Hookers and Coke and Magical Thinking

Hookers and Coke and Magical Thinking

by digby


Krugman features this excellent comment from a reader who obviously knows whereof he speaks:

The markets want money for cocaine and prostitutes. I am deadly serious.

Most people don’t realize that “the markets” are in reality 22-27 year old business school graduates, furiously concocting chaotic trading strategies on excel sheets and reporting to bosses perhaps 5 years senior to them. In addition, they generally possess the mentality and probably intelligence of junior cycle secondary school students. Without knowledge of these basic facts, nothing about the markets makes any sense—and with knowledge, everything does.

What the markets, bond and speculators, etc, want right now is for Ireland to give them a feel good feeling, nothing more. A single sharp, sweeping budget would do that; a four year budget plan will not. Remember that most of these guys won’t actually still be trading in four years. They’ll either have retired or will have been promoted to a position where they don’t care about Ireland anymore. Anyone that does will be a major speculator looking to short the country for massive profit.

In lieu of a proper budget, what the country can do—and what will work—is bribe senior ratings agencies owners and officials to give the country a better rating. Even a few millions spent on bumping up Ireland’s rating would save millions and possibly save the country.

Bread and circuses for the masses; cocaine and prostitutes for the markets. This can be looked on a unethical obviously, but since the entire system is unethical, unprincipled and chaotic anyway, why not just exploit that fact to do some good for the nation instead of bankrupting it in an effort to buy new BMWs for unmarried 25 year olds.


Unfortunately, their bosses aren't just content with being multi-millionaires, that much is obvious. They demand to be worshiped like Gods so that should be factored into this. Parades perhaps? Religious services? (I don't think they're going to be content with being feted like racles and ohigh priests of all on Fareed Zakaria's CNN show.)

What this comment points out is that "markets" are actually "humans." And they are very specific humans with very specific incentives. It would be helpful if we started to recognize that and acted accordingly.

Which brings us to today's hideous piece of Village wisdom from David Broder:

Can Obama harness the forces that might spur new growth? This is the key question for the next two years.

What are those forces? Essentially, there are two. One is the power of the business cycle, the tidal force that throughout history has dictated when the economy expands and when it contracts.

Economists struggle to analyze this, but they almost inevitably conclude that it cannot be rushed and almost resists political command. As the saying goes, the market will go where it is going to go.

In this regard, Obama has no advantage over any other pol. Even in analyzing the tidal force correctly, he cannot control it.

What else might affect the economy? The answer is obvious, but its implications are frightening. War and peace influence the economy.

Look back at FDR and the Great Depression. What finally resolved that economic crisis? World War II.

Here is where Obama is likely to prevail. With strong Republican support in Congress for challenging Iran's ambition to become a nuclear power, he can spend much of 2011 and 2012 orchestrating a showdown with the mullahs. This will help him politically because the opposition party will be urging him on. And as tensions rise and we accelerate preparations for war, the economy will improve.


Aside from Broder's shocking and repulsive sangfroid about yet another middle east war (which is probably a fairly accurate assessment of Village thinking) he's perfectly captured the Republican logic which says that as long as the government is spending money on building things that blow people up, it will stimulate the economy but if it spends on things that don't blow people up it's a waste because the "market will go where it's going to go." They think war is controllable by man. Everything else is controlled by an invisible hand that helps wealthy people keep their money.

Markets, like corporations, are just organizing concepts for human activity. Putting any faith in their "wisdom" is nothing more than primitive magical thinking.


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