Bad time for French market lessons

The anguish in the financial world has made this week a poor moment for convincing France of the joys of the free market. In a piece of unlucky timing, President Sarkozy will be expected to do that tomorrow when he is presented with a radical remedy for France's economic ills.

The cure is a batch of ideas devised over the past eight months at Sarkozy's request by Jacques Attali, the famous Paris economic strategist, and 40 lesser eminences. They could be entitled "300 ways to save France".

Sarko asked Attali, who remains best-known as economics guru to François Mitterrand, the late Socialist president,  to suggest ways of helping the French economy break free of the bonds that stifle growth. Even Sarko, with his fondness for la rupture, was not bargaining on how far Attali would go down the "Anglo-Saxon road".

We visited this last autumn when Attali's ideas for shop-keepers were emerging. In the final version, which is circulating in draft, he proposes removing or loosening most of the restrictions on trades and professions, from hair dressers and supermarkets to lawyers and taxi drivers. He also proposes opening the frontiers to worker immigrants, letting people work beyond retirement age and even the assessment of school teachers performance by their pupils. Read on in today's newspaper.

Unsurprisingly, Sarkozy is said to be uneasy about endorsing quite such an un-French menu, especially when the country is feeling the pinch and yearns for reassurance. Ségolène Royal, the Socialist, sees the Attali report as good chance for nailing Sarkozy as an inhumane "ultra-liberal" as she campaigns for her party leadership.

Much in the Attali report also proposes old-fashioned heavy spending by the  dirigiste state. But its stress on the virtues of competition will meet a chilly response in a week that much of France seems to be gloating over the misfortunes of the financial markets. Bernard Maris, the lefty commentator on France Inter, the public radio, dispatched the Attali ideas this morning as unworkable and immoral.

The reaction to the financial melt-down follows predictable lines, with leftwing newspapers talking about panic and the abyss. Libération (front page at top) was gleeful today as it denounced the greed and irrationality of the markets.

"Heated white hot by liberal dogma, the financial profession has rejected all attempts at regulation, explaining that the divine market would find in itself the remedies to its imbalances," wrote Laurent Joffrin, Libé's Editor. "The only medicine that it has been able to produce is the crash. We are there now."

Le Monde joined in, inveighing against the greed of the City and Wall Street. "Marxism is a philosophy which went bankrupt. But its critique of capitalism -- that profits are privatised while the risks are shared by all -- has always contained a slice of truth," wrote Le Monde's commentator.

Away from ideology, France is much like everywhere else. People are worried about their investments, whether financial or in the housing market. The gloom this week will not help Sarkozy persuade millions in the protected sectors to give up their security. 

Comments

[azloon]

CB, thanks for jumping on this subject which is sure to be topic numero uno for months to come. the discussion actually started on the previous string and will be picked up vigorously here.

finally, a problem which wiil test sarko's substance. i think Carla should fade into the background for awhile. she's a marie antoinette-type character who will not endear sarko to his financially-aggrieved subjects over the course of a recession.

[Daisy]

His best opportunity for reform was in the first 6 months in office when his popularity was high and people were in favour of reforms. Now with recession brewing, people will just hunker down and protect their own. Let's look on the bright side though: we have Carla's next CD to look forward to!!

[Pierre Bernardi]

Charles, the risks are shared by those who decided to play the stock market. Let's turn your maxim on its head: under marxism, the risks are shared by all while the profits are non-existent.

Meanwhile, the US appears to be paying the price of speculation. France is insulated by its lesser reliance on variable credit. Less gain when times are good, less pain when times are bad.

[Rocket]

"Jacques Attali, the famous Paris economic strategist, and 40 lesser eminences. They could be entitled "300 ways to save France".

Lest we forget this is the same Jacques Attali who wrote in the IHT on April 19, 2007

"You're all just jealous"

http://www.iht.com/articles/2007/04/19/opinion/edattali.php

[Daniel Strohl]

"Bernard Maris, the lefty commentator on France Inter, the public radio, dispatched the Attali ideas this morning as unworkable and immoral".

