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The action of the Swiss National Bank shows that “investors” aren’t that powerful

September 10, 2011

The intervention of the Swiss National Bank to prevent the value of its franc from rising due to “investors” seeking a safe haven from the Euro’s troubles provides a valuable demonstration of the tenuous real power of “financial markets”.

The terms “investor” and “financial markets” are in quotes because their widespread use in the media serve propagandistic purposes in a very Orwellian way.  Referring to the massively consolidated oligarchs – the elites who dominate and, in a very real sense, terrorize the world through their concentrated control of both money and the oligopolistic corporations that produce most of the world’s output – as “investors” or as the “financial markets” is a laughable abuse of the English language.

Now that Switzerland has decided it won’t destroy its economy in order to provide a safe haven for “investors”, where will they place their great hoards?  They could “invest” in the US or Japan but interest rates there are extremely low and the respective central banks are under great pressure to protect the domestic economies.  Gold?  Perhaps.  But it’s very likely gold is already in a well developed bubble and should there be a massive new influx into gold, government intervention would become increasingly certain.  Gold ownership by private “investors” was illegal just a few decades ago and could just as easily be outlawed again.  The gold market exists only as long as governments permit it.  The same applies to all other commodities and to land.

The reality is that “investors” don’t really have the power to force society into any form of austerity and, by pushing their hand to the degree they currently are doing, put themselves at great risk that the wider public will eventually catch on.  Pimco tycoon Bill Gross, for one, was humbled over the past months as he attempted to lead an attack against the US government – and in a wider sense against democracy itself – with baseless threats to boycott US bonds.  He had a poker hand of maybe a couple deuces, his hand was called, and like his fellow “investors” in Switzerland, he lost.  Where outside of Europe, the US, Japan, and a bunch of much smaller economies are these hoarders going to “invest”?  Governments have complete control and corner the market.  If the ever so popular debt to GDP ratio of all the key economies of the world were to double or triple overnight, interest rates could not possibly go up.  Where would the global “investors” take their hoards to enforce such a rise?  Cash under their mattress?  And the very idea that “investors” could force higher rates ignores the reality that governments can produce their own currencies at will.

The essential and fully Keynesian point is that society has complete power to maintain policies that assure widespread prosperity for all and is never hostage – even if we accept the existence of massive inequality – to the domination of “investors” and their inhuman logic of deficit control and austerity.  Society has this power but doesn’t exercise it because of the infiltration of the “investor” class into all the key institutions of democracy.

Societies throughout the world must demand now that their governments immediately adopt policies guaranteeing widespread prosperity.  They must wake up and realize that the “investor” class has no power against the concerted action of democracy.

From → Wealth & Poverty

One Comment
  1. Tom Hickey permalink

    Bill Mitchell. Who is in charge?

    Short answer: A government that is the monopoly issuer of a non-convertible floating rate currency is in charge of its currency owing to it monopoly. The monopolist is the price setter since it controls quantity.

    While this is about setting the interest rate and managing the yield curve, it is also true of fx rate.

    All the SNB had to do was declare that it was setting the peg at a certain value and stood ready to purchase whatever quantity of euro necessary to maintain the peg. The market immediately fell into line since the SNB as unlimited ability to issue CHF to purchase foreign currency. A central bank does essentially the same thing in setting interest rates and managing the yield curve.

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