SUMMARY. With bankers in disgrace, and central bankers fearful of a new crisis, will Churchill-style leadership be provided by an Italian comedian? You couldn’t make this up.
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It has been a strange few weeks.
Banks have been a self evident problem since 2008, from which point tighter regulation and reform has been promised. The evidence of the Libor-scam (which stretches beyond Barclays) is clearly that much remains to be done.
Meantime central bankers (the best of breed?) have been providing cheap loans to European banks, enabling them to buy the flakey government debt of their own country, Spain being the best example. The inter-dependence of bank and State is frightening. While the action by central banks was well intentioned, to reduce the likelihood of an imminent banking crisis, if there was now a banking crisis the consequences would be much more severe, due to this increased inter-dependence, like two drunks propping each other up.
And have we all forgotten 2008 so quickly? We learnt in 2008 that banking crises don’t stay local and quickly engulf the world. The Bank of England admitted that in 2008 we were within minutes of High Street cash machines being closed. That is why the central banks remain scared stiff, yet their actions might just be putting off a very ugly day of reckoning. Where is the leadership going to come from? Where is the Churchill of our times?
That British politicians believe they can cast any light on this complex problem is laughable, though in Italy this is taken to another comic level. In recent days former President Berlusconi has suggested Italy should leave the eurozone. Crazy? Well he is merely testing Italian public opinion ahead of next year’s election. His party lies in third place in opinion polls. Second in the polls is the Five Star Movement led by a comedian called Beppe Grillo, and they definitely want out of the euro. You couldn’t make this up.
This is funny until you recall that the amount of Italian government debt held by foreigners, nearly 800 billon euro, is more than that of Greece, Ireland and Portugal combined.
There is a sense that something like a comprehensive solution (to the euro, banking and debt crises) will only be found and agreed upon amidst a deep crisis. It would be strange indeed if the comedy duo of Bumbling Berlusconi and Beppe Grillo were the catalyst for a solution to these crises.