This so-called crisis is being run by and for banks. They were burned by the credit crunch, by their own reckless lending to a housing bubble and to spendthrift governments. Declaring themselves too big to fail, they demanded policies whose sole virtue was to see their loans secured, at whatever cost to the European economy. They do not want a collapse of even a part of the euro, as that would jeopardise their balance sheets.
The banks are the people who lined up quietly and took their 70% haircut on the Greek bonds.
The banks are the people who have been selling down their sovereign positions and writing off chunks of those they haven\’t sold.
The banks are exactly the people who are causing the bond prices to fall, the yields to soar, as they agree with each other that \”we\’re not buying that shit\”.
The problem is not the banks. It is the politicians desperate to stop the banks doing what they are doing. The banks are acknowledging economic reality and the politicians want to stop them destroying their lovely plan.
This isn\’t about saving the banks. It\’s about saving the reputations of the idiot fucking politicians who designed this dog\’s breakfast of a system.
“….ignorant Sir Simon….”
Meanwhile Ursine animals defecate in sylvan glades….
Actually, it is quite a nice ambiguity in the title. Did Tim mean to miss out the comma, or not …
And the politicians are advised by whom, exactly, worstall?
They don’t get born from eggs, do they?
How do you survive the day being so blind?
On the Labour side, by the WGCE Richard Murphy.
Sufficient explanation?
They don’t get born from eggs, do they?
For once, I must agree with Arnald.
The politicians that exist today, exist because we created the system that they exploit, not just us but or fathers and grand-fathers back through history.
We have held ‘democracy’ as a shining light against the darkness of totalitarianism everywhere.
We have implicitly (through taxation and voting) have continued to support that system and given it power over every aspect of our lives.
That venal politicians have taken this and corrupted it to serve their own agendas, lining their pockets and subsidizing their cronies should be unsurprising.
The only way we can redeem ourselves is to destroy these totalitarian pygmies in Parliament and return power to the people using the power of the internet.
However, too many of our fellow subjects now feed off the tit of the state.
Where is our Cincinnatus in our time of need.
The problem is that only 5-10% of our politicians have the knowledge and intellectual ability to understand the details of financial systems which as you say in the case of the euro was almost designed to fail.
The rest focus on easily understood issues like bonuses and bailouts and use these to stoke the resentments of the people against banks and away from themselves.
So solutions are invariably those proposed by the larger group who end up attacking the symptom and not the problem.
Reality only comes with a shock. And it is far more shocking and far more painful that it should have been.
Mostly other politicians or wannabees. But you have, unsurprisingly, failed to address the point of the post.
It is the commercial (investment, retail, combined) banks are the ones who have already taken the losses. The central banks – who are not the m/billionaire rapacious capitalist fat cats of Guardian, O-everywhere and other lefty loathing (End the Fed is a Tea Party campaign) – are the ones who have been protected up till now.
“They don’t get born from eggs, do they?”
Arnald, what exactly do you think an ovary contains?
It’s like watching someone crash a clown car over and over.
I seem to remember a blogger (if only I could remember who) writing about the banking crisis being, if not caused by, then certainly exacerbated by the repeal of the Glass-Steagal (sp?) Act in the US and by our own Broon Loonie passing legislation to the effect that all bank debt is guaranteed by the government (which I believe doesn’t actually have any money). Does anyone know about this? Or have I been misinformed?
Cheers,
Captain Fatty
You nearly got it right. “Glass-Steagall”.
But, although some blogger may have blamed GLBA’s repeal of ss 20 & 32 of the 1933 Banking Act, none of the critical players in the US financial crash were directly affected by that repeal.
AIG was an insurance / re-insurance firm; Bear, Lehman and Merrill were pretty much pure investment banks …
On the UK side, of course, it was different. But not even the Sage of Kirkcaldy guaranteed all bank debt by legislation. The saving of Northern Rock by direct government intervention, however, did set up a “fair playing field” expectation that went badly wrong (for HMG and for the taxpayer) when bigger banks needed the same assistance.
They should all have been allowed to go bust and the govt only pick up the pieces long enough to sell them to somebody sensible. Which would probably have been Barclays … Oops.
Thank you SE, very useful information (nice blog, by the way). I hope none of you mind me hi-jacking the comment thread, but would anyone happen to know the name and date of the aforementioned Sage’s fair-playing-field Act? Probably “The Banking Act” or some other imaginative name. “Saving the World Act”?
Day after day, I’m getting less and less ignorant. Must do something about the tosser bit though…
Cheers,
Captain Fatty
CF,
It wasn’t legislative – it was executive – but it then fell within the EU government assistance rules, as well as UK common law.
So they couldn’t preferentially support the customers-are-core-labour-voters-no-longer-a-community-bank Northern Rock preferentially to the evil-capitalist-exploiter-Tory-bastards at RBS. As they had, reasonably from their pov-at-the-time but disastrously with hindsight, decided to support NR and gone to the EU for permission, they were then in the position that they had to, pardon the crudity, bugger us all without lube.
I apologise for the double preferentially.
Thanks SE. So it’s all the EU’s fault. I had suspected as much… :). It ought to be the politicians/bankers apologising for double preferentially – some sort of euphemism, I suspect, for the activities they get up to behind closed doors.
Cheers,
Captain Fatty
Actually, CF, no, in this limited regard, I would say that the EU rules are sensible. If mostly ignored, especially by the French.
They simply say that govts are not really supposed to interfere in the market (although the EU are allowed to) – something most of us would support. And if they do interfere, they must (note change in wording) do so in a ‘fair’ manner. Such fairness to be determined by some failed apparatchik in exile in Brussels, so possibly bearing no similarity to the meaning of the word in English.
Anyway – bed-time. Before Arnald pops out of his absinthe bottle and dribbles all over the blog …
One of the unpredictable times when Worstall is spot on.It was the politicians that got the banks to lend all that money into the housing bubble which Sir Simon complains about.All the political parties exist in housing bubbleland and cannot adapt as the bubbles start popping:only one policy ,to buy votes by keeping house prices inflated.
And the politicians want the banks to go back to lending large sums of money the banks are not guaranteed to get back while at the same time holding more money.
Get the people spending again and it solves the economy problem. Creates another bigger problem for the future….. but that can always be blamed on bankers by the politicians.
In the meantime the politicians look better than they are. Can’t actually see a downside in the plan for the politicians…..
“This isn’t about saving the banks. It’s about saving the reputations of the idiot fucking politicians who designed this dog’s breakfast of a system.”
Which indirectly involves saving the banks. You might recall the Emerald Isle was not allowed to default on senior bank debt as doing so would raise funding costs for other European banks. Irish debt/GDP jumped about 90 percentage points as a result. That looks very much like a taxpayer-funded bailout of the banks to me, Tim.
My last post exaggerated the cost of the bank bailout. It was “only” 40% of GDP. That still makes it one of the worst banking crises in modern history (as I recall, Indonesia in ’98 was the record at 50% of GDP).
Presumably the rest of the rise in debt/GDP was automatic stabilizers.