Politicians shut down the markets...

I am wondering lately: could things become even worse than having Greek butter on the head? This week we got the answer, and it was the German government that gave it to us by unilaterally introducing a prohibition on short-selling (as a response to financial markets developments). Because the Germans find it clear that those crooks at banks and financial markets are messing with us politicans and we will get back to them. Even the Dutch parliament followed that same line of reasoning today. And the stock markets in the US continued their nose dive.

I remember well that two years ago, at the beginning of the crisis, we were all afraid that politcians would overreact on the crisis. Well, we finally experience it now. With Lehman, it was the distrust between banks that lead to a frozen/absent market. But now, the mechanism is more direct. Politicians themselves shut down the markets and thus create an atmosphere of distrust and unease. Because the real killer for a market is politicians stepping in en messing with the trades directly. So at first we had a liquidity-crisis, then a trust-crisis, followed by a euro-crisis which now results in a political-financial crisis.

Things aren't proceeding that well this way. And all of that because essentially Merkel comes from Eastern Europa and hasn't learnt that well how financal markets work. It would be quite remarkable if, in the end, the 'communist system and upbringing' turns out to be responsible -in this indirect way- for the euro failing and for the end of eurocapitalism.....


Greek butter on the heads of politicians...?

The past few days were all about Greece, the European Union and the financial system. All kinds of stuff happened that amazed me. Most remarkable was, IMHO, the reflex by politicians to blame the financial markets (and/or banks) that the trade in Greek governments bonds halted. Rating agancies were blamed for putting Greece on the hot seat. Politicians felt that speculants, banks and anyonemore were speculating Euroland to its downfall, which is why new regulation should be designed to counteract such speculative trades.

Let's look at this from a distance. The European politicians decide to introduce the euro and realize this requires fiscal discipline. Yet, the disciplining mechanism (stability pact: a well chosen name) is not being used, nor followed. The euro thus becomes a coin with some loose ends.

Meanwhile, financial markets have seriously realised that all sorts of loans may have counterparty risks (having learnt this the hard way by being too careless with the bus loads of cheap money since 2000). Whether it is a bank or a government that you lend out money too, there is always a counterparty risk. And particularly rating agencies are very eager to demonstrate that they did learn their lessons from the crisis. They won't be caught redhanded by giving out AAA-ratings. No, they now more seriously look at risks than before. And apply that lesson to Greece. Only to be heavily blamed by the politicians for doing so and upsetting the markets.

The conclusion seems clear to me. The current size and maturity of the financial markets does not leave a lot of room for immature politicians who think it is possible to build a European Union without respecting their own basic agreements on budgets. What happens in the financial markets is not so much caused by speculation. It is better to state that it is the direct but delayed result of political inabilities and inaction. The grudge that politicians hold towards speculaters thus returns as a boomerang to hit themselves.


The beginning, why did I start this blog?

This is a blog about amazement and wonder. I am often surprised about what happens in the Netherlands, how the public react and about the views of Dutch politicians. Aren't we just running around as headless chickens too often? Talking through our hats? Don't we, Dutch people, often find things too selfexplaining whilst they are actually not? I can really be surprised sometimes and this blog is just a place to vent my observations and to create a public archive of my personal surprise.

Perhaps it surprises you that, some 10 years after blogging evolved, I am now taking up this blog..? Well, that seems a pretty good start for me. You are surprised, I am surprised, We are surprised.