Stupid, stupid, stupid

German Chancellor Angela Merkel, who hosted yesterday\’s summit of German, French, Italian, Spanish, Dutch and British leaders in Berlin, said the sort of rampant speculation and misuse of leverage that occurred in the credit bubble would not be tolerated.

"We have today underscored our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk," she said.

But hedge funds have been severely tested in recent months: and shown that they do not in fact pose systemic risk.

The systemic risk in fact came from the banks….those parts of the financial system that you already regulate.

We all understand that you just don\’t like these "unregulated" investors, because they don\’t compliantly do what you tell them to, but that\’s no justification for loading them with regulatory controls.

5 thoughts on “Stupid, stupid, stupid”

  1. I love the way that all these EU leaders including Brown talk about “appropriate regulation” without ever saying what that means.

    I can only assume that this is because they genuinely have no idea what it means.

  2. The crisis was also caused by tax evasion, at least that is what you might conclude from other parts of the statement.

  3. Hedge funds lost on average about 19 per cent last year, which is still not nearly as bad as the 40% fall in the MSCI World Index of stocks. yes, some hedge funds have blown up and seen clients pull out, but on the whole, the industry does not deserve the hatred directed at it. The problem, I suspect, is that a lot of politicians, being economic illiterates, don’t really understand what these funds do, or understand short-selling, leverage, derivatives. It is all double-Dutch to them.

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