Ask yourself this – what’s to stop this happening again?
Even if Germany agrees to cough up tens of billions and the poorer Greeks agree to be further impoverished for a decade, what is to stop Portugal, Spain or Italy, who are already on the same slope, sliding down to where Greece is now? And if they do then the same banks who are in fear of collapse from bad loans and bad debts will once again start to shake and scream just like they are doing now.
Is this fixed? Have the banks cleaned up their bad debts? Have they learned a thing? Or are they still as arrogant as they were before?
You see what makes me a little irritable is when I read how, “A noted investment strategist” quoted by Marketwatch said he felt this sell off was the bond market telling M. Trichet, Head of the ECB, “… to get your act together and provide some leadership and establish some order.”
Of course, what he means by ‘Get your act together’, and ‘provide some leadership’ is BAIL US OUT! Buy all the rotten and worthless debts that we no longer want. We don’t care what it costs you, or what bad things it does to anyone else at any point in the future – just make sure we and all the people we do business with don’t face any losses. That’s what he is barking at in our faces. Imperiously dressing it up in pompous exhortations to provide leadership.
That ‘noted investment strategist’ knows it could happen again and probably will. SO he wants something done about it. Not the right thing. Not the thing which might help all us little people. No. Something specifically designed to help him and those who are in the same financial quick sand he is in.
If the bond market seizes up lots of bond buyers who hold those bonds and many others will lose their shirts and their minds. That’s what he’s indignant about. Not whether M Trichet is showing proper leadership.
The bond market lent unwisely. They hoped to make money. Now they won’t. But they want you to believe it’s nothing to do with them. Its just bad leadership by a central bank that won’t bend over for them.
Dear Golem, I absolutely agree with you on the analysis about who 'a noted investment strategist' is, what he's really saying and what interests he serves.
Shame on journalists for not exposing it for what it is. Bigger shame even for political leaders not to throw the real meaning of such statements back in the investment strategists' faces and not accepting the premise of such 'leadership' being called for.
Lack of understanding of basic economics may account for that. But what the heck does one make of of similar statements from Economy Nobel Price winner Paul Krugmann, who in his op-ed comments in New York Times 6th of May states: "So is the euro itself in danger? In a word, yes. If European leaders don’t start acting much more forcefully, providing Greece with enough help to avoid the worst, a chain reaction that starts with a Greek default and ends up wreaking much wider havoc looks all too possible".
Seems we have an element of ideology, in the marxist sense, to fight too.
I sometimes write Mr. Krugman, the last time re his views on regulation of financial markets, to ask him to return to the subject of US foreign policy, where his views are sound, but no, he's adamant with economy and finance comments. That Nobel Prize must really have have been a boost to his confidence.
Makes me wonder: Who was the comittee behind the prize? Did they sense that lending Nobel prestige to a Keynesian ideologue would be wise for business as things were beginning to fall apart?
May be hard for politicians and ECB alike to stand firm confronted with 'investmens strategists' and "objective science" calling for the same type of 'leadership'.
Dear Lars,
I really enjoy your thoughtful comments. It would be great if others would join in. Perhaps they will in time.
I think you are right. We are fighting an ideology. More, we are fighting 'ideological capture'. Everyone, it seems, has been captured by the same way of seeing and understanding what is going on. And that is a very dangerous situation.
What we need is a debate between people who see and understand what is going on from very DIFFERENT perspectives. Otherwise we are all trapped inside a single view.
Krugman, is an odd one, I agree. But as you note he thinks disaster lies in the collapse in value of 'assets' denominated in Euros. He does not seem to think that devaluing the euro, by using it to prop up valueless assets (by buying them) or insolvent banks by giving them euros in exchange for debts that will never be repaid – he does not see that these are the actions that will destroy the euro. Why he does not see this I don't know.
I do think he believes bailing out the banks is some kind of Keynesian government stepping in to stimulate and invest when the markets themselves fail to do so. The problem I see with this is that government are NOT actually doing any actual Keynesian stimulating. For the simple reason that they keep putting their stimulus into the banks where it disappears. The bail out has not stimulated because it has never etered the real economy. It is in the banks or back at the central banks on deposit from the banks it was lent to.
I think Krugman is wrong. Which is the height of arrogance I know. Blogger tells Nobel Prize winner he's wrong! I'm sure he would laugh – good naturedly I hope.