The European commission announced moves today to shore up the euro and ward off market pressure on Greece by considering a ban on complex derivatives allegedly being used to undermine the single currency.

The draconian move suggested by José Manuel Barroso, commission president, follows a joint campaign by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, for a prompt clampdown on credit default swaps (CDS).

Given that they\’re entirely ignorant of how financial markets work why in fuck are we giving them the power to run a continent?

From what I understand there are CDSs on some $9 billion of Greek debt. Against the $300 or $400 billion odd of debt outstanding this is pissant. Good starting point is here and search through the rest of the blog for CDS pieces.

At very best this is shooting the messenger and at worst this is astounding ignorance.

Barroso said today it was \”not justified\” to buy CDSs \”by unseen interventions on a risk, on a purely speculative basis … The commission will examine closely the relevance of banning purely speculative naked sales on credit default swaps of sovereign debt.\”

Ignorant, ignorant. A sale of a CDS is always \”naked\”. A purchase can be naked or covered, but a sale is always naked (well, it doesn\’t have to be, it;s certainly possible to hold the debt and sell a CDS on it but no one actually does that….to be boringly precise you might well find that Goldmans, as an example, both holds Greek debt and sells CDSs on it but that\’s just because Goldmans is big and does lots of things. You don\’t, as a trading strategy, hold bonds and sell a CDS.).

Market speculation against the euro was \”an aggravating factor\” in the Greek crisis, Barroso added, but conceded that Greece\’s problems \”were not caused by speculation on the financial markets\”.

Despite the criticism of the markets and the CDS crackdown led by Merkel, Germany\’s financial services regulator said it had seen no evidence of speculation against Greek bonds and no growth in the use in effect of CDSs betting on the chances of a Greek default.


7 thoughts on “Cretins”

  1. “Given that they’re entirely ignorant of how financial markets work why in fuck are we giving them the power to run a continent?”

    As I may have said before, we don’t give them the power, they just take it. We can’t vote them out; all we can do is hope that eventually someone in UK government will have the sense to get us out of the appalling disaster that is the EU.

    In fact, I’m not convinced that they are entirely ignorant; I suspect that they’re just doing what they do best (ie, fucking things up), waiting until someone finds a way of ameliorating said fuck-ups, then tries to prevent them from doing so.

    Am I giving them to much credit? “Never attribute to malice that which can be adequately explained by stupidity”, but the quote continues: “but don’t rule out malice”.

  2. The Pedant-General

    Morons: it’s the debt that’s the problem, not the people telling you that the debt’s the problem.

  3. When central planners cock up (ie, whenever and wherever central planning exists), then they always blame “speculators”.

    This goes right back to Stalin, and probably Lenin too.

    They are just all the same.

  4. Rumour has it that they are going to ban short-selling on AIG and City etc. Dumber than nine chickens- the wh0le lot!

  5. Andrew:

    You’re quite right in saying that central planners are wont to blame speculators for the going awry of their plans. But they’re not the only ones nor do I believe they’re original in laying such blame. It’s just common for the economically ignorant (which is an awful lot of folks) to seize on speculation as a source of what “did them dirty.”
    You’ll find the same sort of blame-laying coming from farmers displeased with the prices they get for their crops and even from otherwise savvy dealers in various commodities, including scrap metals, when things don’t go the way that suits them. Nobody likes to be wrong (and the handiest folks to blame are those whose opinions differed from your own).

  6. A credit default swap is merely a tradable insurance policy against a certain type of risk: ie, default. What next, a campaign to ban insurance against fire, theft and whatnot?


  7. In the meanwhile, Germany is borrowing 4481 Euro every second, just to keep the wolf from the door.

    I wonder where they will find this much money once the financial markets are no longer functioning properly?

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