A lefty commentator qualifiying the ideas of the "economics guru to François Mitterrand", as unworkable and immoral ! LOL !

Let us hope that this distinguished gentleman will present "workable and moral" ideas as soon as possible - it is urgent ! Tout le monde est suspendu anxieusement à ses lèvres ...

[Daniel Strohl]

Rocket,

Excellent link - as usual, I would say !

[rockinred]

@ PIERRE BERNARDI
"the risks are shared by those who decided to play the stock market etc" What complete and utter nonsense! This is arrogant, economically illiterate rubbish that flies in the face of the facts. For example, the so-called sub-prime crisis, one of the main contributory factors to the current dire circumstances, was a deliberate ploy to foist bad debt on to others, engineered by bankers desperate for short term profit. Do you suppose that any of those in the UK who have seen their Northern Rock savings evaporate thought they were bravely 'sharing risks by playing the market'? People like you provide the very best illustration of why France should not - and will not - pursue the deluded path of neoliberal economics.

[Valentin]

Re Rocket's link:
Good article. I was pleasantly impressed to see Jacques Attali repeat word by word my different positions on French state, economy, language, immigration. This blog's popularity never ceases to amaze me.
Attali might define himself as leftwing, I still bet he'll never get his own metro station from Mr. Bernardi :)

[concedo nulli]

Azloon, I learnt recently that Marie Antoinette was not so pretty to loook at. Her mother thought so at least. Maybe that's why the French never felt for her. When I first went to a lycée, a little friend (the daughter of a well-known communist journalist) asked as a test of where I stood who I liked best Marie Antoinette or Robespierre. Of course I liked the foreign princess better, I did not know she was not personable.I have believed for a while that she was unintelligent, or rather that she was not properly educated, very much like Princess Diana but have never bothered to look into the matter more thoroughly.Clearly "l'imaginaire des français" is sick: to have to choose between Marie Antoinette and Robespierre!I was brought up to believe that the XIXth century was "stupid" because of its puritanism. I now feel that the XVIIIth century was a disaster, ending as it did. Fortunately, now we can expect looks, brains and a modicum of mental balance around our deserving and vulnerable president who is doing his best to break with this unhealthy inheritance.

[azloon]

[one of the main contributory factors to the current dire circumstances, was a deliberate ploy to foist bad debt on to others, engineered by bankers desperate for short term profit] Rockinred

ummmmm.....so .....what's your point ??

is mcdonald's 'desparate for short-term profits' because it wants to sell a billion hamburgers every day?

the romans (yes, the romans, for chrissakes!!) had an expression for this situation: caveat emptor.

when someone wants to sell you something that sounds too good to be true, it probably is. :)

look at it positvely. you can bet european banks won't be buying u.s. mortgage-backed securities for quite awhile.

you must be one of those french leftists CB mentions who are gloating at the meltdown of stockmarkets around the world...as just one more bit of evidence that capitalism is evil, and the french 'nanny' state is the antidote to this evil.

i suggest you drop your bitterness, call a stockbroker and pick up a few (depressed) shares of
veolia or vivendi, or better yet, both.

life's a bitch, then you die.

cheers

[Dominique]

Rocket,

I think we talked about this Attali article at that time. Comments did not change. When i read comments about, for exemple, the "jalousie" toward the so hated french leftist"fonctionnaires" and public services, 35 hours week, from our foreign friends, i tend to believe that Attali was pretty right.

[Pierre Bernardi]

Rockinred, bit of a confused message you've got there. Let's balance the risks, shall we? On the one hand, imperfect workings leading to cyclical loss. On the other, impoverishment for billions. At present, mechanisms to combat the imperfections of liberalism include a plan to protect the savings of Northern Rock investors. There was no plan to save the populations of the Soviet Union. I advise you to write to your MP. In the free market, that at least is a freedom you retain.

If the general case is clear, I will return to your specific point. I agree entirely when you say that "one of the main contributory factors to the current dire circumstances, was a deliberate ploy to foist bad debt on to others, engineered by bankers desperate for short term profit". Hence the euphemism, 'subprime', turning out to mean 'the whole market except for the Capitol'.

