Attacking your creditors is an intriguing strategy

You stated "All euro-zone governments need to borrow money from the markets".

All this confirms from your previous leaders on London,is that you no nothing about finance.

They acrually need to borrow direct from "real" long term "investors" such as pension funds etc. or the ECB creating its own money or civil society at large.

In the 1960's and 1970's when I worked in what you call the markets as a banking and corporate treasurer, it was true that the markets acted as intermediary's between borrowers and investors, but in the last decade or so,this is now a very small part of the markets roll in real finance.

Today, the markets only priority is to speculate in all commodity, financial and metal markets for their own profits and obscene incomes,and this form of casino trading as we now know, has absolutely nothing to do with the "real Economy" and serving no useful purpose according,to Turner and Volcker, for 99% of civil society.

I have noticed you all use the word "investors" when you really mean "speculative traders" operating out of the "financial capitalist unregulated markets" primarily based in London and Wall St. and so in my view, the last thing that EZ borrowers need to do, is to go anywhere near these "Banksters and gamblers" for their funding requirments, and it is good to see that someone like Hollande is indeed attacking,as his main enemy,these non existant (market) creditors, who are without question, the "cancer" of the global political economy which he seems, hopefully along with Merkel et al, to fully recognise.

You forgot

4: They produce nothing of value, and are parasites sucking the economic vitality of the real economy, re-allocating skills and capital away from worthwhile ventures and into ever more complex schemes to make money off of money while producing nothing of lasting value.

"The political message seems to be: 'We hate private-sector creditors. We will penalise you by defaulting on your debts but not on debts to official creditors..."

Great post, and fair.

However, the counter by the bankers has been to privatise their investment gains, and to use their political and economic clout to socialize their losses.

So, it ain't like the banks are just victims in the dance.

I do not think we should care too much about what populist politicians preparing for elections declaring, or what the media are saying. They have to make a lot of noise this is their bread and butter.
Of course it is not the banks and the bankers who are the problem.
The problem is the system that made them what they are.
Humanity has gradually disconnected itself from reality going way beyond necessities and resources which necessitated the growing credit system which in turn became an individual "monster", we entered a virtual world, a dream where money without any assets have became the object of desire.
We have been playing a cosmic Monopoly game for decades, and now suddenly we realize there is no cover for the plenty of zeros we printed on empty paper.
It does not matter what politicians want to do with the banks, financial institutions, what superficial adjustments our "leaders" try to make to perform cosmetic surgery.
The only solution for the deepening global crisis and most of our present day "human diseases" is a return to necessity and resource based consumption and economy.

While all the points above are valid, they ignore the main one.

European countries, and American consumers, have spent themselves into debt slavery to either a) live larger than they deserve or b) live as well as prior generations despite lower incomes. They are now faced with a drastically lower standard of living. And investors have lost their money.

One can blame the borrowers for living beyond their means, the investors for taking stupid risks, the governments for allowing this kind of indebtedness to go on, or encouraging it with low interest rates (or for China accumulating dollar reserves). But they have all ended up losers, and tend not to blame themselves.

Meanwhile, those in finance have scored dynastic wealth in arranging the deals in which everyone else was impoverished, after lying about what the consequences would be. So the resentment among impoverished borrowers and lenders is understandable.

All the rage directed to bankers has the purpose of deflecting the attention from the real problem here: the politicians themselves.
This is not a crisis of finance - it is a crisis of the Welfare State. After years of carelessly adding to their credit card balances to fund even the most exotic "entitlement" or "right", governments are learning that the party is over. And they resent the markets that are flashing a bright light on the emperor's clothes.
And the banking crisis was also a reflection of this behavior (especially in America, where welfare is slightly less generous). Rather than regulating the banks as they were supposed to, politicians have encouraged all forms of easy (even reckless) credit, under the sleeping gaze of the Fed.
Ranting against [those anonymous bastards in] the market is so easy. Much more difficult is to take resposibility of one's decisions. And telling the electorate that the party is over: impossible!

Dear Buttonwood,
you parade the passing of the Dodd-Frank act as proof that democracy can overcome vested financial interest. However the Dodd-Frank act has been watered down so much by lobby groups that it is now completely toothless, proving the opposite of your assertion.
You also state that "markets" are allowing the US, UK and Germany to borrow at negative real rates. You cannot make this claim until you can quantify what the effect of the different bouts of QE and money printing has been on those rates.

The finance industry is a rigged game: asymmetric relationship between profit and pay witnessed by an average Goldman payout of 400.000 (includes secretaries etc.) versus country average of 40.000. No other industry offers same exorbitant pay and finance is not anymore complicated than many an other industry. People sense this unfairness and politics is picking upon it!

The problem with capitalism is the ruthless market rules applying to everyone except bankers and financiers. For them it's socialism all the way.

