By Les Leopold, AlterNet
The markets are “jittery,” “upset,” “skittish” and “unnerved.” They are “confident” or “unsure.” They are “demanding” that political leaders “put up or shut up.” And they are “reacting unfavorably” to Obama’s newfound populism.
These are just a few of the many ways financial markets are described each and every day by the media, financial players and public officials. At first it seems as if these markets are humanoids onto which we project our feelings. Yet, on closer inspection, it’s more like we have ascribed to them god-like powers. We are told to appease the market gods or face eternal financial damnation. As President Obama warned Europe recently, they must “muster the political will” to “settle markets down.”
Why do we worship these angry market gods?
Trading has been around for as long as humans. We, no doubt, increased our chances of survival through trading what we had more of for what we needed or wanted. The more complex our societies became the more markets grew. At some point during the Renaissance, markets emerged that traded money as well as goods, as city-states and nations sought ways to fund wars. But these markets were far from god-like. Sovereign nations ruled supreme and money-lenders had to do their bidding if they hoped to be repaid or in some cases, if they hoped to avoid execution. Even Adam Smith didn’t suggest that financial markets had god-like powers. In fact, these markets seemed more like petulant children throwing tantrums as they puffed up tulip bubbles, South Sea bubbles, railroad bubbles and periodic financial panics.
When the mother of all financial crashes struck in 1929, it seemed as if markets would forever lose their god-like status. A consensus emerged that financial speculation was a major cause of the Great Depression, and tight controls were established during the New Deal to teach these petulant children a lesson they would never forget.
They forgot. We forgot.
After WWII, a new generation of economists emerged who worshiped the markets and detested any and all government interference. For these true believers, markets were infallible, blessed by what they called the “efficient markets” theory. Financial markets, they claimed, always got prices right. They always provided the best allocation of society’s scarce resources, and most importantly, they undermined bad government decisions. And all of this happened without any guidance and without anyone exercising any control whatsoever. These great autonomous and anonymous forces of modern economies ruled supreme and that was absolutely wonderful, according to these worshipers– praise the lord!
Led by economist Milton Friedman, these market apostles undermined any and all regulations that were put in place during the Great Depression to contain the diabolical impacts of markets run wild. “Let them run wild,” we were told, “and we’ll get an economic boom to make all boats rise.” Starting with President Carter, each and every president unleashed financial markets more and more until the financial sector towered over the global economy. Not only were the new financial market gods, bigger and more powerful than ever before, but the new high priests — our financial elites — earned millions of dollars, then hundreds of millions, and then billions as they collected modern-day tithes from all of us for tending to the financial gods. While markets were said to be intermediaries between our savings and needed investment, the financial elites became the intermediaries between our money and their own pockets.
Our financial high priests taught our political leaders how to appease the financial market gods: cut more taxes for the rich, gut more regulations and trim social programs. Not only didn’t the riches flow to all of us, but the markets again crashed in 2008 revealing as they did in 1929 to be nothing more than enormous casinos designed by and for the high priests.
When President Obama came into office, the market gods were in total disarray and the high priests were on their knees begging for help. That was the perfect time to unmask the false gods and the false profits. Instead, like the Bush administration, Obama turned over policy-making to the high priests – Geithner, Summers, Bernanke – who secretly provided up to $7.77 trillion in free loans and asset guarantees to help their fellow Wall Street priests become even more powerful. The market gods were resurrected again and given license to run wild.
The “new and improved” markets would do the bidding for the high financial priests who feared a populist reaction. The financial elites worried they might be pressured by the masses to pay for the damage they had done – the collapsed economy, the loss of millions of jobs, and the reduction of government tax revenues that, in turn, forced up the deficits. But, in a world ruled by false market gods and greedy priests, the rest of us were asked to shoulder the new deficits. And if we refused, the priests who lurked behind the markets would see to it that money rushed away from any government that resisted them.
The first act of these vengeful money gods concerned America’s debt rating. To tame American populist passions, the high priests sent out their vassals – the rating agencies – to do their bidding (even though those same agencies misrated thousands of toxic assets that led to the crash). This happened precisely at the time last summer when Congress was debating how to pay back the enormous debts that were created by the financial crash. The message from the vassals was clear – the public must pay, not the high priests, or beware of the vengeful market gods. When Europe considered controls on financial markets through transaction taxes, the rating agencies again began cutting the debt ratings of European countries and banks, causing them to pay more for financing and helping to heighten the Eurozone crisis. Again the message is clear: the financial elites want the masses to sacrifice even more in order to pay back the debts that came about in large part as consequence of the financial crash.
Who are these financial elites who pull the strings behind these god-like markets?
They are the proprietary trading desks at the too-big-to-fail banks that grew even bigger during the crash, financed by secret government loans. They are the hedge funds that make billions during crises as they stir up runs against sovereign bonds and banks. They are the enormous pools of private wealth moved by private asset managers. In short, the markets gods are actually the disembodied cover for the 1/10 of the 1 percent that collectively holds trillions of dollars in capital. These financial elites are using their market gods to bludgeon democracy. Their game is now rigged to the point where all politicians must appease them…or face excommunication.
But this charade may not last. As we watch our democratic processes fold before these avenging gods, unrest is growing. Occupy Wall Street could be the first sign of a serious uprising in defense of democracy against the financial elites. But nothing is certain except this: The financial high priests will never relinquish their money and power without an enormous and determined populist movement.
Our choices will become increasingly stark as the high priests demand more sacrifice from us – cuts in schools, cuts in social security, cuts in health care coverage, cuts in our standard of living. They will push us down until we develop the organizational power to unmask their false gods and fight back.
Our resistance can start with this simple cognitive step: every time you hear a commentator talk about what the markets “want” or what the markets “reject,” remember the financial elites who are pulling the strings.
Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It (Chelsea Green, 2009).
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