An English translation of Feu en la demeure !, posted on my French blog on February 25.
Ladies and gentlemen of the European regulatory authorities, I am today turning to you: the house is on fire!
Demands that Greece lowers its civil servants’ wages will not save her. Your prodding Greece to tackle tax evasion will not save her. Your offer to establish a… piggy bank (how laughable an idea!), will not save her either. All that is far too little, far too late. It is also beside the point.
On February 3rd, I happened to be one of the guests on the English show of France 24 TV channel, ”The Debate”. For our sake, I beg you to hear what I had to say when the discussion bogged down on whether or not Greece cooked the books on its economic statistics. This is how I then summarized my address:
I am saying, we are witnessing again someone playing a little game with Credit-Default-Swaps (CDS). But this time, it is not, 1) Bear Stearns, 2) Lehman Brothers, 3) Merrill Lynch, it is, 1) Greece, 2) Portugal, 3) Spain. The doings of the financial markets, these past days, are not unlike George Soros’ coup that sank the British Pound in 1992 (and some think that the economic « science » renewal lies in his hands!).
Your little piggy bank in support of Greece, established after such travails, will last but a few hours in the storm, and immediately following that, four more will be required, one for Portugal, one for Ireland, one for Cyprus, and the next, for Spain, a much larger penny bank than the others put together.
Then, you will have a few days in order to catch your breath, the next target not belonging to the euro-zone: I am speaking of the United-Kingdom.
We are not dealing with wages being too high: what we are facing here a domino effect, in the same way Lehman Brothers’ name was spelled out in the sky the day of the fall of Bear Stearns, so will the name of Portugal be carved in heavens when Greece defaults.
What is to be done? Aim the spotlights towards the source. Towards the lethal combination of national debts rating by credit rating agencies with naked Credit-Default-Swaps positions, those bets taken by some with absolutely no personal risk but in the process creating systemic risks by the tonne, all but for one goal: enormous personal gains.
It is time, Ladies and Gentlemen, to consider outlawing speculation on price fluctuations (also known as financial spread betting).
Do not object it is complicated: it is not, it is already written in the spirit, if not yet the letter, of the Statements of Financial Accounting Standards No. 133 (FAS 133).
Do not mention it is going to affect liquidity: my usual response to this argument is that bettors only create liquidity for other bettors and in that it is of no importance whatsoever. But today I am going to add something else: at the present stage of a probable disintegration of the euro-zone: “Who gives a damn about liquidity!”
(Many thanks to Bernard Bouvet!)