On this date in history:

1880 - Louis Hémon, a French writer best known for his novel Maria Chapdelaine. (d. 1913)

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Open Thread time

On this date in history:

1616 - Andreas Gryphius, a German lyric poet and dramatist, was born.(d. 1664)

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Pepper and Salt - WSJ

German federal finance minister Peer Steinbrück has a plan. On Wednesday, he published an eight-point plan (see in German, and in English as pdf), to be presented at the G7 meeting of finance ministers in Washington today. No word about nationalisation, but definitely about new regulation. Condensed summary:

1. Obligation to keep innovative financial instruments on the balance sheet, and they must be supported with sufficient equity.
   
2. Bank liquidity cushions must be increased, and a minimum size must be set for them.
   
3. International standards should be created for greater personal liability for the financial market participants accountable (to prevent golden parachutes).
   
4. Incentive and remuneration schemes should be adjusted in the financial sector (Steinbrück links those to the insane push for high profit margins).
   
5. Closer coordination between FSF and IMF.
   
6. Detrimental short-selling should be temporarily banned by international agreement.
   
7. A ban on the securitization of 100% of lending risk (to make lenders aware of risk).
   
8. Enhance cooperation between national regulators.

In The Wealth of Nations, when discussing Banking reform in Scotland in the latter part of the 18th century, Adam Smith had the following to say

To restrain private people, it may be said, from receiving in payment the promissory notes of a banker for any sum, whether great or small, when they themselves are willing to receive them; or, to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty, which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respect a violation of natural liberty.

More below the fold.

From the Panic Room comes this report by the Financial Times: Warning on use of anti-terror law on banks (October 10 2008)

The use of anti-terror powers to freeze billions of pounds of Icelandic bank assets in Britain is a distortion of the law’s intent and risks further gumming up the ailing financial system, legal experts warned on Thursday. Financial crime lawyers said the government’s unprecedented decision to apply the freezing order for purposes other than tackling terrorism opened the way to its use in other cases centred on commercial and political interests. The Treasury’s action on Wednesday to protect the deposits of British account holders has highlighted broader concerns that some security-related laws passed since the September 11 2001 terrorist attacks are so widely drafted they are open to abuse.

If this is what it takes for the Very Serious People™ to realise that the post-9/11 laws are "so widely drafted they are open to abuse", so be it. Now let's work to get them repealed or at least the language tightened.

As a direct consequence of the credit crisis, the first country, Iceland Teeters on the Brink. But yesterday, a turmoil on Hungarian financial markets signalled that larger countries are at risk, too, and that from indirect effects.

Yesterday, not only did the Budapest Stock Exchange follow the Dow down, but

• the shares of the largest bank OTP (which has no exposure at all to bad assets in the US) fell 22% (altogether 40% in four days),
• the local currency, the Forint, fell from 250 to 265 an Euro within hours
• and, much more importantly, the secondary market in state treasuries came to a standstill.

Experts and the national bank claim that Hungary's financial situation is still sound and can weather the storm, and that we are seeing collateral damage from the global panic. Still, one hard fact remains: in the credit crunch, countries with higher budget deficits will have a hard time finding financing.

On this date in history:

1813 - Birth of Giuseppe Verdi, an Italian Romantic composer, mainly of opera. He was one of the most influential composers of Italian opera in the 19th century. (d. 1901)

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The cost of borrowing in dollars for three months in London soared to the highest level this year as coordinated interest-rate reductions worldwide failed to revive lending among banks for any longer than a day.

[Jerome's WEEEEEE™ Technology]

[Jerome's WEEEEEE™ Technology]

Martin Wolf is back (see this earlier article which I discussed back in June) with his theory that the imbalances that led to the current crisis were caused to a significant extent by Asia's saving glut:

Any country that receives a huge and sustained inflow of foreign lending runs the risk of a subsequent financial crisis, because external and domestic financial fragility will grow. Precisely such a crisis is now happening to the US and a number of other high-income countries including the UK. These latest crises are also related to those that preceded them – particularly the Asian crisis of 1997-98. Only after this shock did emerging economies become massive capital exporters. This pattern was reinforced by China’s choice of an export-oriented development path, partly influenced by fear of what had happened to its neighbours during the Asian crisis. It was further entrenched by the recent jumps in the oil price and the consequent explosion in the current account surpluses of oil exporting countries.

While there is truth to the fact that Asian countries sought to protect themselves from capital deficits, the reason for their capital surpluses comes from our deficits, which were themselves the result of coordinated policy choices - what I have dubbed the Anglo Disease: the ideological choice to favor the income of the rich, by a combination of deregulation of corporations and finance, downwards pressure on wages, lower taxes, and the idolisation of financial investment and financial valuation of everything.

Monetary policy was a key component in this - cheap money allowed, through easy leverage, to increase the value of assets (whose distribution is even more skewed than that of incomes) and, more importantly, made it possible to hide from the masses, by providing consumer debt or house equity withdrawals to prop up their spending, that their incomes were stagnant - and were in fact being looted by the happy few whose pyramid scheme-like shenanigans are crashing down today (on us, not on them).

So sure, Asian countries had mercantilist exchange rate policies, and were happy to accumulate surpluses. Just don't dare say they started this. We did. On purpose.

On this date in history:

1892 - Marina Tsvetaeva, a Russian and Soviet poet and writer, was born.(d. 1941)

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In reaction to UK Chancellor of the Exchequer Alistair Darling's anouncement of a £500bn (yes, you read that right) bailout plan for British banks, Evening Standard commentator Anthony Hilton writes

The other thing to note is that the political landscape has changed. Only a month ago, such a move wan inconceivable. There will be a political price to pay for this. For the City to continue to thrive, we must hope it is not too heavy.

(My emphasis) His column is appropriately called City Comment.

Gah!

On this date in history:

1870 - Louis Vierne, a renowned French organist and composer, was born.(d. 1937)

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Wholesale Bank Nationalisation Countdown Underway
What Else?

How we are meant to keep track of all of these National and International Days of... I don't know but today is International Day for Decent Work, pulled together by trade unions and NGOs, with a number of events taking place in different countries.

In Belgium, a 2 year campaign on decent work is being launched with the slogan, 'Workers are no tools'.

The campaign aims at promoting solidarity, at raising awareness on the situation of workers over the whole world and at promoting debate on decent work with working people, union members and general public The campaign also wants to press Belgian and European poiticians and policy makers to make of ‘decent work’ a central lead in future policies.

The weblink above leads to other sites in different languages.

Now that an OECD country is having a banking and currency crisis of East Asian proportions and a Eurozone member state is engaging in a massive undercover bailout, it would be salutary to revisit what Stiglitz had to say about bailouts and bankruptcies in his book Globalization and its Discontents:

What is Needed

...

Less reliance on bailouts. With increased use of bankruptcies and standstills, there will be less need for the big bailouts, which failed so frequently, with the money either going to ensure that Western creditors got paid back more money than they otherwise would, or that exchange rates were maintained at overvalued levels longer than they otherwise would (allowing the rich inside the country to get more of their money out at more favorable terms, but leaving the country more indebted). As we have seen, the bailouts have not just failed to work; they have contributed to the problem, by reducing incentives for care in lending, and for covering of exchange risks.

(Op. cit., Ch. 9: The Way Ahead)

A few graphs from the European Wind Energy Association's Pure Power study (PDF) about the prospects of wind power published earlier this year.

One of the most annoying arguments against wind is that it's too small to make a difference. Well, it's as big as nukes were in the same phase of development, and there's no limitation to it growing further.

More Wind power diaries