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Well, we view the basic facts different.

There also seems to be a value dissonance. I like my regional public bank and my regional/local saving bank. I think the are a valuable part of the German banking system and should be defended against the ravaging neoliberalism. As should be the equivalent parts of the banking system of other European countries. (And the state bank of North Dakota)

And you do discriminate against other Europeans:

Domestic need-to-save
Foreign need-to-save
Domestic want-to-save
Foreign want-to-save

A clear hierarchy of needs against foreigners.

by IM on Sat Feb 5th, 2011 at 07:28:21 AM EST
[ Parent ]
There also seems to be a value dissonance. I like my regional public bank and my regional/local saving bank. I think the are a valuable part of the German banking system and should be defended against the ravaging neoliberalism.

Well, yeah. If there's enough money to go around to keep banks from losing their shirts, then local banks and state-owned banks should be at the front of the queue.

But the fact is that if a bank becomes insolvent, there are established procedures to resolve that situation without any major loss for the real economy. The bank's management is decapitated, the assets sold off, and its shareholders and unsecured creditors get to take a haircut. But the economic function - credit analysis, information gathering, transaction clearing and money creation - will still be carried on during and after a bankruptcy.

When a manufacturing firm goes bankrupt, on the other hand, there is a significant risk that it is going to be disassembled and sold as scrap. Which destroys its economic function. And when a pension fund is insolvent, retirees get shafted. So all in all, if you have to shaft someone it's better for everyone, except the shareholders and management, that you shaft a bank than a manufacturing firm.

And the proportion of banks that are simply evil is arguably higher than the proportion of manufacturing firms that are simply evil.

And you do discriminate against other Europeans

Yes, because foreigners have another safety net.

In the best of all possible worlds, the EU would come together and make a list of firms and individuals who needed to be bailed out for the common good, and another list of firms and individuals who need to go whistle for their money. And then the EU would, collectively, bail out the people who needed to be bailed out.

In the world we actually have, the EU is not going to bail out the Irish retirees. And while the German government might bail out German retirees, it isn't going to bail out Irish retirees. So shafting the foreigners in preference to the Irish is the only way the Irish government can incentivise other governments to lend material support to a rescue operation that could ensure that nobody had to be shafted (except the hedge funds).

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 5th, 2011 at 08:03:04 AM EST
[ Parent ]
Uh, is your German regional public bank insolvent?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 5th, 2011 at 08:17:16 AM EST
[ Parent ]
I hope not. Sparkassen and Genossenschaftsbanken tend to be the healthy part of our banking system. But if the great lets default plan succeeds, they can get hit too. For no good reason.
by IM on Sat Feb 5th, 2011 at 08:31:30 AM EST
[ Parent ]
If they get hit it will be because they could not resist investing in what should have been an obvious raging real estate bubble. That is a good reason, regardless of where the bubble occurred.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 5th, 2011 at 06:03:53 PM EST
[ Parent ]

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