a euro operating as the single currency in Germany, Benelux, France, Luxembourg and Austria. Any other states would have to sign up to proper fiscal controls and prove, for a period of minimum 5 years that they can operate to a discipline that would ensure the situation at the moment can never be repeated.

As for these speculators, Robert Peston and you (Stephanie) insist that the German action can't / won't have an impact, but clearly the casino bankers are worried enough to have got themselves in a flat spin over them. Hopefully European governments will wrest control of their financial systems from the speculators who's time has certainly come.

Glad to see you're coming round to Angela's was of thinking Steph.
What a difference a day makes eh?

Merkel is paving the way for bank defaults on a massive scale. This is the idea behind 'an orderly insolvency process' for Club Med.

It seems to me that the German position is that the only real solution is default which will hammer the banks and pension funds; to this end the ban on short selling is to prevent speculators, in Germany at least, not making money out of the crisis.

Contrast with the French position which is to throw money at the problem.

At the end of the day Germany is a trading nation and needs a stable currency and Merkel is coming to the conclusion that sovereign defaults is the only practical solution on offer.

I don’t reckon this is about credit default swaps or naked short selling.
I think this is about trying to convert bad debt into good debt.

We should have a sweepstake.
How long can the game of ‘pass the Euro debt parcel’ last, when will the music stop?

For the avoidance of doubt:
The ECB printing shed loads of money or a Nation debt restructuring represents the music stopping.

From what I’m reading, I’d say my understanding of “short selling” is the equivalent of deadbeats & hoodlums getting credit to gamble from racket run underground bookies. Only rather than having the option of insuring your slef against potential loss, the street hoods take a beating if it all goes beally up.

Please correct if I’m wrong.

"who runs Europe - governments or the markets?"

I seem to remember a similar question was asked in 1992, just before sterling crashed out of the European exchange rate mechanism. The answer in 1992 was quite clearly "the markets". Has anything very much changed since then?

As previously mentioned I don’t reckon this is about credit default swaps or naked short selling. I think this is about trying to convert bad debt into good debt.

And again as previously mentioned, perhaps we could have a sweepstake.
When will the music stop in the game of ‘pass the Euro debt parcel’.

For the avoidance of doubt:
The ECB printing shed loads of money
or
A nation debt restructuring
Represents the music stopping.

Now you may want to consider exactly how much is a shed load of money.
Prior to Mr King undertaking QE there was in fact no defined amount.
A shed load simply referred to a large but undefined quantity.

However after he printed £200 billion, it became universally recognised that a shed load of money was in fact £200 billion.

Remembering of course this is a wonderfully British concept, and therefore we need to convert it into Euros, which at the current exchange rate is around £231.34 billion.

So if the ECB announces its going to print an amount equal to, or in excess of €231.34 billion Euros, it will in fact have created a shed load of money, and the music can then be described as having stopped.

Now the sweepstake could be furthered by trying to predict the number of Euro sheds created.

For too long the city and other financial centres have had there way and we all know why were in the present economic difficulties. An outright ban on all forms of short selling should be adopted its creates nothing and was instrumental in the destruction of Northern Rock. I totally agree with Germany that we should be concentrating on an export lead recovery and re-build our manufacturing base and even go as far as bring in selective import restrictions particularly with regards to China, India and other countries that impose restrictions on foriegn ownership and trade.
Britain needs less reliance on the banking & services sector we desperately need a balanced economy, a stable currency and decent interest rates for savers with high interest rates for private borrowers with a lower rate for business to invest or tax incentives to offset higher interest rates.

It is worth remembering, it is only the 'Naked Shorts' (unbacked by borrowed stocks or bonds) that have been banned.

The ordinary trades are unaffected.

It is only the worst of the spivs, a select group indeed, who use them.

If there was any doubt, I approve !
Angela would get my Vote.

If the markets are in charge, why the heck did we have to bail them out?

Hang 'em up to dry and see if they come out any cleaner

The BONNIE AND CLYDE political/banking game for a larf, is a vast edifice of unrecoverable debt ,only kept solvent by ever increasing amounts of freshly minted fiat, it will end like this LOL


Maid in England

https://www.telegraph.co.uk/news/uknews/7741921/Wife-fighting-400-million-divorce-case-runs-out-of-money.html

When will they realise, that they are not fighting the markets,they are fighting their own people to support their own ego, so as not to admit that the Euro was fundamentally flawed from the start and remains so. You can not have monetary union without genuine political, cultural and economic union.

The markets are simply refelcting the political, cultural and social reality of the situation Europe now finds its self in. the markets have concluded that the people of europe, in the end, will not put up with the consequences of supporting the single currency at all costs.

The germans are not greeks and never will be in terms of national characteristics, intension and motivation for being. The economic architecture has to refelct that basic reality, the economic architecture can not force an alternative reality upon us.