Chacun voit midi à sa porte. The UK may be suffering from a serious bout of 'neoliberalitis' at the moment, but France remains beholden to a socialist past. Charles Bremner's article provides comfort for armchair observers, far from reality. But thank you for the opportunity of clarifying my post.

[Rocket]

Dominique

"When i read comments about, for exemple, the "jalousie" toward the so hated french leftist"fonctionnaires" and public services, 35 hours week, from our foreign friends, i tend to believe that Attali was pretty right."

So let's look at the facts.

Point one

Who is talking about so hated French? We are offering constructive criticism

Let's not put the blame on "leftist fonctionnaires" themselves. Anybody will suck on a nice steak if you give it to them on a platter. That is what the French government has done for years with "fonctionnnaires" Let's just say that "fonctionnnaries" are too numerous which Mr. Attali details in his "10,000 propositions" to save France.

Point 2

35 hours. Well it seems as if it has been a failure. Finally it is politically correct in France to say so. Unfortunately the "reformettes" which we have in France will not completely do away with this aberration. (il ne faut pas affoler les français) This has got the be the only industrialized country in the world where a government tried to push working less to "earn more"

Point 3

Public Services. You still can't get someone to answer the phone or respond to e mail in a "decent" (by rest of world standards) in France.

To sum it up.

"Les Français savent très bien qu'il n'y pas d'argent dans les caisses",

N.Sarkozy

http://droiteetmoderne.canalblog.com/archives/2007/12/01/7085801.html

et al.
Once again read the propositions and you will understand the M Attali supports drastic cuts in public spending.

I tend to believe that "la moutarde lui est monté au nez" before he took pen in hand to write his article in the IHT. he should have stepped back and counted to 10.

The French also claim to abhor nationalism, but try and criticize their country and you are called a bigot and then suddenly everyone in the country becomes nationalistic.

I personally see no reason to be jealous except for some incredible patisserie that I recently ate from a patisserie called

La Petite Rose
11 Bd de Courcelles
75008 Paris

http://paris.8.evous.fr/La-Petite-Rose,1182.html

IT IS ABSOLUTELY HEAVEN!

When you eat their patisserie you die and go immedately to heaven.

[dada]

http://fr.youtube.com/watch?v=a-aI1Ch39ZU

[Jolly Swagman]

Could Atali be the Necker for Sarko's Louis XVI and Carla's Marie Antoinette???

[Sam Young]

How did Wealth Tax ("ISF") go unmentioned in this Attali report?
This ISF tax is charged to all people (French tax resident or not) who have net assets in France worth more than 760,000 euro. It was introduced by François Mitterand to punish people who have a bit of wealth.
I'm assuming that the main reason for holding on to this tax is that it has a strong symbolic value. But Luxembourg had it and got rid of it. Sweden too. Spain is getting rid of it.
Who seriously believes (for example) that the taxi industry will be liberalized? I am willing to bet that the Govt. won't even enact those elements of the proposal which are under its control (such as paying it suppliers earlier - for those of you who don't know, the French state pays between 3 and 6 months after the service is rendered)

Here's an interesting stat: almost half (47%) of French Info tech & Comm. Tech. Start-ups created between 1998 and 2001 were sold to foreigners, mainly to American companies (31% of Starts ups sold were outside the EU).
On the one hand, one could argue that it shows that young French engineers, graphics designers, programmers, etc.can be creative and daring. But it is most unfortunate that they could not get the venture capital to stay in France. There are lots of stats of this type available, and they all point to one thing: basically, the French do not know how to manage an economy nor create wealth.

[Tom Benford]

If Attali in IHT(Rocket's link) is a sample of his intellectual rigour and clear-sighted economic and political thinking, I wonder if it would be possible for us Brits to get enough money together to convince him to take on the job of Prime Minister ? It could be the saving of us. I have never, ever, seen such an unbiased assessment of national circumstances, by anyone whether pol or journo, in Britain.

