There are too many people who say too many stupid things about regulations for me to possibly comment on all them. However, I’ll try to do more of it.
Today’s stupid statement is courtesy of Yglesias, who links to a graph of volatility of equity prices in the US and Germany. Apparently, we’re supposed to see the graphs, notice that the volatilities are highly correlated, and conclude that US regulations cannot be driving changes in equity prices in the US. The implicit additional premise is that US regulations don’t impact German firms.
Unfortunately, that implicit premise is badly mistaken.
The German volatility index in question is calculated on the DAX. The DAX is made up of "German" companies such as: Adidas, Bayer, BMW, Deutsche Bank, and Volkswagen. Obviously, these companies don’t do any business in the US at all and are therefore totally isolated from US regulations! (Note that Deutsche Bank, for example, owns the 8th largest bank holding company in the US).
A little closer to home, I’ve had meetings with lobbyists from 8 different countries on one rule that I’ve been working on. Any examination of lobbying records will show similar results.
Moreover, the regulatory uncertainty argument does not suggest that equity prices of the largest firms in different countries should be dis-similar during periods of uncertainty. Most of us that believe in the regulatory uncertainty argument believe that complex regulations favor large firms. As such, large German firms and large American firms may both benefit roughly equally due to regulatory uncertainty. Therefore, it’s not particularly surprising that their equity prices track each other pretty well.