Wake up Merkel and Co...smell the coffee...or is that the smell of burning tyres in the streets?

This comment was removed because the moderators found it broke the house rules. Explain.

It means that Germany is only interested in itself

The Euro is finished...who will pull out first

Germany or Greece?

After the events of the last few years isn't it time ban short selling never mind naked short selling? Only the truly greedy or stupid would want to see the market fall, it's just daft but then they have the cheek to expect the tax payer to bail them out when it all goes wrong.

I wonder if the question "who runs Europe - governments or the markets?" is not unlike "what determines the power output of a wind farm - turbines or winds?"

How naive can one human being be? You don't even have to place a phone call to New York City, Hong Kong, or Shanghai. Type, click, done! It happens that fast. If you want to play in the world market, you play but its rules. These are the rules governments all over the world have agreed to. They are beyond the power of Germany or all of Europe combined to change on its own. There are a lot of powerful people who have a vested interest in keeping them about the way they are now with only a few minor changes. The renegotiation of market rules would take years and would be very different from what would protect Europe from its past sins. By the time any change could occur at all, the horse would not only have left the barn before the door was closed, he'd be clear into the next county. Why would a perfectly intelligent woman deliberately do something the whole world knows is futile and pointless and in the process making such a public spectacle of herself by advertising her inadequacy to the challenge?

Stephanie, you say:
"The rest of the world needs domestic demand in the eurozone to grow, not shrink even further, in the next few years"

I agree if you mean Germany but I disagree if you mean Greece, Portugal, Spain and Italy. People in countries with large government debts and large annual deficits first need to pay more tax to keep their governments from defaulting. Otherwise chaos will reign.

#16 doctor bob'

I agree with much of what you have said but would probably have described it in different terms.

As many on here have noted, the German authorities appear to have mistaken a symptom as a cause. The main factor for all Western economies is globalisation which has been driven by the needs of the international financial industry. In the constant drive for short term gain, it has destroyed the long term wealth of large parts of the Western economies. This has and will continue to lead toward either major social disruption or increasing militarisation.

Until Europe adopts protectionist strategies and starts putting its own people back to work then these effects of globalisation will intensify.

None of us can say with any confidence it rhe Euro will survive in its present form or not. It really does not matter for the UK if we are in the Erozone or out. However, it is imperative that the UK take a leading role in the development of a pan-European economic strategy.

Stephanie,
Please can you clarify exactly what the German authorities have banned? I have heard/read three different bans from/on the BBC:
All short selling
Currency short selling
Sovereign credit/debt short selling.

In the middle example it was said not to be a total ban but a ban on free shorting - no buyer in sight deals.

What exactly has been banned?

When the fans of things can only get beterr stop running, the giant gullibliesed bouncy castle theme park in the do buy sands which allowed bankster carpetbaggers to take pension fun ds for a ride will go pssssssssssssssss as the seams unravel and the kidded bouncers disappear into the quacks.

Now you see it soon you wont.


Take consolation in the simple fact that fiat currency was no more than an attempt to monopolies hope or as it now is seen with its mask ripped off,wishful thinking.


What a purrformance however the showboat must go on for the fat cats to be able to take their piece of the pie out of the sky and spend it today swanning around the med .

The rest of the world needs domestic demand in the euro zone to grow, not shrink even further, in the next few years. But right now it is very difficult to see how that will happen.

Indeed, if Germany has its way, the euro zone is going to make an even smaller contribution to future global growth than we thought.

Stephanie,
Any chance of working out an estimate of this impact on the UK. I know the UK budget is based on us growing by 3.25% from 2011 to 2015 without any glitches in that growth rate.

What I don't know is what the assumptions were in those figures for the Euro growth, which clearly impacts our exporting success.

I do know that each 1% less growth we achieve than the forecast 3.25% means a shortfall of tens of billions in our budget. So if this is going to be assumed in the new estimates by George Osborne next month we will all need to be sat down to hear the news, as the impact will be nothing less than shocking.

"Be in no doubt: in return for signing-off on this rescue package, Germany will want the new rules of the road to be written in Germany's own image. ... Germany wants tough fiscal controls for every eurozone country to come out of this."

Me too. If those tough fiscal controls had been there in the first place would we all be in such a mess?

"But outside Germany, the worry is that the big losers in all this won't be speculators - but ordinary citizens in countries like Spain and Portugal who find they cannot combine massive budget cuts with decent economic growth."

Disagree - the "ordinary" citizen lives hand to mouth already while corruption is all over and the big fat cats and certain politicians pocket millions unashamedly. The game is up and some useless high level spongers are starting to sweat: and not before time. The ordinary citizen can't starve to death - twice.

".. the UK and the rest of the world will suffer as well ..."