[GAG]

Rockinred

A correction. No savers in the British Bank Northern Rock have seen their savings evaporate. It’s true that investors have seen the value of their shares drop, but depositors are still able to recover their savings in full and the bank is still offering interest rates comparable with other banks and building societies.

I agree with you though, that France does not have and never will have, the courage to carry out the structural and, often minor reforms necessary. Unfortunately, France is condemned to a slow but inevitable descent into impoverishment.
GAG

[Richard Huxley]

Too true France needs more competition in it's marketplace but is dogged by the same old problems. It is far from easy to set up shop here and the costs to employ someone are very high. These social costs generally drive people away from creating their own companies and creating competition. Add to this the inefficiency and complexity of the tax/social system and you have a real crap shoot. For example Urssaf (the social contributions people) charged me the cotisation for someone else in another department...when I call them up they pass you around on the phone saying it's not their job, incroyable!

People want cheaper goods...did anyone see the programme on M6 about Pouvoir D'achat? I was only thinking about how little inflation is talked about here in France but relatively, across many sectors, prices for food and electronics are higher than in the UK. People do not use the internet as much in France to find better deals...relative to wages the price of life is getting much more expensive.

Its too late for all this idle talk and hot air ranting (like always) about the evil capitalists. France is on it's knees no wonder it needs more immigrants. Going back to the 'good old days' is what actually fuelled the downward spiral in the first place.

If the ECB drops rates then inflation and cost of living across the eurozone will only get worse.

I think it's a great idea to open up many sectors to more competition. Reduce regulations and get people out being more entrepreneurial. This word hardly exists in France.

Come one France..I love you..but things gotta change.

[Rocket]

As usual Christophe Barbier hits the nail on the head.

http://tinyurl.com/2hkdbk

[David]

Thank You CB a lot! I've been quite a frequent reader of Your posts and I was starting to be a bit afraid, that the "Sarko" fascination has prevailed far too much around over the real issues.

Sarkos personal life might be a nice easy reading once in a while, but (although it might be a No. 1 topic in Paris Match) I think what's really important is what he and his administration have promised and are (or not) doing in their offices.

So far I completely agree with Richard Huxley (to name the last one, but also many other posters). Attali report FINALLY names the problems and tries to offer solutions. They might be "unfrench" and too liberal (almost a swear word here) for the people around, but then they're also:

1. Necessary (no argue about the fact that France needs a change in its market)

2. The Only ones available (and implementable) so far (that I'd know of).

If there is a better solution for a way out of the mess, I'd like to hear about it in about the same level of details, as Mr Attali gave.

[textibule]

I had not read the Jacques Attali article in IHT, so thanks for the reference. It is infused with that frustrating wisdom that the French are so good at when defending their immobilism.

Back in 1998, M. Attali flew down to our little patch of France profonde and gave a 10 minute speech to high-tech entrepreneurs, telling us that we should keep the faith, that France was proud of us, and agreed that the Internet was going to change the world.

The directeur of our local Chambre de Commerce later told me that M. Attali had asked for, and received, 20000 FFrancs (3000€) for the 10 minute sermon.

Which proves that being an eminence grise is a fabulous metier in France. The fact that the 20000 FF was paid somehow by us entrepreneurs probably explains why, as someone famously pointed out, there is no longer a word for 'entrepreneur' in the french language.

[christopher muir]

I wish that Charles could start writing again about Carla and thus cheer me up. While assessing the charts of the krach gyrations of the past days, I was invited to a rather unsettling report of George Soros' updated musings about our futures. http://news.bbc.co.uk/2/hi/business/7204159.stm

[john o'doe]

Just jealous? Attali's proposals recycle previous preposterously pretentious ambitions, see http://actu.efinancialcareers.fr/NEWS_ITEM/newsItemId-11568 to make Paris Europe's foremost financial centre. Could he be just a little jealous of the City?

