Witch brew

FEAR AND AWE OF "THE MARKETS" IS THE SAME AS PRIMITIVE SUPERSTITION

Why do political leaders abase themselves before the banks?

Prequel - supernatural powers can be enhanced by money.....

Many people seem to believe that "The Markets" are a force that cannot be resisted without, it seems, taking time to think about what they mean by "Markets". Thus they are performing an act of faith akin to that of religious followers.

I am not religious. So before we explore the mysteries of why "The Markets" are so powerful, here is a warning from an agnostic. The Markets are composed of people and institutions and are thus very human. One reason they are so powerful is that they spend millions on political contributions and support for all manner of institutes. They also help politicians to employ researchers and run their offices. In this way, they have managed to create thousands of "missionaries" amongst political leaders and the media.

If this thought spoils the thrill of the supernatural, I apologise.

Now read on.........

The world is rapidly sliding into a new phase of neo-liberal market fundamentalism driven, it would appear, by a mysterious force called "The Markets".

Having bailed out the banking system by a good dose of Keynesian intervention, sensible people had reason to hope that governments would find a constructive role in supporting the recovery by fiscal stimuli and focused investment.

Wild hopes for the adoption of sensible policies of collaboration between the major stakeholders in society to sustain an investment-led recovery have been dashed in Britain, the US, Ireland and many European countries by a lemming-like rush to the very neo-liberal economic policies that caused the disasters in the first place.

When asked by commentators why deficits had to be reduced by violent and rapid retrenchment, the common answer was that "The Markets" were demanding it - and failure to comply with their demands would lead to dire consequences, often not very clearly spelled out. Thus Britain has adopted deficit-reduction policies and public service slashing that will almost certainly increase inequality and misery for the poor, whilst prolonging the recession. The blithe answer to questions about where future growth will come from seems to be that the "Private Sector" will lead the economy to future growth. This ignores the fact that the private sector did no such thing in boom times, instead preferring to waste investment money on speculation and in industry backing big merger deals rather than long term investment. It also ignores the fact that in the US, Britain and many European countries the public sector was the main engine of employment growth and cuts in the public sector, as well as destroying public service jobs, will hit private firms dependent upon it for work very hard.

We seem to have entered a period of Voodoo economics, when the voices of sense and reason coming from economists like Paul Krugman, Joseph Stiglitz and David Blanchflower are scorned, despite the fact that they were in the tiny minority that forecast the collapse of the financial system.

Paul Krugman has written in the New York Times, describing the strange mind-sets of many political leaders, especially in the UK and USA:

"As I look at what passes for responsible economic policy these days, there's an analogy that keeps passing through my mind. I know it's over the top, but here it is anyway: the policy elite - central bankers, finance ministers, politicians who pose as defenders of fiscal virtue - are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.

Hey, I told you it was over the top. But bear with me for a minute.

Late last year the conventional wisdom on economic policy took a hard right turn. Even though the world's major economies had barely begun to recover, even though unemployment remained disastrously high across much of America and Europe, creating jobs was no longer on the agenda. Instead, we were told, governments had to turn all their attention to reducing budget deficits.

Skeptics pointed out that slashing spending in a depressed economy does little to improve long-run budget prospects, and may actually make them worse by depressing economic growth. But the apostles of austerity - sometimes referred to as "austerians" - brushed aside all attempts to do the math. Never mind the numbers, they declared: immediate spending cuts were needed to ward off the "bond vigilantes," investors who would pull the plug on spendthrift governments, driving up their borrowing costs and precipitating a crisis. Look at Greece, they said.

The skeptics countered that Greece is a special case, trapped by its use of the euro, which condemns it to years of deflation and stagnation whatever it does. The interest rates paid by major nations with their own currencies - not just the United States, but also Britain and Japan - showed no sign that the bond vigilantes were about to attack, or even that they existed.

Just you wait, said the austerians: the bond vigilantes may be invisible, but they must be feared all the same.

This was a strange argument even a few months ago, when the U.S. government could borrow for 10 years at less than 4 percent interest. We were being told that it was necessary to give up on job creation, to inflict suffering on millions of workers, in order to satisfy demands that investors were not, in fact, actually making, but which austerians claimed they would make in the future.

But the argument has become even stranger recently, as it has become clear that investors aren't worried about deficits; they're worried about stagnation and deflation. And they've been signaling that concern by driving interest rates on the debt of major economies lower, not higher. On Thursday, the rate on 10-year U.S. bonds was only 2.58 percent.

So how do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that there's a bubble in the bond market: investors aren't really concerned about economic weakness; they're just getting carried away. It's hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we're being told to ignore what those markets are actually saying because they're confused.

You see, then, why I find myself thinking in terms of strange and savage cults, demanding human sacrifices to appease unseen forces.

And, yes, we are talking about sacrifices. Anyone who doubts the suffering caused by slashing spending in a weak economy should look at the catastrophic effects of austerity programs in Greece and Ireland.

So here's the question I find myself asking: What will it take to break the hold of this cruel cult on the minds of the policy elite? When, if ever, will we get back to the job of rebuilding the economy?

Who are the wrathful Gods of "The Markets?"

High priests in days gone by evoked fear and awe of unseen but vengeful deities by cloaking them in mystery and exploiting the ignorance of the populace. Once the light of knowledge and rationality was shone on primitive superstition, fear of the unknown dissipated. Literature is full of vivid examples of ignorant worship of imaginary deities. "The Lord of the Flies" by William Golding is a brilliant example of what happens when hysteria takes over from rational thought. Today's politicians are behaving rather like hysterical children or priests invoking fear of unseen but vengeful deities, just as Krugman claims.

So who are the invisible but fearsome "Gods?"

Quite simply, they are investment bankers, currency and bond traders, and all manner of speculators in the investment markets. They include Hedge Funds, who added to the instability of banks during the crisis by betting on their further decline. Their avenging angels are the Credit Rating Agencies, who completely messed up their assessments of the global investment banks. So why do politicians listen to them now?

In short, "The Markets" consist, in the main, of the very people who brought the world financial system to its knees in the first place.
We know who they are, traders and speculators; supported by their Dark Angels, the Credit Rating agencies. Surely the crucial task for the international community is to devise ways of curbing their evil influence. It is ridiculous to think that these people can ruin the lives of hundreds of millions of people without any accountability.

The fact that they exercise great power can be dealt with quite simply - curb their powers to do further damage.

Political leaders in the West are democratically elected. Bankers are not. They have no right to determine political policy or to blight the lives of millions.

So it is high time for politicians to come to their senses, represent the people to whom they have a duty of care and stop acting as agents of the unelected "Gods" of the markets.

For further entertainment, here is an analysis of the cultures and psychology of "The Markets" compiled by a psychologist who worked as an investment banker and money trader.

Psychopathic Symptoms Commonly Manifested in the Financial Markets.

May the benign Gods (whoever they are) save us from such people and their disciples!!