So how much of the drop in stock prices are due to the politicians threatening more regulations

With all these politicians threatening more regulation, what do you expect to happen to financial markets?

Effective regulation is needed if financial markets are to be kept under control, German Finance Minister Wolfgang Schaeuble told the Financial Times in an interview published on Thursday.

"I'm convinced the markets are really out of control. That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism," Schaeuble told the paper.

"A market does not function properly if the risks and rewards are completely unbalanced," he said.

"We need transparency. Given the complexity of modern technology, the individual needs a chance to judge what he is doing. That's why we need standardization of products. And we need transparency for all market participants."

Germany blames much of the euro zone's debt crisis on financial speculation and announced a ban on naked short-selling of German bank shares and the bonds of euro zone governments on Tuesday. . . .

From the Financial Times:

Fears of a disorderly regulatory crackdown on banks and financial markets triggered a crisis of confidence among investors on Thursday that sent share prices reeling in a global flight to safety.

US, European and Asian shares all tumbled in the wake of Germany’s partial ban on naked short selling and ahead of a crucial vote on the US financial regulation bill. The S&P 500 fell 3.9 per cent, bringing its losses since late April to 12 per cent and pushing it into “correction” territory.

“The lack of clarity from the politicians has shattered confidence,” said David Owen, chief European financial economist at Jefferies.

Disappointing US jobless data revived fears that the economic recovery could prove short-lived, helping push Treasuries higher and German bond prices to a record. And in Greece there were protests over wage cuts.

Angela Merkel, Germany’s chancellor, fanned fears of further political intervention in the markets after Berlin’s unilateral ban on naked short selling – the practice of selling securities such as shares and bonds that are not owned or borrowed.

“We need the financial industry to be honest with us,” she told a conference in Berlin. “If we don’t get honesty, then we might not do the right thing technically but we will do the right thing politically.”

Wolfgang Schäuble, her finance minister, defended Germany’s sudden move. “If you want to drain a swamp, you don’t ask the frogs for an objective assessment of the situation,” he told reporters. . . .

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