[GAG]

In an earlier comment I said “Unfortunately, France is condemned to a slow but inevitable descent into impoverishment.” But it’s not all bad news. France as a holiday and second home destination is likely to become more attractive in the future, a sort of pre 1980’s Greece, with cheap labour, restaurants, property, etc. France should get out of the Euro and then devalue its Franc to find its new true place in Europe. Imagine a whole nation of skilled artisans, domestic servants and chefs just waiting to cater for the needs of other Europeans, what luxury we could all live in. Let’s settle the immigration debate once and for all and allow only skilled immigrants from France to carry out our menial tasks.
GAG

[Valentin]

"Point 3
Public Services. You still can't get someone to answer the phone or respond to e mail in a ..."

Rocket is exaggerating.
My latest exchanges with the tax administration, as well as those of last autumn with the social security were extremely professional and efficient, both by mail and by post.

If I stop and think about it, I had no communication issue for quite some time now, be it with the public administration, (cell)phone operators, electricity provider, internet provider... the only problem I had the last 2 years was with my bank - so annoying that I'll probably move to another one.

[Actu75]

Rocket
Thanks for the link. I too had not read the article that kind of sums up the debates going on around here.Like Dominique I largely share his views, though I wonder if Mr Attali does not himself by times reproduce some behaviours of these french elites he mocks.

And, also, thanks for the joke:
"Who is talking about so hated French? We are offering constructive criticism"

[Pierre Bernardi]

Richard Huxley, why should the ECB drop interest rates? Have you seen today's consumption figures?

Anyway, as I pointed out, French households are far less dependent on variable rates than British or American ones. You can't do subprime if you don't have the ammo. You'll need to adapt your mentality if you want to find refuge here. This country has laws. Ask Azloon.

[Pierre Bernardi]

Paris has a wonderful transport system.

A quick comparison:

Size of London: 1579km²
Size of Paris: 105km²

Number of London tube stations: 276
Number of Paris métro stations: 298

That's 16 times more per km².

[Dominique]

Dada,

"Who is talking about so hated French? "

I did not.. i talked about the "hated french leftist"fonctionnaires" and public services, 35 hours week".

How come did you translate this into "hated french"? that probably is more of your own problem...

More, regarding "public services" you obviously dislike so much because you can't have them answering your phone call, please be aware that their purpose is not to have you on the phone, but to have people being able to use hospitals, roads, schools, electricity etc...

Regarding public spendings and ATTALI propositions, i see no contradiction with his IHT article. The french society does make choices, being aware of what it means and what it takes. More healthcare, more time, means less earnings and less dependance on the CAC40 crash! ATTALI does not propose to get rid of the quality of life, he rather makes an economical project out of it.

That's the very purpose of politics : make the society more smooth, regulated, and less market addict or dependant. I know you will cry about this, but this is the very purpose of the concept of a state : citizen's insurance against the bad side of human condition. Otherwise, what is the point paying for an administration?

Challenging the city would be easy : let's get rid of all laws, all regulations, all moral, and offer the easiest business friendly environment whatever it cost to others! This very system is based on the idea that other countries don't do the same. That's called economic darwinism : the opposite of the "politique de civilisation" Sarkozy is willing to set up by the way...

[john o'doe]

According to radio reports Sarkozy says he'll be considering Attali's remedies particularly the recommendation regarding TAXIS! The whole country needs reduced taxation but he's giving priority to the problem of finding a Paris taxi!

[Daniel Strohl]

Pierre,

"That's 16 times more per km²".

You seem to be "un fin connaisseur du métro parisien", and not only in left wing political matters - LOL !

Valentin,

"so annoying that I'll probably move to another one.

May be you should try "une banque nationalisée" - LOL !

[Daniel Strohl]

Richard,

You too have hit the nail right on the head.

"These social costs generally drive people away from creating their own companies and creating competition."

Exactly ! And in addition to the costs, one should not forget to mention the disheartening complexity of the paper work. The bosses of small and medium companies spend almost more time dealing with administrative issues than with their main job – i.e get orders, deliver them, organize the maintenance if relevant, manage, train and motivate their staff etc. And one should not forget to mention the problem of late payments (state payments of course included).

