EU: British regulators are to blame for Britain's perma-slump, not Europe

The Telegraph ^ | 7/26/2012 | Ambrose Evans-Pritchard

[bruinbirdman]

Britain is contracting as fast or even faster that those eurozone states – Spain, Italy – imposing far tougher fiscal austerity. This has caused some consternation.

There is no Keynesian explanation for this, but there is certainly a monetary explanation.

The UK is not my beat, but let me just say that the answer to this seeming mystery is right under our noses. Regulators have choked the British banking system even more violently than European regulators have choked the eurozone banking system.

Michel Barnier, we need you here to liberate us from our own commissars.

Professor Tim Congdon has been arguing all along that the regulatory assault on banks across the world over the last four years is the biggest single reason why the global economy has failed to recover. I think he is probably right.

The policy is pro-cyclical folly and is asphyxiating the M3/M4 money supply almost everywhere.

Forcing banks to raise more capital is for booms not busts, ideally according to some sort of sliding scale or lean-against-the wind principle.

The Europeans forced banks to raise core Tier 1 capital ratios to 9pc by a deadline last month – ie, find a friendly Gulf sheikh (fewer of them around than you might think) or shrink lending.

No wonder eurozone banks have slashed their balance sheets by €4 trillion since the Great Recession – crippling Club Med in the process. But the British have gone even further, and to make matters worse we have a higher sensititivity to credit than Germany or France.

I believe the Vickers regime implies a ratio that will ultimately be nearer 11pc to 12pc, though experts will correct me if am wrong.

British banks have deleveraged drastically. That is why M4 money is flat on its back. It is why there is a

[Olog-hai]

Let’s see the EU “regulate” the European Central Bank, the ultimate rate-fixer that caused the 2008 recession. (Oh, that’s right, they can’t and won’t, because it’s “independent” and accountable to nobody . . .)

[nvscanman]

With regulation you get stagnant economies, contraction and other economic woes. Without regulation you get bizarre and unfit schemes
like credit default swaps, leveraged collateralized mortgages and other
insane schemes designed to churn money around so insiders can make
obscene profits on investment schemes few if any truly understand.

Damned if we regulate the bastards.....damned if we don’t.