Brownian motion: a cure for subcrime cancer?

While the G7 in Washington was inconclusive, Europe advanced more yesterday by generalising G. Brown’s approach: each country will use its own resources, but the plan is coordinated –  aiming to interbank lending and temporary quasi-nationalisations (taxpayer- based recapitalisation of banks). Today’s rally (now 6% in Europe, at 4 pm GMT) is meaning nothing: we were observing a decreasing length of rally periods after injections of money and policies. The political good news is the return to a Berlin-Paris axis, which traditionally marks political waves of Europe building.


 G. Brown is a Robin Hood PRO TEMPORE: after the crisis, he’ll give banks back to rentiers, and Nottingham will be exploited as  it was before.

Brownian Motion in Europe

Published: October 13 2008 09:48 | Last updated: October 13 2008 16:24

Perhaps Gordon Brown should travel more often. The lugubrious British premier, out of sorts at home and seriously adrift in the polls, has been styled as a swashbuckling conductor in the Spanish press, and a “magician” in France. Europe has apparently bought into Mr Brown’s conviction that this is a severe, but transient crisis of confidence that can be overcome by piling on more and more government debt.

While the wisdom of that strategy is questionable, it is clear that there is strength in numbers. If governments all muck in together, using taxpayers’ money to recapitalise banks while providing guarantees on new debt issuance, they sacrifice their balance sheets en masse. Some budget deficits will widen more than others. But if they cock a collective snook at fiscal rules and targets, they’ll discourage capital arbitrage within the Union …


Roubini Hood is optimist for the 1st time in years

I spent the weekend in Washington attending the IMF annual meetings and giving a series of talks in a variety of public and private fora (IADB talk, C-Span interview, Euro 50 Group meeting, IMF panel, etc.). After last week crash in stock markets and financial markets (and it was indeed a crash as during the week equity prices fell as much as the two day crash of 1929) policy makers finally realized the risk of a systemic financial meltdown, they peered into the systemic collapse abyss a few steps in front of them and finally got religion and started announcing radical policy actions (the G7 statement, the EU leaders agreement to bailout European banks, the British plan to rescue – and partially nationalize – its banks, the European countries plans along the same lines, and the Treasury plan to ditch the initial TARP that was aimed only buying toxic assets in favor of plan to recapitalize – i.e. partially nationalize – US banks and broker dealers. While many details of these plans are fuzzy and there will be some national variants the contour of the approach are similar andclose to the recommendations that I made in this forum

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