The above is a description (may be somewhat exaggerated) which was up to date 12 years ago, when I decided to retire, fed up with the whole mess. Yesterday, the young gentleman (young – he is nevertheless aged 46 now !) and former employee who took over our company called me yesterday to wish us a happy New Year. He told me that he is still struggling with late payments – his customers are private industry (semiconductors). However, he did not complain over the administrative burden. Either he has got well mithridatized with the time, or else things have become easier. May be it is a mix ...

[Valentin]

Pierre Bernardi:

"A quick comparison"

The 1500 km2, isn't that GREATER London? Because if yes, at the very least we should compare it to Paris + "la petite couronne", not to Paris intra muros. (also see John's remarks in that sense on previous threads)

Daniel,

not really, thanks :) after BNP Paribas and Societe Generale I've had quite enough of their kind of customer service. I'll probably go to some online bank; plus they often pay you for using their services and not the other way around.

[stephen Bull]

France is fortunate to be diverted by King Bling and Carla. Think how boring are the messages from the British Government. While Sarko addresses important personal and global issues, our rulers are busy telling us not to eat, not to drink, to teach our children to cook, to build wind-mills and not to walk in the streets.
What a contrast!

[stephen Bull]

France is fortunate to be diverted by King Bling and Carla. Think how boring are the messages from the British Government. While Sarko addresses important personal and global issues, our rulers are busy telling us not to eat, not to drink, to teach our children to cook, to build wind-mills and not to walk in the streets.
What a contrast!

[Daniel Strohl]

Valentin,

I was a customer of one of the two banks you mention. I got fed up with them (not with the person with whom we were dealing, who was very nice and very competent, but with their rules and manner "de faire de l'argent").

Now we are back in our former bank, which has a more pastoral and less Parisian mood (they were our bankers when we were in activity). The customer service is excellent; we know one or two employees since 1984.

Stephen,

"our rulers are busy telling us not to eat, not to drink ..."

Too bad ! In contrast, Sarkozy is known for inviting people in restaurants and even if he does not drink wine or alcohol (everybody has weaknesses !), I am pretty sure that his guests are honoured with good wine and good food...

[Richard Huxley]

To Pierre:

''Richard Huxley, why should the ECB drop interest rates? Have you seen today's consumption figures?''

Thanks for the response. ECB rates would be changed if growth across the eurozone continued to slow. Agreed it is almost 50/50 whether they will stay the same or go down. I think by the looks of it Trecher is taking a tought stance. However I would not rule out a cut in the first half of this year.

I agree France has limited itself by good banking methods and only allowing people to pay 33% of their net income on a mortgage. However it is slightly foolish to think that only this will not cause a reduction in asset values. Indirect exposure to the credit crisis (like what we are beginning to see) is causing major problems for europe. France does not have much room for manouveur regarding public spending..Sarko put a freeze on that this morning for 5yrs.

[Richard Huxley]

Addendum:

The next best thing to making massive changes to the social tax and compulsary pension scheme would be to adopt a new stance on Frais de Notaire.

Frais de Notaire is the one thing that is stopping many french people from buying a property. It runs at 7% for older properties (almost 10% when you add on the sundries). Young people therefore have to save a deposit AND pay this insulting fee...incredible and almost impossible.

Here is Strasbourg prices are quite high compared to the rest of France. It is a region where there are better job prospects, 'apparently'.

Take the UK where stamp duty doesn't exist up to 260-280k euros. This would be fairer to many...

[dot king]

Richard H - at least half of the 7% of "notaire's fees" is government taxes. The total, unless a loan dossier is needed, is just less than 7%, that round figure being a good "rule of thumb" for clients to be able to calculate the final cost of the transaction.
I mention this because it seems to me unfair to call them "notaire's fees" when s/he doesn't bank that much, but simply collects the whole amount, at least half of which is then transmitted for frittering away in the national coffers.
(Like everyone else in that kind of profession libérale, the notaire takes a percentage in fees, but what s/he takes for his/her work isn't the whole 7%.)

It is shameful that house-purchase is thus restricted to those who can produce in one fell swoop, the deposit, the whole purchase price, plus(allez) "transaction costs", or if, instead of paying the full price they take out a mortgage and have to pay on top of that lot, bank dossier fees, then mortgage registration fees (stamp duty equiv) - which the notaire also has to collect and pay to the lending bank and the local tax office.