There's a GLOBAL crisis, then a recession, heading for depression and 'we're all going to suffer'. Blow me down, never thought of that....

If I were a German taxpayer I wouldn't be impressed at attempts to take the heat off Greek politicians by introducing meaningless rules attacking negative market sentiment that many Germans themselves subscribe to.

I'd rather see a clearly defined set of targets for fiscal balance with realistic exit routes (eg currency exit with dowry) if those targets couldn't be met. Otherwise I might be suspicious that the SPV could turn into a never ending round of political fudges and requests for more funding.

re #8
In addition, the amounts of money earned by some involved and the bonuses that accrue, especially to those at the top, have some unfortunate effects:
They lead to tax avoidance at best, evasion at worst,
They distort other markets, especially the housing market in the UK, and
They lead to other salary and bonus distortions.

Not a good idea.

I am not against people doing well for themselves, if they have skills and opportunities and the acquisition of those skills and opportunities are open to others. Regulation of the activities - self or otherwise - needs to be transparent and done with integrity. They should also pay a fair share of tax to the state in which they operate.

Unfortunately, we started to chuck a lot of those principles, and others, out of the window a long time ago. Now we are paying the price!

#8 john_from_hendon

Your argument is half-reasoned but in the end your world is impossible.
1. There is nothing to stop you and I entering into a naked short-sell gamble, we just need to find a jurisdiction where its legal. It shouldn't be hard, and I can't think of any similar attempt to control a market which has worked.
2. I have never seen any evidence that the UK version of this helped matters at all a couple of years ago.
3. You clearly advocate industrial policy on a grand scale to kill off hedge funds and boost manufacturing. This age-old argument ignores the traditional economic maxim of trying to maximise profit and efficiency and relies on wishful thinking. If (and what a big if) we turn the rules of economics on their head and assume that governments really can pick winners, it would take time and right now we need profits and taxes from anywhere at all to finance our bankrupt country.

I think someone said here yesterday that this German initiative was driven by their domestic politics. This rings true to me - they are playing to the gallery that is baying for the blood of financiers even though doing so threatens to undermine the EU itself.

They want someone to blame, but the blame lies with the EU itself, the profligate member states, the complacency and arrogance of the ECB and the eurocrats. If they could run a whelk stall they wouldn't be in this mess.

I think we're missing the point.

Germany is worried about its banks. They have very big exposure to Club Med and will take a serious hit with any sovereign defaults. They know that and the markets know that. This comes on top of their heavy exposure to derivative losses incurred.

They have tried to ring-fence their top ten banks in German trading but not elswehere (and it seems with unintended consequences). The markets rightly have guessed some form of panic with this unilateral measure.

BTW - all those going on about 'bad market speculators' please do some reading up on the subject. The ban is on 'naked' short selling only. But its still a heads/tails call that you can lose as much as win.

The market doesn't go down because of it only if enough investors think that the outlook is negative on the asset traded.

Whichever way you look at it yesterday's action was not good for the Euro's longevity. Some commentators on here will just have to deal with that........

"Make no mistake, the UK and the rest of the world will suffer as well, if the conclusion of this crisis is a eurozone based on the same export-led growth model as Germany."
To me this does not make any sense at all. The article also equates 'export-led' with lack of domestic demand. This is distorted logic and not economics. Export led economies including Korea, Japan, China,large sectors of Indian economy, and Germany obviously, do not stop importing goods. And contrary to the claims, the growth of their domestic markets depends precisely on their success on exporting, among other others. An export based economy is also a proof that your products make sense in the world, they are in demand. Its makes your economy stronger. Therefore its very hard to imagine that the 'UK population will suffer' if there is more demand for UK goods around the world. From the perspectives of the developing countries, there is no better way to promote their economies than to build up comparative advantages (products, technology, HR etc.)in export vis-a-vis other countries. Is the article suggesting better models that i do not get or carrying on the good tradition of denouncing anything German?

This comment was removed because the moderators found it broke the house rules. Explain.

Stephanomics
Who runs Europe: The governments or the markets?

You might make that "the World" rather than Europe?

Stephanie what if you and Robert were to open a new blog called something like 'the big picture' designed to go further than your current remit (which I imagine is something like 'clear and unbiased reporting of events...) and have a clear and incisive, investigative blog that opens things up in the way of 'what does that actually mean?'

That could be a positive focus for the surprising (in every way!) intelligence of the comments posted on this site. When I last looked at the main page 61,114 BBC pages had just been read. How many read your blogs? from where in the world? and who are they? I have seen comments from people who seem 'beyond communism' to others who could be 'investors' yet to greater or lesser degrees we are all in the same bigger picture, for example:

The shifting struggle for economic power and influence between old and new regions of the world

That power is based on Fiat currencies, that are themselves are so divorced from reality (how many IOU's have been printed?) that they cannot sustain much longer, especially as more and more people cease to believe in them. As so many of your contributors indicate.

