Killing the messenger won’t solve the debt crisis

I don’t even want to comment on this one: “EU reaches deal on naked CDS ban law”

Shoot the messenger and the problem will go away? I think not…

Share your views of the quality of policy makers in Europe please.

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3 Comments

  1. Alex Salter

     /  October 19, 2011

    Arbitrageurs are harbingers of efficiency. Their job is to bring asset prices in line with their fundamentals, which means in-line with their opportunity cost in the current constellation of prices. If they’re right, markets are more efficient. If they’re wrong, they and only they take a bath. This is a perfect example of Mises’s ideas on the dynamics of interventionism: One regulation, ostensibly to improve the economy, will make things significantly worse. The politicians will respond by instating another regulation, which again will make things worse instead of better. Lather, rinse repeat.

    Politicians in Europe seem a bit more insulated from the electorate than politicians in the U.S. We know that governments worldwide gain permanent additional powers during a crisis, even after it passes. I can see definite public choice considerations which incentivize the politicians to keep the economy teetering, but not in total freefall, as it is now.

    Reply
  2. Alex, so true, so true. Mises’ theory of intervention dynamics is an example that Austrian economics is worth studying.

    The only positive to say of this crisis is that European policy makers is providing lots of evidence that public theory is correct even though I hope feel we need a new discipline of research called “public psychiatry” to understand European policy makers.

    Reply
  3. Lars, I’ll support your suggestion for a research discipline in “public psychiatry” 🙂

    Reading this I remembered a post from Felix Salmon mentioning a report ordered by some EU institution to account for the CDS market and the likely effects of a ban.

    Felix: http://blogs.reuters.com/felix-salmon/2010/12/09/the-eu-debunks-the-debt-speculation-meme/
    The report is here :http://www.scribd.com/doc/44989344/20852775

    It just makes the EU officials look even more ridiculous.

    Reply

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