The "prêt à taux zéro" was put forward as a remedy, but perusal of the small print was enough to learn that this was available to only a few who fitted the criteria for acceptance. (You needed to be really poor, therefore even more at risk.)
I don't know whether these criteria have been revised since Borloo took over and added "la maison à €100.000" to the equation.
Given that even for un prêt à taux zéro, a loan dossier has to be drawn up, am I right in thinking that bank dossier fees still apply?
I always thought that it was yet another way of "punishing" the less well-off - they need a mortgage to purchase, so charge 'em more.

Meanwhile La Société Générale is "dismissing" a rogue trader who has lost them a record sum, surpassing even Nick Leeson's performance. He went to prison for bringing down Barings, but it was a "dismissal" of a kind I suppose. I expect all those who can hardly manage to keep a roof over their heads will lie awake marvelling at how lax are those who are supposed to take care of the world's finances. They can drift into sleep whispering "we wuz poor, but we wuz 'appy"
I'm sure there are bloggers who understand much more about the innardly workings of the monetary world than I do (nobbut a babe in arms, I freely admit it), but in the end it comes down to the same thing. Highly paid people who deal only in other people's money and this in a cavalier and cynical fashion.

[thinknoworpaylater]

Rocket - my old friend - so you think weare still living in Roman Times. Get up to date. Caveat Emptor is fine ina face to face economy. But cunning ruses are now described as *products* (sub-prime for Godssake) Is that face to face - are you and I in the same world? Remember - You will reap as you sow is anothewr one with more relevance to the current situation. The banking system has freaked-up as you like to say - thats the problem!

[azloon]

THINKNOW

i think you are referring to my post, not Rocket's, where i mention caveat emptor.

the people who packaged the subprime derivative instruments and sold them world-wide did not believe they were selling junk. and neither did the rating agencies who gave them 'AAA' ratings, act for which they will probably go bankrupt.

the issuers may have been naive in that they misunderstood and understimated the 'worst case scenario.' but their actions were not criminal. in fact, they were required and did gain approval from the u,.s. securities and exchange commision before selling these products.

for the most part, they were packaged and sold by investment banks whose mission is, in favor to their own stockholders, to make as much money as they can. in fact, they are remiss if they don't take this attitude.

clearly, greed enters this equation. but, as gordon gecko (michael dougless) said in oliver stone's 'wall street,' "greed is good." that may be somewhat hyperbolic, but it is a manifesttion of adam smith's 'invisable hand,' which has always operated in free markets.

you win some, you lose some. (gallic shrug)

[thinknoworpaylater]

Sorry it was Azloon not Rocket - but then what the hell there isnt much difference (mischief). And in passing a beefburger is not a*product* like the stuff that was sold to international banks. Dont be so hard on Rockinred there remains a question of moral culpability for those who know more (the banks?) selling to those who know less.

[Richard Huxley]

I stand corrected re: Notaire's share of fees. Still even 3/4% isnt bad is it.

I heard that they dismissed ideas to reduce this fee last year...I suppose in the last few years a booming property market brought in hefty taxes.

Thanks for clarification.

[azloon]

THINKNOW

please read my post: is there EVER a situation in which the seller doesn't know more than the buyer? i hope not.

as i said above, the sellers may have been greedy but that doesn't mean they acted dishonestly. they thought these products were safe, and so did the rating agencies -- moody's, standard and poors. again, greed may have affected the rating agencies as well.

investment banking not charity work. an investment banker who feels the urge to act charitably are encouranged to work at a soup kitchen or to tutor a disadvantaged child (as a number actually do).

i am not meaning to be 'hard' on Rockinred, just to present an alternative view of the issue of subprime 'slime.'

euroliberal financial thinking does not jibe with the attitudes of u.s. style capitalism. in fact, most americans are scornful of the views expressed by Rockinred.

we may, over time, move closer to some of the more paternalistic approaches of europe (the 'nanny state'), but there is stiff resistance to it presently.