So obviously even at this 'kiddie' level it is obvious the situation is like a sinking boat where those in it start to panic and desperately flail around, and so we will see more and more crazy hysterical actions and events, laws and 'certainties' being re written over night - all just to try and keep something unsustainable afloat.

I think we all know this, without even adding a baby dinosaur into the room of the fact that we as a race are stripping the resources of the planet by many times what would be sustainable, and then we have 'mommy huge dinosaur' which is the population of the worlds unstoppable growth - we are in some kind of trouble...

Again we all know this but how do we think about it? where do we go from here? let's look at that in the tangible way so many things are discussed here. For example, if (if?) Fiat currency is based on political madness and does not have a future - what do we actually do instead?

What is the point?
There is a story I keep hearing that, could, be true. At things like village fairs if you have a 'guess the number of sweeties' contest and you take all the guesses, including the wacky ones, then you end up with an average not far off the actual number.

Or another way to put it is that everything has consequences and these consequences can affect us all.

How long before the FTSE is back below the 4400 level when Blair took office?

re #8

Governments, more specifically our (past) Government, realised that setting up markets is quite a good idea. There is a chance to make some money even if the tax take is not all it could be. It makes us look good around the world. And as some individuals get rich, they might just remember who enabled them to get rich and bless them with a vote at the next general election.

Just think. Forty years ago, if you were an environmental crusader, you paid for it yourself. Twenty years ago, you might have a part-time job with a charity but you had to earn a bit of a(n) (extra) crust doing something else. Now, I would not be the slightest bit surprised to learn that our nationally/internationally known figures earn six figure salaries (before the decimal point) for telling you and me not to use a supermarket's plastic bag when we go to the only market that's important to us - for our food.

See! I am a CHEERFUL cynic!

" 7. At 11:34am on 20 May 2010, Ian_the_chopper wrote:
The Euro zone seems to me a bit like a lads night out at a curry house.

The Southern Europeans have been ordering more poppadoms, lots of side dishes and quaffing the beer like it is going out of fashion. The sober sensible Germans who are driving home, after all it saves money on a taxi, have had a couple of glasses of water and no starter.

Now it comes to settle up the bill and one of the Southern Europeans has suggested that they split the bill. The Germans look annoyed but these things happen with mates and already they have had grief about moaning about always seeming to be the first to have to buy a round.

To make things even better for the Germans the Greeks have just said they forgot to go to the cash machine and could someone, i.e. the Germans, sub them for the meal and they will pay them back next time. Honest!

And we still wonder why the Germans are in a mood?"


Couldn't have put it better. Cheers Mate!!

"Germany's lost the plot"

Oh no, the plot is there and waiting. The grave has already been dug. The tombstone that will mark the mortal remains of its carcas has already been engraved;

"Here lies the German Economy 1945-2010
It fell on its sword and died for an impossible dream
R.I.P."

Snow white Merkel has said to the seven dwarfs "there'll be no hi ho ing in my back yard by the anglosaxon lumpend mervinking pro lettoryat.





"Off to work you go now and you can take your pick ease with you."




HiHo hiho its off to hedge fun we go hiho hiho hiho.

Let’s be absolutely clear. This is nothing to do with markets, it’s about the Euro and political union, or should I say federalism. The rest is just another smokescreen.
Again let’s be absolutely clear. There has never been a currency union that has worked in the long term. Currency union without political union is nonsense. The bureaucrats and some notable Europhiles dreamed the Euro idea up, in the full knowledge of historical evidence pointing to its eventual failure, and expecting that the crisis which was inevitable would force countries to accept political union or risk financial disaster.
The Euro is near that point now. The people in Southern Europe are feeling the consequences of the inevitable crisis and their politicians’ should be honest with their electorate, as should those of Germany and France, and ask them in the referendum, so frequently and fondly denied by the bureaucrats and politicians of Brussels’, if they are willing to unite in a federal system of government and give up their respective national governments or not. If the proposal is rejected by the majority then an organised dismantling of the Euro should be accepted as the consequence. What Germany and France and the rest of the ‘rich north’ must accept if they vote for a federal system, and consequently federal taxes, is that in the main and until the ‘poor south’ catch up in productivity terms then the majority of federal taxes will be spent in the poor south.
Given the current bailout is now expected to last three to four years at most and produce devastating economic consequences’ for the recipients of the bailout in the form of massive deflation isn’t it about time the politicians of all parties told the truth to their respective electorates.

If Euroland doesn't want to be traded on the world markets, it can become a non convertable currency like the Russian ruble was during the Soviet era. It will be completely insulated from the winds of the investors and speculators. No one will short it...or buy it. It will be worthless. In other words, no difference.

I am with Angie all the way to a third term!!!

