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Stocks and bonds sold off after the Federal Reserve ended its policy
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GRACEFULLY DONE IN DEED ; This is an interesting little signal of how politics really works over here. A minor Dutch politician told everyone the truth about Europe’s banks and banking systems and immediately European bank stocks dropped by 4%. This showing quite how it really is all a game of confidence at present, all just smoke and mirrors. As Felix Salmon points out, it isn’t that what was said was wrong. Quite the opposite in fact: the difficulty was that what was said was absolutely correct and true:
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If a gaffe is what happens when a politician accidentally tells the truth, what’s the word for when a politician deliberately tells the truth? Dutch finance minister Jeroen Dijsselbloem, the current head of the Eurogroup, held a formal, on-the-record joint interview with Reuters and the FT today, saying that the messy and chaotic Cyprus solution is a model for future bailouts.
Those comments are now being walked back, because it’s generally not a good idea for high-ranking policymakers to say the kind of things which could precipitate bank runs across much of the Eurozone. But that doesn’t mean Dijsselbloem’s initial comments weren’t true; indeed, it’s notable that no one’s denying them outright.
Dijsselbloem’s interview can be summed up simply: we’re not bailing out banks any more. Instead, we’re going to let them fail.
Of course these remarks are being walked back. For much of European politics operates under the pas devant les enfants rule. Yes, of course, we adults can all tell the truth to each other but we really shouldn’t say such things in front of the children. The children being we the voters. This does have its problems of course: as when groupthink means that no one actually tells the truth, even in private. Or even when they actually believe the guff that is being fed to the children voters.
Links 25 March: Sense In Cyprus, How To Deal With Both Deposit Insurance And Moral Hazard Tim WorstallTim Worstall Contributor
Is Germany Playing A Game Of Chicken Over Cyprus? Tim WorstallTim Worstall Contributor
Krugman And The Cyprus Endgame: But What If 'Doing An Iceland' Succeeds? Tim WorstallTim Worstall Contributor
How To Really Bail Out Cyprus: Take It All From The Large Depositors Tim WorstallTim Worstall Contributor
However, what makes this all much worse is that the original statements were not only true they were also sensible (something of a first in European politics in itself).