The markets crack the whip

WHY ISN'T BBC's Jeremy Paxman giving the Markets a hard time? He might ask: "Can you think of a reason the mass of the people shouldn't gather together in angry array and tell you to sod off?"

It's unlikely. The Markets have no face. The Markets are mysterious and all-powerful, everywhere and nowhere. The Markets' First Commandment is: "I am the Lord thy God, thou shalt have no other gods but me."

Not even the god of democracy. Definitely not the god of democracy. In fact, any god other than the god of democracy.

Like many another, the Markets are a pitiless, jealous, vengeful god. On Today on Radio Four, we were told that governments on both sides of the Atlantic were waiting "nervously" for the Markets' "verdict" on developments over the weekend.

On Friday, Italy had been collared and made an example of. Two weeks earlier, Prime Minister Silvio Berlusconi had, against all expectations, managed to pilot through parliament a package of austerity measures designed to balance the budget by 2014.

Opposition MPs and some in his own People of Liberty party complained that the target date was too soon and cuts too deep. But, as Will Hutton put it in the Observer, "the Markets' judgments are brutal." Their dismissive response to Berlusconi's proposals sent the yield on Italian sovereign debt soaring to 6.4 percent, making it virtually impossible to service the debt, much less protect services, or inject money to stimulate growth.

On Friday night, Berlusconi announced that the budget would be balanced by 2013. The cuts would come sooner and go deeper. Parliament had given its views, the Markets had issued orders.

The Financial Times suggested this week that if President Obama had been able to deliver a plan to cut the budget deficit by $4 trillion over the next decade, the Markets might have decided the U.S. remained a good bet.

But his opponents' opposition to new taxes meant that he could only win agreement on a $2.4 trillion cut. Betting tipsters (also known as a "credit rating agency") Standard and Poor's advised Market gamblers that this wasn't good enough. The resultant downgrade makes further spending cuts highly likely. Obama was elected in 2008 on a promise to defend safety-net programs, most importantly Medicare and Social Security. But in the absence of tax hikes, it's these programs that must bear the brunt.

The choice of the people in the polling booths counts for nothing against the dictates of the Markets.

IT'S THE same the whole world over. Many will have noted--and even savored--the irony of China chastising the U.S. for failing to get its capitalist house in order. But China's concern reflects fears of a drastic write-down of its own dollar debt. They are all in this together. That is, in thrall to the Markets.

So who are the Markets and where are they to be found? The phrase "the Markets" refers to hedge-fund managers, the bosses of investment banks, holders of mortgage bonds (chunks of aggregates of thousands of mortgages), collateralized debt obligations (CDOs; chunks of aggregates of hundreds of lower-end mortgage bonds) and credit default swaps (insurance policies on CDOs), straightforward currency speculators and the like.

Also included are the bosses of major insurance companies and pension funds who have leased out billions in shares in their own institutions for speculators to play the Markets with.

Hilarious as it might be if matters were not so serious, the ratings agencies have commonly allocated triple-A status to mortgage bonds, CDOs and such bundles of junk, thus to keep the merry-go-round whirling. As Hutton remarked: "The financial system has become a madhouse."

What are we to do, though, if even the most powerful of governments are helpless in the face of the malignancy of the Markets?

Do what we are told by governments doing what they've been told? Accept that democracy is a dead letter and bow our heads to the bad times about to engulf us? If elections, parliaments, the democratic system itself, can offer no remedy, what then? The song which first made me spring up and take notice of the awesome north coast band And So I Watch You From Afar was "These Riots Are Just the Beginning."

I played it full-blast on Saturday night as I watched the live scenes from Tottenham High Road and thought to myself: "How true that is, how very true."

First published at the Belfast Telegraph.