As the Wealth of the West moves East to Asia and Australia we will have the Dollar, Euro, and Pound locked into a Competitive Devaluation spiral.

What a miserable state of affairs.

I have to give the Europians credit. It isn't easy to bankrupt an entire continent and drive 500 million people broke all at the same time.

#47. StopFiddling wrote:

"#8 john_from_hendon

Your argument is half-reasoned but in the end your world is impossible."

Sorry, but that assumes that the World as it is is possible and as we see it collapsing all around us somehow I don't think it will work(Stagger from every worse crisis to an even worse crisis) without some more regulation.

Easy steps would be: transactions that do not go through a recognised exchange are not enforceable at law (just like gambling debts that they are.) Furthermore anyone engaging in such transaction shall cease to be a member of any recognised exchange. That seems quite reasonable. All this without re-imposing exchange control too (that is the ultimate threat.)

And what about a wealth tax on global wealth? Cut them off at the knees!

We need a new-world and we must strive to construct one or this depression we are just entering will go on for a couple of generations.

It is becomming clearer that Germany is now making the move that was anticipated by some when the Euro was started, which is to merge the countries in the Euro into one country, just as hapened when Germany was formed. It is very strange that a single currency for Europe was implemented at a time when Italy was having problems between its North and South with the lira too weak for the North and too strong for the South. Doubters will sayn that it does not affect America with over 50 States, but having lived there I can state that the inequalities for the Americans are massive. They only tend to show their middle and higher classes to the rest of the world, covering up those at the bottom of the pile. Germany can not complain about cover ups by politicians to suit their own ends, as they to practice them. Having found out about fake companies run by the state to keep their unemployment numbers down in the past, I always take their statistics with a bag of salt!!!

In the words of a popular song 'Don't cry for me Argentina'. I was there when the peso devalued from parity with the US dollar to 50 cents on the dollar. Ten years later they still haven't settled with their remaining creditors but at least they have some economic growth. There is no way that the PIIGS can improve their competitiveness with Germany by 30%, so the only route will be devaluation. This will come as no surprise to the markets, since it's what the UK has done for the last two years. Banning short selling will not change this reality and Chancellor Merkel knows that.

#48
"Germany is worried about its banks. They have very big exposure to Club Med and will take a serious hit with any sovereign defaults. They know that and the markets know that."


Half right Prof.

The Germans intend to engineer sovereigh defaults in Club Med; this is the train they see coming down the line. They have come to the sensible realisation that the problem worldwide is just too big to keep throwing money at it.

This is the same banking crisis that started 3 years ago. It started with the banks and will end with the banks.

The only solution is to tear up all this paper debt and move on. It will not be good for economies over dependent on banks like the UK.

The BaFin ban on naked shorting and CDS will probably be followed by other countries (both New York and London have been there) and will avoid a banking sector share collapse which is far more dangerous than writing-off bad debts.

The FTSE has now come to the end of the longest Bear rally in history and will sink down below 3500.

As for the Euro. It is just a currency that will find its level that reflects economic reality. If, and only if, the Germans abandon the Euro, will it fail.

The end game is approaching. (God, I sound like Armegediontimes :) ).

#55
"Germany's lost the plot"

Oh no, the plot is there and waiting. The grave has already been dug. The tombstone that will mark the mortal remains of its carcas has already been engraved;

"Here lies the German Economy 1945-2010
It fell on its sword and died for an impossible dream
R.I.P."


So a devaluing Euro is bad for the German export machine.

Hmmm.

German banks are lined up for a mullering. Who cares. They are not a big cog in the German machine.

#57
"The bureaucrats and some notable Europhiles dreamed the Euro idea up, in the full knowledge of historical evidence pointing to its eventual failure, and expecting that the crisis which was inevitable would force countries to accept political union or risk financial disaster.
The Euro is near that point now."


Good analysis which I share.

#55,

What's R.I.P.?

Black Friday tomorrow.

US Non-Farm payroll figures will be interesting.

Deutchebank must be run by some of the dumbest bankers on earth. They fall for every scam. They nearly got blown away in the US housing market train wreck. If President Bush hadn't bailed out AIG they wouldn't exist. Now Merkel has to bail them out, that's what this fund is really all about, German and French taxpayers bailing out German and French banks. If it was only about the Greek people, they wouldn't get a cent. They'd be told to go take a hike.

Although Germany's move on short selling contradicts its plans of the 1990s for Frankfurt to supplant London as the financial centre for this third of the globe, it shouldn't surprise anyone who knows the Germans. They are still very much an industrial nation with an industrial mentality. They believe the only respectable way to make money is to design, develop and manufacture high value, quality products.

I agree with their innate suspicion of other methods.

