MacShane: Cretin

The existence of the euro means that there are no George Soros-type speculators able to organise runs on the lira, peseta or drachma. We have been spared the currency crises of the past.

Err, no. it\’s the absence of a fixed exchange rate system which denies such speculators their chance of a one way bet.

Merkel pointed out it was Whitehall that opposed any regulation of hedge fund activity when the EU tentatively suggested that these outriders of finance capital might, just might, be subjected to the same rules as other institutions entrusted with the public\’s money.

Hedge funds are subject to the same regulation as other institutions. They\’re private companies, they don\’t have any special legal rights, they\’re not backed by hte BoE like the banks are….they\’re just companies like millions of others. And they have precisely the same system of regulation.

13 thoughts on “MacShane: Cretin”

  1. “Err, no. it’s the absence of a fixed exchange rate system which denies such speculators their chance of a one way bet.”

    There’s still ample opportunity to speculate on different currencies: the spread between Italian and German government euro bonds, for example. The markets think there’s a risk of Italy leaving the euro (and the return of the lira).

  2. Why oh why are we ruled by such morons? Tim for PM.
    I swear I could solve the nation’s problems in a single morning if I was in the hot seat!

  3. Nice try Tim but what about hedge funds’ special deal with Beelzebub that enables them to laugh at the FSA, and drink the blood of long-only fund managers?

    Anyway, the whole point of hedge funds is that they are NOT entrusted with the public’s money. They only have the money of wealthy fools who think that THEIR manager’s alpha is worth the 20% fee…

    If they did take the public’s money they’d have to follow the rules (no short selling etc) but that’s to protect the investors, not the market.

  4. As the crisis was created by a combination of over loose monetary policy, miss placed hyperactivity by Fannie & Freddie and a total miss pricing of risk (on the part of major banks), I fail to see why everyone is attacking hedge funds.

    Gordon Brown personally helped to fan the flames of the bubble, thus making our part in the suffering worse.

  5. Gordon Brown personally helped to fan the flames of the bubble

    What, because he believed the consensus among economists that price targeting by an independent central bank was the most appropriate way to set monetary policy?

    I’d rather politicians followed economists’ consensuses – even when the consequences end up dodgy – than picking the word of some random milleniarist flake who wants to abolish fractional reserve banking ten years before anything went wrong (which is a reasonable characterisation of most of the ‘told you so’s about the current crisis…)

  6. “What, because he believed the consensus among economists that price targeting by an independent central bank was the most appropriate way to set monetary policy?”

    It was Gordon Brown’s decision not to include house prices in the official inflation figures that the BoE had to target.

  7. I’m not saying it would have solved everything but according to this, last year the difference between the two measures was quite significant (4.4% to 2.4%). It would have made the problem less severe.

  8. it’s Goodhart’s Law. You need to be intelligent about setting objectives. just setting targets against one criterion will lead to trouble. For example, if you set a target for mpg in a car, you can best achieve that by driving at a steady 50mph regardless of circumstances. The targets need to reflect the complexity of life to some extent. Single-measure targeting was the problem. Didn’t we learn that in the 80s with sterling M3 targets?

  9. Johnb:

    What Ross said.

    By devaluing the system of inflation targeting, thus forcing the “independent” bank of England to set interest rates too low, he made the bubble a lot worse. The crisis was going to happen anyway, but he made it worse.

    There is also the fact that the regulatory system was designed by one G Brown and has obviously failed.

  10. Fucksocks, forgot to pre-emptively mention that CPI was used by the majority of other central banks and national statistics institutes, and that it was the measure recommended by economists for inflation targetting. The shift from RPI to CPI was not a politically-driven one.

    (also note that 2007 was the only year when the RPI/CPI difference was substantial, because interest rates went up – in other years, because foreign capital kept interest rates low and buy-to-let capital appreciation kept rents low, house price rises were not reflected in aggregate housing costs, which are made up of owner-occupiers’ total mortgage payments plus tenants’ total rents.)

    Again, the shift was most likely wrong in retrospect, and some people who aren’t cranks spotted the bubble impact of the targetting regime in advance – but most serious economists didn’t, and 2007 was far too late to have done anything serious about the bubble anyway.

  11. There is also the fact that the regulatory system was designed by one G Brown and has obviously failed.

    …and you can’t look at these things on an absolute basis either. Has the UK regulatory system failed worse than the US one? The German one? The Ireland one? The Icelandic one? Has it failed worse than the previous system would have done? The answers to the first four questions won’t be clear for several years, and the answer to the last will never be fully established.

Leave a Reply

Your email address will not be published. Required fields are marked *