There’s been a lot of chatter recently about a possible turnaround in the stock market. Investors are, by and large, losing confidence in the absurdity of the worldwide zero interest rate policy (ZIRP) which central banks have coordinated to impose on most developed economies.
While there are some intellectual excuses for ZIRP, the more practical one is that it allows governments to maintain their popularity for a little while longer by silently expropriating savers in favor of connected cronies. Further, ZIRP boosting financial markets ensures that pension funds for government workers don’t go immediately bust or have cash flow issues. The government would start to have immediate legitimacy problems if any of this occurred — similar to what we’ve seen for the government of Greece, but with many more states, people, and territory involved.
Banking interests have to be tiring of ZIRP because, while it may confer a few benefits, it puts a lot of pressure on the entire commercial banking system because of low rates on loans across the board. It also diminishes demand for savings, which will tend to be absorbed by other asset classes — particularly risky ones that represent opportunities.
It’s becoming more challenging for touts to justify the continued bull market in financial assets, but it’s necessary to try to pump it up as much as possible for the short-term interests of the state. This is part of the general problem of democracy — with a maximally expanded franchise, you have to continually buy people off with bribes and make-work jobs. This comes at the expense of the most productive elements of society, who become gradually corrupted and then impoverished as the policy goes on.
Those productive elements, by and large, have adopted a sort of self-sacrificing ethos that would have seemed extreme to some of the most go-go 1980s yuppies. This ethos says that highly productive people should sacrifice their private lives almost entirely for their corporations — a sort of campaign for self-obliteration, an inverted parody of Marxist agitation, but for the managerial classes.
Since 2007, many states — especially the US — have tried to float a propaganda campaign that spectacular economic progress was right around the corner, despite fiscal issues and ‘experimental’ (i.e. desperate/crazy) monetary policy. The thought was that, despite tax shortfalls and other issues, monetary and fiscal stimulus would have an enormous ‘multiplier effect’ which would return ‘economic growth,’ whatever that term can be taken to mean.
New eras in finance, particularly with unorthodox policy, all tend to end the same way — with collapses in the paper asset markets as financial dis-coordination disrupts real production and pauperizes speculators.
The question this raises s whether or not there was ever really a serious choice involved in all these matters. The answer is ‘probably not.’
The institutional inertia of more than a century of precedent, combined with a culture eager to deny reality, made it so that dissent against the policy was like hollering into a hurricane. It was never going to work, but everyone had to pretend that it’d work, if only to conserve the remaining momentum in the society. These are the consequences of decisions made in past decades, many of those by people who have been dead a long time.
A thousand thousand excuses must be invented and promulgated to avoid much of any criticism of the root causes — instead, various immaterial phenomena must be blamed — anything but the willfully deceptive decisions made by those administrators with temporary authority. In some ways that makes sense, because individuals are rarely responsible for anything — instead, there are institutions, and empowered administrators, but none have clear, absolute responsibility for anything.
This has been part of the issue preventing a better resolution of 2007 — while many elements of the government and the banks may have wanted to be responsible — even some prominent academics have attempted to solve the most pressing problems — it was never possible for all the institutions that needed to do so to coordinate to propose something that could have restored more credibility to the state and its banks. After the failed compromises, various parts of different institutions sort of went their own separate ways, some plans were drafted that were never enacted, and the press covered up the embarrassment with glossy pap.
After that, all the responsible people declared that the problems were over, and that anyone who thought otherwise was a ‘chicken little’ type. At the end of it perhaps some can comfort themselves with the observation that, even if people had wanted to do the right thing, it wouldn’t have been possible to put it into practice.
Or perhaps more accurately: no one with much authority really liked the United States of America enough to want to keep it together. A lack of authentic belief in the thing itself allowed enough people to shrug their shoulders and permit it to begin to fade away.