A perfect song for the EU's funeral;

https://www.youtube.com/watch?v=6E2hYDIFDIU

Based on the assumption that Germany is looking at the potential of ultimately no bailout for Club Med and endeavouring to protect its banking system from the fallout, will others do the same? ....... The French, The Italians, The ECB unilaterally perhaps?

As a general thought, it is perhaps time for united intergovernmental action against the "markets" Sit back and think over the last 2 years. The market allowed asset bubbles that most knew had to burst. When they did burst they turned thier attention to government debts as the next method of increasing profits. Do not forget they lent the money in the first place to develop the excess debt. I look at at simply, the markets are a tad like drug dealers,they let governments and joe public have a quick "fix" of cheap loans,once well and truly hooked the cost of loans increase. Classic model of dealer junkie relationship.
So come on you governments,face these dealers down.

61. At 3:46pm on 20 May 2010, MarcusAureliusII wrote:
'I have to give the Europians credit. It isn't easy to bankrupt an entire continent and drive 500 million people broke all at the same time'


Well I don't think you should give out the credits just yet.
It's still undecided as to whether the ECB prints money or lets nations go bust.

No bailout = No European Union
No European Union = No need for Euro Politicians

What would you push for if you were a Euro Politician on £300,000+ a year (including expenses but excluding back handers).

We owe a huge vote of thanks to Germany for this statement of intent to confront the speculation industry head-on and regulate it out of existence.

Quoting SF's blog: "Germany does want to see longer term reforms in this area - it is pressing the European Commission to put forward a draft directive that would take a serious look at some of these trades."

An EU Directive will of course apply to all of Europe, so no matter how many splenetic interventions by the likes of City apologist Boris Johnson and his financier cronies there are, there will be no exceptions for London.

The tide is really turning now against the rampant greed of the speculation industry, but like Canute they are still deluded enough to think they can order the waves to retreat - pretty soon they'll be well ensconced in Davy Jones's locker!

52. At 2:35pm on 20 May 2010, Kevinb wrote:
'How long before the FTSE is back below the 4400 level when Blair took office?'

Not long now that the Conservatives are back. Well, sort of back, they were not wanted enough to let them get there on their own.

Is lack of Blair dragging down the Dow too? The Moscow RTS maybe? I am amazed that he had so much positive global impact, who would have guessed!

If the Euro was got rid of an national currencies came back in a reasonably controlled and planned way what would the consequences be?

Other than lots of politicians with bruised egos that is...

Based on advice given on this blog which has proven to be a reliable...negative indicator, I'm shorting the Euro. Given the source of the advice, I don't see how I can lose.

'but ordinary citizens in countries like Spain and Portugal who find they cannot combine massive budget cuts with decent economic growth'

This assumes that government spending based on borrowing generates economic growth.

It definitely generates an increase in spending.

It might, concievably, generate an increase in GDP.

But growth? over what period?

"So a devaluing Euro is bad for the German export machine."

Interest rates will go up. Costs for anything bought from outside Euroland will go up (energy, technology just to name two.) Prices internally will go up. People will demand their salaries or entitlement payments go up to offset their decreased buying power. And you think that will be good for competition? Considering that much of Germany's exports are to other EU countries and much of it financed by German banks, I'd say that the trouble Euroland is in won't do Germany's economy any good.

Stick a fork in the Euro, that turkey is cooked.

#71
Although Germany's move on short selling contradicts its plans of the 1990s for Frankfurt to supplant London as the financial centre for this third of the globe, it shouldn't surprise anyone who knows the Germans. They are still very much an industrial nation with an industrial mentality. They believe the only respectable way to make money is to design, develop and manufacture high value, quality products.

I agree with their innate suspicion of other methods."


Hear hear

But only 29% of German GDP is manufacturing, with 70% service sector.

I was advised some years back by a guy heading up a corporate "future scenarios" team that in his view the best thing to do was to buy a place in the country with fertile land, near a water supply! In addition he recommended I purchase an AK47 with which to protect my potato-patch from the starving landless. Not a happy thought!

So let's hope that the market manipulators and spivs manage to work out a way of turning banknotes into a nourishing broth. Once they've had their peculiar phyrric victory over the ECB what will do with all the now useless money? Maybe they'll settle down to trading on Europe's first root-vegetable exchange.

We're all doomed, 1000 years of European trade and culture is about to come an end, the beast is at the gate. So burn some tyres in the street, if you have any gold, exchange it for an air ticket to the Cayman Islands. Alternatively, pour a drink, sit back and ignore this ridiculous panic-fest. You're actually playing into the hands of the market manipulators!

#70. At 4:39pm on 20 May 2010, MarcusAureliusII wrote:

"Deutchebank must be run by some of the dumbest bankers on earth. They fall for every scam. They nearly got blown away in the US housing market train wreck." ...

