Germany Bans Short Selling, Another Scapegoating The Markets

Governments almost always believe that market has been the culprit for most of the ills in society. And that when push comes to shove, their instinct is to resort to palliatives: throw money at the problem, regulate or tax.

Since the markets has not stabilized even after the Bazooka or Shock and Awe monster $1 trillion bailout, of the not only of Greece, but the entire Euro Union, last night, Germany banned short selling in European bonds and credit default swap and shares of select industries in the stock market.

This from Bloomberg,

``Germany prohibited naked short- selling and speculating on European government bonds with credit-default swaps in an effort to calm the region’s financial markets, sparking anxiety among investors about increasing government regulation.

``The ban, which took effect at midnight and lasts until March 31, 2011, also applies to the shares of 10 banks and insurers, German financial regulator BaFin said late yesterday in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, BaFin said."

The problem is that these bans introduces more risks by not allowing the markets to reflect on the fundamentals via price signals.

Besides, excessive government spending financed by debt coupled with insufficient revenue, which is the source of the Euro's problem, hasn't been caused by the markets but by extant policies.

So the German government is simply looking for another scapegoat.

While the stockmarkets in Europe did react positively, perhaps due to some short covering on the issues affected by the ban, US stocks got slammed and the Euro cratered!

Regulators don't seem to realize that banning naked shorts hardly produces the intended effects and instead creates an aura of heightened uncertainty.

So aside from regulatory risks, these actions may suggests of an act of desperation or act of concealment of problems.

At the near climax of the Lehman episode in 2008, the US government reacted the same way, by instituting a ban on naked short selling in mid September as Lehman filed for bankruptcy.

And instead of the consequences going in the way of the regulators, the US markets collapsed! See below...

The blue arrows mark the time where naked short bans had been imposed.

Japan followed in November of the same year (above window), yet the results were the same...a failure to stem the hemorrhage.

The more governments manipulate the markets, the unstable they will be.

Filipinos Killed In Afghan Chopper Crash Manifestation Of Failed Migration Policies

The recent deaths of 10 Filipinos in a helicopter crash in Afghanistan is a conspicuous example of the failed policy of migration controls.

This from the Associated Press (bold highlights mine) ``Ten Filipino workers were among the civilians killed in a helicopter crash at NATO's largest air base in Afghanistan, officials said Tuesday.

``All 16 people aboard the Russian-owned civilian Mi-8 helicopter died Sunday when it slammed into the tarmac at Kandahar Air Base shortly after takeoff....

``The Philippines has banned its overseas workers from Afghanistan, but many still end up employed at military bases there.

``A Filipino carpenter at Kandahar Air Base was killed in a rocket attack in March.

``The Filipinos killed Sunday had been working at the NATO base for several years. They did not return to the Philippines because the government had imposed a ban on travel to Afghanistan, the head of the Overseas Workers Welfare Administration, Carmelita Dimzon, told the Philippine Star daily"...

``Last week, Manila airport authorities intercepted 13 workers bound for Afghanistan. Vice President Noli de Castro said they had been recruited illegally as carpenters, plumbers and electricians at the Kandahar base for a monthly salary of $1,300 — about 10 times what they would make back home...

``Apart from Afghanistan, Filipino workers are not allowed to seek jobs in Iraq, Lebanon and Nigeria. About 6,000 were thought to be working illegally at military bases across Iraq.

Another from the Philippine Inquirer,

``[Philippine Vice President] De Castro agreed with the OWWA that the fatalities were not entitled to full benefits from the government for being undocumented workers.

``However, he said the DFA and the Department of Labor and Employment (Dole) would follow up their benefits from their employers...

``Asked why the Filipino workers were lured to work in this war-torn country despite the deployment ban, De Castro said it could be due to the withdrawal of American forces from Iraq.

“The problem is the concentration of jobs has shifted to Afghanistan because Americans are withdrawing from Iraq,” he said, adding that most of the foreign workers in Afghanistan were employed by US bases and NATO.

``He said the Task Force on Illegal Recruitment, which he heads, has decided to go after the recruiters of the Filipino fatalities."

Our comments:

-the ban on the deployment of Overseas Filipino Workers to places considered as dangerous has not stopped or prevented local laborers in search of "greener pastures" in spite of the increased risks.

This means OFWs in prohibited areas had opted on their own accord to assume security risks in exchange for higher pay.

-It also exposes the impossibility to control people's desire to seek ways to improve one's well being, aside from exposing institutional inefficiencies despite the tomes of regulations and maze of procedures aside from charges and fees slapped on OFWs allegedly for their supposed benefits.

-Because there is a demand for our OFW, a labor black market has emerged.

-And if the demand for local labor in high risk places comes mostly from official institutions as the US or NATO military bases then all the directives to contain illegal recruitment seems like a pretentious witchhunt.

Our regulators appear barking at the wrong tree! Official channel coordination and not a ban should be the answer.

-So instead of helping aggrieved OFWs, the ban has only deprived OFWs of the so called death benefits.

Government policies designed to help the OFW turn out to only punish them.