[dot king]

"you win some, you lose some. (gallic shrug)" azloon

yes, that's the name of the game if you're a bank or a stockbroker, or a mortgage broker, but -
at the bottom of this particular food chain are people who lose their homes

there's nothing surer
the rich get rich
and the poor get poorer
in the meantime
in between time
ain't we got fu-un

da da da dum ksshhh ; )

[John Gregory Flinn]

I'm really cheating here, Charles - coming in after 'La Société Générale'story has broke.
I'm sure you would have had a good few points to make!

Greed and Fear drive the markets, which when combined produce the 'S.G.' affair, as with Barings and Nick Leeson some years ago.

"France is insulated by its lesser reliance on variable credit"

I think PIERRE BERNADI is partly correct in that the average French person who has a job, a mortgage and no direct investments in the market will fare better than those in the US or UK.
Property values in particular have not inflated so much here as in the UK, US and elsewhere (Australia?). The easy never, never credit available in the anglo-saxon economies has produced a bubble of immense proportions which is currently deflating.
However Banks and other like Financial institutions in France have bought into the debt and credit markets of the US and can therefore be similarly affected.
That could affect the average Frenchman if, for example he/she is employed in financial services and their employer goes to the wall. Foreclosure of property could follow in that sort of case.

Cash is king, but Bonds may also be safer than shares.

Incidentally I have seen press reports that Hilary Clinton's solution to the crisis is to;-
"declare a moratorium on (property) foreclosures for 90 days", and,
"freeze interest rates for 5 years (thus voiding financial contracts with variable interest rates).
A definite whiff of socialism in the US election campaign unlikely to help any Market recovery!

[Thanks John. I wanted to post on the SocGen disaster, but I've been too busy reporting it for tomorrow's newspaper. Quite a story ! CB]

[Valentin]

Azloon :

"the people who packaged the subprime derivative instruments and sold them world-wide did not believe they were selling junk."

That's exactly what I was telling you a few months ago when we discussed this and you were calling me a kind of socialist (or typical french :)) for saying that all modern finance must be seriously regulated because they risk to bring down the whole system.

Back then I argued exactly this: risk is more and more hidden in packaging and re-packaging of all sorts of financial products, and far from limiting the possibility of trouble, this will act like cancer cells hidden in an otherwise healthy body.
You can now see that in action. Everybody is scared and credit is crunching because no one knows for sure where subprimes actually are, and how much they're worth.

I'll also repeat now that the traders, as the whole system, are not naive at all, understood and knew very well what they were doing, and this is just another, very sophisticated kind of speculation.
Or like Terry said, no different from gambling - only at the expense of everyone else, for the profit of the financial barons.

It's not criminal, because the thing is practically completely unregulated. Enron wasn't very criminal either.

Greed is not punished by the law (as opposed to insult :)) but when its effects are bankruptcies, throwing millions honest investors in poverty (ex.Northern Rock) or bringing a whole country in recession (the United States of America),
something must surely be done to limit greed's scope of action.

Forbid all hedging might be an idea.

[dot king]

"Still even 3/4% isnt bad is it."
Richard Huxley

An architect would take 10% for example, so it seems almost reasonable . . .

[dot king]

I thought Northern Rock was a building society - it certainly used to be. In the UK such organisations existed to enable those with modest earnings to save for housing projects (personal). To have an account in a building society used to mean that you had a better chance of getting a mortgage when you wanted to buy property, often the interest rate was slightly higher than at a bank.
Gradually the building societies took on banking activities as well, issuing cheque-books on current accounts with an interest rate attached in excess of a certain minimum permanent balance. The "high street" banks had quite severe competition at one time to match their services and keep their clientèle. Now some of these building societies call themeselves simply "bank" (Woolwich, Abbey National, Halifax) but there will be a large number of (probably older generation) savers who still think of them as building societies where their money is SAFE.
THIS is the shame of it all.
Modest people who have always "put by" find themselves going down the pan because of what someone on the other side of the world did in the time it took to press a "send" button on a computer keyboard.
Hallucinant, non?