No I think you'll find the US is home to the dumbest bankers on earth - the people who created the US housing market train wreck in the first place, the geniuses who thought lending vast amounts of money to people with no prospect of paying it back was a sound long-term investment strategy.

People are complaining about Germany take control of the EU. I can provide these politicians a simple advice. If you don't want Germany to control your economies, don't put your economy in a situation where it will need German money to keep it running. I know there'll be those saying that German money fuelled the property bubble is Spain.Well, Spain failed terrible in observing what was happening and let itself be carried out by the unsustainable housing speculation.China has realised that its property market is turning into a bubble and has already taken measures to avoid greed taking over the country housing market. So do your homework and there'll be no need for you to be humiliated by German and IMF bailing out conditions.

68. At 4:35pm on 20 May 2010, The Patriot wrote:
#55,

What's R.I.P.?


Rampaging in Poland

77. At 5:18pm on 20 May 2010, Squarepeg wrote:
52. At 2:35pm on 20 May 2010, Kevinb wrote:
'How long before the FTSE is back below the 4400 level when Blair took office?'

Not long now that the Conservatives are back. Well, sort of back, they were not wanted enough to let them get there on their own.

Is lack of Blair dragging down the Dow too? The Moscow RTS maybe? I am amazed that he had so much positive global impact, who would have guessed!

You appear to be in a round hole...this is for grown-ups

Surely all this economic turbulence is the inevitable consequence of hitting the bottom of the pyramid - running out of naive developing populations to fuel the giant Ponzi scheme that is free market capitalism. Don't get me wrong I am no radical socialist, but it is pretty obvious that the world has limited natural resources and wealth; money as a token of wealth is neither created nor destroyed, just transferred from one pocket to another, and limitless "growth" is by definition impossible. When we reach the bottom of the barrel, as we are doing, the get-rich-quick traders realise they have to swish things around even more violently in order that they can take from someone else and fill their greedy hands.

In summary, I admire the Germans for seeing the obvious truth that short termism benefits no-one but the traders.

Talk about 2 wrongs not making a right! Ban naked short selling so that the Greek rescue package can go through? So you ban something that has little or nothing to so with the break-up of the Eurozone to allow something to happen that will be a catalyst to the break-up of the Eurozone. What sort of twisted logic is this? The same sort I suppose that thinks that the best way to help a country with their debt problem is to load them with more of it i.e. Greece, 150% debt = 7.5% of GDP minimum interest payments per annum, good luck! Only way out is to restructure the debt, not increase it. Why can't the powers that be grasp this simple fact?

#83 Anglophone - cheers and completely agree with you! Outside for a glass of CoatwithSpecks Chicken; 'twas lovely and helped a UK business too. Couldn't recommend it enough. Have one on me. Merkel knows what she is doing, somehow I have more faith in her than any of our leaders. So cheers MerkyBaby, good luck to you.

#62 john_from_hendon

Some reasonable ideas there John but they won't work!

The world is not collapsing around us. A goofy monetary union may reduce to its core and eject a couple of bankrupt states, maybe. The odd German bank thats been a clot may even hit the skids. Armageddon, no.

A transaction is enforceable in the jurisdiction its in. This has long gone on - for example a property agreement to lease is often signed offshore to avoid stamp duty in this country. There's nothing wrong with it at all. Its an agreement to agree, a signed piece of paper, nothing more. I don't see why short-sellers need to be a member of an exchange.

Exchange controls to go with industrial policy? This sounds like the failed mistakes of the seventies.

We definitely don't need a new world order imposed in haste by panicky euro-enthusiasts.

Even Alistair Darling called the German statement "displacement activity" and today Angela Merkel is all shrill about regulating everything.

The EU is learning that it can't legislate its way out of financial trouble, you have to manage your way out.

I wonder how long it will be before the crash of the Euro and then the break up of the Union. Say five years!!!!! Many said it could never last - I never thought it was suited to Britain, am I glad we did not go into the Euro.

Dear all,

I'm not quite clever enough to understand all of the reactions of the markets to this bail-out and ban-on-naked-trades situation. Nor am I able to predict, what's really going to happen in the next few days on the political stage in the Euro-zone and the EU. And it IS a stage, even if the outcome turns out to be very real - for us (unfortunately in any way, we'll lose against markets AND politics, so what does the rabbit care, whether it's eaten by the wolf or the bear).

I am, however, right now sitting in my living room in Germany and quite convinced, Germans do actually really approve of any steps taken to tame the markets at this stage, tame the speculators, tame the gamblers (not metaphorically prison them, however! In fact: Prison them, if they act(ed) unlawfull, that's for sure^^). If I read the signs correctly, the German population is completely fed up with any sort of gambling - on the political side and on the economic side, and there is exactly zero tolerance left for any player in the markets (or politics!) speculating or gambling - on whatsoever!

