RAPID RESPONSES

HMV fills a gap
[Re: HMV’s last stand has new toys but not much future, Tuesday] The sale of CDs is engrained in the HMV brand and it has not moved on from this and did not move quickly enough to embrace the download age. Its HMVDigital website does not feel user-friendly and is somewhat detached from the main HMV.com website.

The question is, can HMV succeed in a market where BestBuy failed? We can only hope that the market data gathered from the PureHMV card has pointed it in this direction. It would be a shame to see an HMV-shaped hole in our high streets.

Will S

Ratio-nal markets
Jamie Whyte is correct to say that regulators cannot accurately determine the “right” banking equity ratios for the future [Plan to ringfence banks will leave us all in the dark, Wednesday], but then neither can banks or markets. Future risk is not a quantitative formula that can be rationally determined as both the future and its risks are unknowable.

Even markets, which do an efficient job of arriving at a current view of prices, cannot determine prices for future risks other than by making assumptions based on the past. It is from such past data that it is certain that ratios were too low, or taxpayers would not have had to inject capital, therefore an increase in ratio is justified on the qualitative empirical data alone.

Neither is this move out of step with Whyte’s view that markets are the best determinant of the ratio. As a new lender, the taxpayer must now also be part of the market and so it is quite acceptable for taxpayers’ representatives, the elected government, to take an active part in setting ratios. Furthermore, as taxpayers are now the final lender of last resort it is equally fitting that their government representatives can command the minimum ratio to be applied. This is all perfectly in keeping with a true market philosophy, as he who pays the piper now calls the tune.

Finally, one can never know if the ratio is excessive: as with any insurance premium, one can only tell after the event if it was too small.

Paul J. Weighell

Hamburg view
I forwarded Mark Tinker’s Forum article [To save the euro and end the liquidity crisis Germany needs to leave the Eurozone, Monday 12 December] to a German friend. Here is his response; a view from Hamburg:

“I found your attached article very interesting. Obviously I do not agree totally, but I am at least as worried about the euro as you are. Still, I have to admit that I am even more worried about Great Britain being isolated from the rest of Europe. It is definitely to a large extent a historical mistake of our politicians not to try harder to keep David Cameron on board, but I still have problems to find constructive suggestions in his position and way of presenting it, too.

“The idea that Germany should leave the euro does sound convincing at first glance. And there are of course some who would profit enormously from this step. It should be no surprise to me, when I heard the speech from George Soros in the summer of last year in Berlin, demanding exactly the same. I did not forget his part in the currency crisis of the early 1990s in England. I don’t think we should let anything similar happen with the money from other European people.

“Germany has of course profited from the single currency. Still there was effectively hardly any growth in the German economy in the past ten years. One of the reasons for this was our current account surplus (which is nowadays criticised by many other Europeans), which means nothing else but an outflow of capital from Germany. In the end, the boom years in southern Europe, until the Lehman Brothers crisis, was a result of German (and of course others’) investments. Money that was no longer available for investments within Germany. It is therefore no surprise that the German economy is now growing, because investors are scared out of Greece and Spain and have rediscovered Germany. The question therefore should be, how to reinstall mutual trust in the markets and reliable economic foundations in the south. Debating how to split up the Eurozone is definitely not helpful for this.

“The central reason why I am still convinced that the euro area should not be split up is political, though. I do hope, that it leads in the long run to governments not spending more of their taxpayers’ money than they have. I think everybody in Europe (and especially the younger generations) can win, if politicians could no longer buy voters’ support, paying off the dept with inflation. We tried this way before and found out what “stagflation” means. (I do know of course, that there are many Keynesians around that do have a different opinion.)

Anyway, I was never a fan of the EU as a superstate and I don't see the euro as step in this direction. What I do see all over Europe (including Germany) however are politicians presenting simple solutions and blaming other countries. I don’t think the world economy is interested in those little games. If the EU wants to be a success again, it is time to stop regulating everything and to pull out of social policies. A concentration on the common market might be a good foundation to convince even the British not to ally to Hungarian populists but to stay part of Europe.

“Even in spite of the geographically unfounded British view on Europe, I will always stay fundamentally anglophile.”

Jim Caton, consultant

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