Moronic German Government
Apparently the German government is going to ban certain kinds of short selling and credit derivatives transactions.
Remember how Richard Fuld of Lehman used to complain about short sellers? But really Lehman failed because its balance sheet was garbage...
Falling asset prices are really kind of neutral in terms of consequences. Sure, some people's equity is wiped out but the world's supply of resources and productive capacity doesn't change. On the other hand, crippling markets that we have spent centuries developing does have lasting, wealth-destroying consequences.
Posts
2 comments:
CP,
I posted this awhile back on Liquidity-Solvency: http://thejungleiseverywhere.blogspot.com/2009/09/redefining-liquidity-solvency-debate.html
I'd be interested to know what you think. I should've also added to my post the idea you expressed in yours-- that the world doesn't come to an end if the current owners aren't prevented from "short term liquidity shocks" that result in other equity owners coming to control the assets.
What makes banks special? Any other business that experiences a "liquidity crisis" would be taken through bankruptcy court if it couldn't get some temporary, voluntary funding from someone else. But if a bank does, it gets special benefits, special, government-provided emergency lending.
Let's call every business a bank and open the spigots for everyone!
(Btw, what happens when your "short term liquidity crisis" goes on for years, like current money center banks are experiencing?)
The people who are claiming a "liquidity" crisis are disingenuous.
Banks have massive political power and have been using it to exempt themselves from normal rules, i.e. bankruptcy when an institution is insolvent.
Our bankruptcy courts are perfectly functional, we can get a bankruptcy judge up at midnight if Citigroup needs to file.
The banks shot themselves in the foot by being such jerks (paying massive bonuses, etc) after the previous round of bailouts. They won't get bailed out again.
Post a Comment