I am very convinced that all this fuss is not about "Germany wanting to retain it's export surplus" or suchlike. I am, however, convinced that there is a slight tendency in German policy to believe the time to be right to go on with further integration. And this isn't completely off the point, since we're all in deep trouble and it might turn out to be a realistic alternative. I am absolutely sure that the German population is at the edge: They won't any longer pay and pay and pay... for nothing. These days are gone, far too late. I guess they'll still pay, but only for things that change the situation for good, nothing that preserves it at a status-quo.

We are living in interesting times.


Ash

Funny how the article shifts from the new German regulations on short selling to an attack on the Germans for wanting their ways if they bail out Greece. Or is it seriously implying that a ban on certain financial transactions and possible taxation (let's see if that happens) will actually cost us any economic growth? These activities don't add economic value - hence why they want to get rid of them.

There is nothing wrong with the Germans insisting on tighter controls on exactly those rules that the EU countries have signed up to in order to join the monetary union - especially if they are the ones that pay the bulk of the cost produced by others that have enjoyed higher living standards than they could afford through their own labor.

"The rest of the world needs domestic demand in the eurozone to grow, not shrink even further, in the next few years" - fine, go ahead with that on borrowed money, but don't expect the Germans to bail you out.

#6 >>And the US is the biggest shareholder in the IMF, and it can veto aid packages.

There are no vetos in the IMF as far as I can tell. The US can refuse to pay up its share of the funds but then it risk losing its share of the voting rights.

If the US Congress wants to set up Festung Amerika, then so be it. They can't complain that other countries are not buying their goods when they insist on messing up other people's economies !!

Re. the Eurozone economies - The problem here is not that they don't have enough exports but that their spendings are far in excess of their earnings. This is because their Elysian dreams of a Socialist paradise is costing them more than they can afford. Therefore, they can pare down their dreams or go up in flames.

If the Greeks think that their strikes and riots will scare anyone into bailing them out for free, then they will discover that the rest of the world don't give a hoot about them. They will end up being booted out of the Eurozone and sent off to go on their own sweet way. The world doesn't care for children throwing toys out of their prams.

The same could happen to Britain.

94 wrote

There is nothing wrong with the Germans insisting on tighter controls on exactly those rules that the EU countries have signed up to in order to join the monetary union - especially if they are the ones that pay the bulk of the cost produced by others that have enjoyed higher living standards than they could afford through their own labor.

Actually, Germany and France were the two countries to break the entry conditions first......whichever way you look at the Eurozone it is flawed, and will need to be altered, in one way or another

This is conveniently overlooked by many attacking the south med. countries

Italy is also a basket case, yet due to the attention on Greece and Portugal, they have so far slipped under the radar

Another day, another set of problems, all willfully misunderstood. Get real people this is all about propping up collapsing German banks.

Look at LIBOR rates. Surely periodic infusions of $ trillions, coupled with zero interest rates makes what is happening with LIBOR rather hard to explain.

So...Why bother, let´s not explain it - perhaps it isn´t happening. If it is it must be to do with speculators. It most definitely cannot have anything to do with systemic insolvency, because otherwise the game would be over.

Some will drown in an ocean of debt, but most will be seduced by the siren voices that pull them toward their nemesis in the ocean of delusion.

The time is drawing near when the words of Kenneth Wolstenholme will resonate one last time.

@ #95

I agree to you, to some point. I even agree that strikes in Greece won't help. Riots won't help at all. However, it isn't the majority of Greece's population who caused these troubles. They are victims, and we should never forget that! I interpret these strikes as their right to pronounce: This wasn't our fault!

However, it is for sure, there have to be actions, which will hurt the Greek population, hurt deeply. Much more painful than today anticipated. And I'm not sorry to say this, because this is what's waiting for ALL of us Europeans, Greece is only a start!

So, I'd like to change your comment from "could" to "will"... "The same WILL happen to Britain." , somehow. As it will to all EU members. But not, because they are EU members, probably, we'll all be better off, because we are EU members.

Ash

#72
"A perfect song for the EU's funeral;"


Intrigued.

Why do you guys hate the EU and Germany so much.

Is it the football (well you have a bottle problem with penalties) or were you jilted at a tender age by a blond pigtailed German lass.

How about an intelligent objection to the EU.

There isn't one.

How about an intelligent objection to the Eurozone.

Well it can't work without fiscal and political union.

If the EU fails the nightmare begins.

A German and Russian carve-up of Europe.

Do you want that. Are you that stupid.

Blimey, I sound like KevinB.

#86. At 5:54pm on 20 May 2010, Kevinb wrote:
68. At 4:35pm on 20 May 2010, The Patriot wrote:
#55,

What's R.I.P.?


Rampaging in Poland

------------------------------

Thanks for that - very nearly choked on my coffee.

Nice one Centurion - LOL