The system works like this:

Banks are always available to lend to sovereign governments in the full understanding that they may not be able to repay. In return, these same banks know that the government will bail them out at taxpayer's expense when the inevitable need arises. Governments don't prohibit the banks from lending to foreign governments because the same policy might be applied against them. Both parties work at the illusion that they are independent and even occasionally opposed to each other. The reality is that they are in long term cahoots to fleece the public through bad, vote-getting policy that drives deficits while serving short term political ends and inflation designed to cover their tracks and extend their dae of come-uppance. We are the fools for allowing politicians to play this game at our expense.

The solution is to take these spending levers away from the politicians much as monetary policy has been delegated to independent central banks. Borrowing should only be allowed in the form of amortization of capital projects while wars and stimulative spending should be matched by balancing tax increases. The longer term objective should be elimination of national debts. In the wake of which I ask this question:

Considering the reduction in taxation rates that would accompany the elimination of national debts, what need could there be for stimulation spending? And how popular would unnecessary wars be ( Iraq?) if they were accompanied by a tax increase?

These kinds of debt issues have destroyed governments and even ciovilizations for thousands of years ( Magna Carta, French revolution, Weimar Republic, ec., etc.). We should be smarter than that by now. The politicians are the problem.

The tsunami is coming and there is nowhere to hide for money-changers.
An economy dependent on the speculation of ficticious wealth does not stand up to the scrutiny of internet.
In the future these last 30 years will be seen as a phase that humanity went through - the Era Of Fictitious Wealth, just like there was the Bronze era or the Middle Ages.
They will say in the future, "how could humanity back then be so naive?"

I happen to have grown up in a low income environment in London - father severely disabled in the trenches of Ypres in May 1915 - left school in 1953 after he died at age 15 hardly able to "reed, rite or spel" and here I am, nearly 60 years later, still needing help with my "senior moments".

I will try to do better next time and in the mean time - Thanks and take care.

Your list misses my main objection to the massive role that finance plays in modern life...namely that its contribution to human well being is much smaller than its fraction of GDP. We are sending our best minds to Wall Street where they try to outsmart the rest of our best minds and the result is that some of them get rich while contributing almost nothing to societal well being. Somehow skimming money off of financial transactions has to be made less lucrative so that the best minds choose to work in medicine, engineering, or environmental management.

Bankers gamble on money which should not have been printed in the first place. Politicians do not balance budgets and go on printing money / giving loans against sub-prime assets. Politicians print money for importing goods in spite of large trade imbalance (How can they devalue their currency! China should revalue!). This leads to forming a bubble - beneficiaries being the bankers who take role of asset bubble management knowing fully well that they are in a win win situations - In case of problems, politicians (who caused the mess in the first place) would bail them out.
The system is loaded against common man - who only expects a stable job with decent pay.

I agree with AtlantisKing's comment:

"All the rage directed to bankers has the purpose of deflecting the attention from the real problem here: the politicians themselves."

This is akin to the British police making a big show out of arresting journalists who were paying bribes to...the British police.

"After a few bouts with the ECB, the 57-year-old Mr Hollande may end up wishing that his planned retirement age of 60 also applied to presidents."

Hahaha, I love that sentence! Trichet gave Sarkozy a lecture when the latter wanted freshly printed money, and Monti will give Hollande exactly the same lecture. This will be a great show.

BTW, are people aware that France' trade deficit is increasing fast, and both the public budget deficit and unemployment are higher than in Italy? And Italy is already fixing the problems seriously. What exactly did Hollande want to do about competitiveness and public expenditures?

Plazidus, thanks for enriching the debate with your semantically meaningful contribution.

I don't think there is a war on finance. Sounds more like a self-defensive retort by those who are the object of fairly mild criticism, at least in policy making circles that matter.

In the end the banks were bailed out. I am not sure if any executive was forced to return any money. Seems not many have been investigated. Maybe that will change with investigations into mortgage fraud.

With the list, I think the second point should have been the first one - I think it really ticks off people of all persuasions:

"The second is that banks take reckless risks and then need rescuing by governments."

Otherwise, probably the dubious practices that this article failed to mention also disturbs people to a very significant degree.

Specifically refering to the actions that is now resulting in slew of these penalties being paid off by banks/financial institutions (like Goldman Sachs. I don't think the corruption is systemic, yet (although some news of revolving door activity with the SEC is starting to sound like it).

However, seems like quite a bit of fraud, and that elements in finance got away with a pretty massive white collar crime wave.

What happened to Moral Hazard?

Politicians criticising the investment banking community is, most of the time, mere vote-seeking lip service. However, when the push comes to shove, the politicians (and, of course, the central bankers appointed by them) are precisely the ones who enable the investment banking community to privatise profits and socialise losses. Buttonwood failed to highlight this.

Of course "markets" (i.e. investment banks) are more than "willing to lend governments in America, Britain and Germany"! Flimsy banks tendering worthless pieces of paper as collateral are allowed to borrow money from the Federal Reserve, the Bank of England and the ECB at interest rates close to 0% and to lend them forward to rather creditworthy governments at interest rates several percentage points above that: who wouldn't be willing to lend under those conditions? Why don't these banks take their medicine by sourcing their financing from the "markets"?