Things get Political and Nasty

Things just went seriously political. We are now in the treacherous water between economics and politics which is a turbulent place. Think – Cape Horn. Some of us are in war ships, some sadly in peddle boats.

We now have nations who had been, albeit uneasily, standing together, breaking ranks. And their financial proxies are following. This fight is between Washington and Berlin. France and Perfidious Albion will have to chose sides very soon.

The USA has dictated how this crisis was to be dealt with. No matter what comical posturing Mr Brown was allowed as the UK’s reward for helping the Cousins in Iraq and Afghanistan. I think Germany finally has had enough. Enough of being blackmailed by Sarkozy and enough of telephone calls from Obama. The German’s don’t like being told what to do.

And you have got to love Mr Schaeuble. Haven’t you? Or is it just me? He always was a bit of a wild man. He is now a seriously ill, wild man and I can’t help but wonder if that has given him a perspective and a courage that those around him just don’t have.

A measure of how much America and its financial class have been stung by Germany’s action last night, is that Cantor Fitzgerald has rumbled onto the field of play. Cantor Fitzgerald is one of the Primary Dealers who deal direct with the FED. As such they are in the inner circle of making sure the US sells its debt. They are big and they are the one you never hear of. So when you do, it pays to listen to what is said and what is implied.

Uwe Parpart, chief Asia strategist at Cantor Fitzgerald, was quoted in the Guardian today as saying about the German ban on naked short selling – “Pathetic! Unable to muster the political will or intelligence to tackle fiscal restructuring, EU regulates hedge funds and Germany bans naked shorts,”

That’s strong stuff. For those of you like me, who liked the Lord of the RIngs films – think of the scene before the Black Gate where Sauron’s mouthpiece (you remember the ugly one with way too many sharp teeth – gets his head cut off – that’s Cantor Fitzgerald) ) insults his masters’ enemies. That is how this sounds to me.

Am I the only one who remember the US suddenly banning short selling of financial stocks in September ’08, which the SEC soon expanded to cover all companies? What was that then? Was that pathetic too? Or is it OK when the USA needs to do it, when it’s Lehmans being ‘speculated against’. But when the German’s think there might be speculation going on against euro and European banks – suddenly this is just conspiracy nonsense. What Lehman’s didn’t have obscene debts, no collateral and had lied about its financial state?

This isn’t reasoned argument, it’s an attempt at bullying. Speaking as a European can I just suggest to Cantor Fitzgerald, that bullying the Germans does not have a great track record of success. Love them or dislike them – DON’T mess with them.

Germany is no angel in this. No nation is. But Germany is at least contesting America’s presumption to decide what everyone should do. Ban shorting, don’t ban it. Jump, sit, roll over, play dead ( Yeah – I’m talkin’ to you Stavros!’). The belching of fetid air coming from the Financial sector over this ban, smells. Of fear and Greed.

Germany is squaring up to fight the USA. France has an awful decision to make and Sarkozy is the wrong man. If France sides with Germany its banks get closer to implosion. If it doesn’t, it burns its place in Europe more than the UK has ever done.

For its part the British bulldog, and in this fight it is still a bulldog, will have to decide where its loyalties lie. That decision will be far easier for Cameron and his little Englanders than for Clegg.

All in all a fine old brawl in the offing. I can’t wait.