So the Germans are taking on the markets. The announcement that they are banning naked short selling of CDS (a form of tradeable insurance against a counterparty defaulting) has had its inevitable consequence. I observe one common characteristics of all politicians and regulators. This is what I call Bob's Universal Political Law. They hate markets.
Markets are about democracy - literally the 'rule of the people'. Like democracy they need regulation but in essence they are the free expression of our individual and institutional rights to buy and sell what we want, when we want, how we want. Free and competitive markets where fundamental investors, speculators and arbitrageurs back their judgement - putting their money where their mouths are - provide high quality information about the value of financial securities and ultimately the state of the underlying economy. Speculators, taking huge risks, force price movements to completion much more rapidly than other investors playing the long game. Arbs make sure that securities trading in one market are identically priced in other markets. Politicians hate markets - they tell them what they do not want to hear. Markets find the weak point just like the ocean beating on a sea wall and rarely do they get it wrong.
The banking crisis was a salutory example of the efficiency of the markets - once the vulnerability of the banks to the sub-prime mortgage market was apparent, the markets reacted. Too fast for the politicians and the regulators to cope with. So they called foul and banned short selling in banking stocks. Again, the markets are testing the economies of the Eurozone and in particular the political weakness and risks attaching to sovereign debt. So how do the politicians react? Merkel, dithered over supporting the Greek economy, the markets saw the hole in the Eurozone project and went for it. Guess what? What do the politicians so? Blame the markets. Shoot the messenger.
So what about the first two laws. Well you will just have to wait and find out.