On the day the oil price touches $80, ironically, a renewed push to dilute attempts to limit speculation

Isn't it ironic that on the day that newspapers are abuzz with the news that oil is already back to $80, we have the FT reporting that "US plans for an aggressive crackdown on energy speculation are in danger of unravelling, with leaders at the US commodity regulator raising doubts about proposed reforms"

Why is this? Principally because of - you've guessed it! - concerns that if the US introduces tough rules, then trading will simply move to other countries.

Democart-nominated CFTC commissioner Michael Dunn, who earlier said the CFTC should consider new speculative limits, is reported to now say: “When a contract trades globally, it may be detrimental to US markets for the CFTC to act unilaterally on position limits while other countries with benchmark contracts chart different courses”.

So, as I have argued consistently for several years, global markets have only two choices: either the current more or less unregualted market, or global rules applied consistently across all countries. Continuing with unregulated markets will bring back oil prices at $120 (and perhaps even $250 as some authorities predicted only a short while before the crisis). Putting in place global rules will limit boom-bust speculation and ensure that prices reflect, as they should, genuine demand. Sphere: Related Content

The first political party to start moving in the right direction

The UK is dominated by two political parties: the Conservative ("Tory") Party and the Labour Party. However, from time to time, the third-largest party, the Liberal Democratic Party (LibDem), swings the balance between the Conservatives and Labour.

The LibDemsf appear now to be moving towards system solutions, or at least much more radical reforms than are currently being considered by the two major parties, as well as by the UK Treasury and the UK's financial services regulator, the Financial Services Authority.

Nick Clegg, the Liberal Democrat leader, has apparently now asked Vince Cable, the Liberal Democrat Treasury spokesman, to look at subjecting banks to a “premium rate” of corporation tax. This is because of public concerns at current bank profits and expected bonus payments in view of the limited competition in the financial services sector, following the dissolution of a few banks, and the limitation of activities by many others.

The LibDems are looking at a new bank tax which they believe be in force for several years - in fact till all state support has been withdrawn from the financial system. The Lib Dems have also become the first political party in the world to want to break up large banking groups. Sphere: Related Content

The Governor of the Bank of England Governor breaks with the deadly consensus

I am delighted to see that Mervyn King, the Governor of the Bank of England, has broken with the orthodoxy that encourages a boom-bust economy and passes on the cost of bank failures to the ordinary taxpayer while providing the bulk of profits from bank successes to bank shareholders, directors and employees. Mr King put it this way: “Never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform.”

In calling for banks to be split into separate utility companies and risky ventures, he called in effect for the return of the provisions, in the USA, of the Glass-Steagall Act - but at a global level.

By saying it is a delusion to think tougher regulation will prevent future financial crises, Mr King is arguing that what is needed is not more regulation but a structural solution which prevents them becoming “too large to fail” in the first place.

Most of the orthodoxy continues to focus on what are merely useful measures such as ensuring that banks have more capital, forcing banks to hold debt that automatically turns into equity in a crisis, ensuring that banks arrange in advance for their orderly death with so-called “living wills”, and limiting the incentives given to bankers for taking system-threatening risks. Such measures will be useful, but are not adequate for preventing future crises, as I have repeatedlz argued in this blog. Sphere: Related Content