Surprise! EU leaders produce little of substance at summit

[GRG55]

Re: Surprise! EU leaders produce little of substance at summit

...what's the average holding time of a bond now? 90 seconds?

Touché!

[c1ue]

Re: Surprise! EU leaders produce little of substance at summit

I am not nearly so optimistic that a Tobin tax will have the effect advertised. First, humans are incredibly adept and creative at finding ways around the rules...be they taxes or any other form of regulation...so I expect the ultimate outcome of a Tobin tax will be to raise the cost of financial services for non-financial corporations and those citizens that can least afford it, while the pros and the wealthy move their transactions off the regulated exchanges and further and further away from scrutiny and regulatory control.

I quite agree. All you have to do is look at Facebook and the secondary pre-IPO market to see just how this game was played with SarbOx.

Second, it seems to me that the primary underlying problem the world over is excessive leverage, and an inability to service that debt. Private sector debt. Corporate debt. Public debt. And the economic sector that is able to lever up the most is banking and finance. I do not believe that the continental European politicians are generally any different in how they will treat their precious banks than the UK, USA, Japan, China or anywhere else in the world. They have been bailing them out [why was Greece "bailed out" at all?]. They will nationalize their banks if there is no other alternative. They will recapitalize the banking sector at the public's expense.

I'd modify this statement slightly: it isn't debt per se which is necessarily the problem, it is non-productive debt.

As EJ's TECI or Stiglitz's EDU economy proposals show, there are ways by which debt can be taken on - if the resulting productivity increases offset the interest charges on the debt and increase the overall level of economic activity.

Unfortunately the central banks and governments in the 1st world seem mostly focused on throwing away the productivity capture from new debt on self enriching, populist, and productivity destroying measures.

Yes, I know, all in all it reinforces your original statement. But in theory...

[unlucky]

Re: Surprise! EU leaders produce little of substance at summit

For those scratching our heads and wondering what the hell the EU was playing at last week, another fascinating article in the FT today: Debate over role of ECB hits wrong note

This one is by Erik Nielsen, chief economist of Unicredit. (obligatory ad hominem: clearly an out-and-out bankster ) It's behind a paywall - sorry. But he makes some interesting arguments:
A, that the ECB is exceeding its mandate in its occasional comments on the fiscal policies of eurozone governments (political independence works both ways!);
B, that the mandate obliges the ECB to ensure equal monetary conditions in all member states, and an expansion of the SMP programme would be an effective way of doing this;
C, the ECB is legally wrong not to expand the SMP, however the provision of unlimited long-term liquidity as agreed last week will in time prove to be an adequate substitute.

Fascinating to see an economist from an Italian bank arguing coherently versus the Bundesbank position (tho Mr Nielsen's name suggest northern european provenance).

Does point C hold any water or are the European authorities smoking dope here?