FT.com / Europe - Portugal near political crisis over debt .
Portugal is facing a debt crisis. Whether justified or not I do not know: I am not an expert on Portugal and won't claim to be.
But the follwoing is reported:
He [the Prime Minister] said Portugal had taken over from Greece as the main victim of the “animal spirits” of financial markets that were often “irrational”. The concern in the case of Portugal, he said, was not justified.
Now here't the rub: the markets may well be rational - according to their own highly perverse definition. Undermining states, democracies and currencies is completely rational following the logic of the market. If there's a financial gain to be had destroying well being is entirely rational according to currency and debt traders.
Which is precisely why they need to be regulated quite differently.
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Sounds like politicians trying to blame others for their own failings…again.
Richard,
I have a limited supply of sympathy for hedge funds (who are driving the aggressive shorting here) and often find their relentless stratgies of exploiting systemic and political faultlines unacceptable.
Having said that, I also believe that if governments chose to finance their large budget deficits in the capital markets, they must accept the consequences of these decisions and play by capital markets’ rules.
One such consequence is constant exposure and demands for accontability.
tb
@Ted B.
Accountable, yes
Abused, no
Why not address that?
Richard,
One of the factor that triggered the run on Portuguese bonds was the governemnt’s surprising announcement that budget deficits would be far higher than previously (even very recently) disclosed.
In the case of Greece, it was the discovery that some debts had previously been concealed and that state statistical agencies had been less than truthful about the country’s fiscal position.
Both countries (esp. Greece) are guilty of abusing their bond investors. If these countries were corporations there would be enough cause for the SEC to open proceedings.
Seriously, what treatment do they expect in return?
eg