Thursday 17 June 2010

Spain: An Early Test for Macro-Prudential Mervyn

Ever since I first met CU, he has been warning that Spain would bring about the demise of the Euro; and we may be about to find out.

Whether the Spanish crisis goes the whole way, this type of event is akin to a Lehman or an Enron - a trigger for dominos to start falling. Systemic risk, in other words.

And of course Mervyn King has just been given responsibility for 'macro-prudential oversight', the cure-all for managing systemic risk. Let us hope he's been thinking about what it really means, he's had well over a year since the Turner report highlighted macro-prudential supervision as a missing art - in the UK, at any rate.

Distressed Spanish properties all round.

PS: see that Osborne has pulled off a 'coup' in persuading Hector Sants to stay on. Hmmm ... not sure about that one.

PPS: notice how many very well informed stories Pesto runs about the FSA and how wonderful it is ...? He's a great one for his sources, our Robert.



Budgie said...

If the depth of the crisis in Spain is true, then I am sorry for Spain. But if it brings down the Euro I will be glad. The quicker the Euro is finished off the less painful it will be for the eurozone nations, and for us, in the long run.

CityReactionary said...

Crudely stapling a bunch of very varied economies together with a single currency was always going to be like tieing a donkey, a cheetah and a tortoise together and expecting them to run in the same direction at the same speed for the rest of eternity. Will be fun to watch them try and eat each other when they all fall over though...

Nick Drew said...

fun, CR ? no man is an island, see the 'dominos' link

as Budgie hints, there might be medium-term pain for all

Sebastian Weetabix said...

Better to take the medicine now, methinks. Excise the boil rather than let it fester.