Panic station: Inside the bond markets
The eurozone is quaking, thanks to the men who control the $80 trillion bond market. At its epicentre is the Chicago Mercantile Exchange – when traders here are nervous, nations are rocked.
Monday, 7 June 2010
There is an angry mob out there. Its shape is dimly perceived, but the terrifying shadows cast by its burning torches are clear enough. This is the bond market in full cry.
Its most aggressive participants even call themselves the ‘bond vigilantes’. Across Europe and into the UK, governments cower, populations are told to brace themselves for painful cuts, and austerity is the order of the day. In the US, too, their proscriptions are moving up the political agenda. Fail to assuage the mob, we are told, and untold horrors await, nightmare visions such as the flying apart of the eurozone, the ruin of the British Government’s finances, or the final collapse of the US dollar’s hegemony.
We are in danger of submitting ourselves to policymaking by fear. A world created in the image of the bond vigilantes is a vicious, reactionary place, to be resisted rather than embraced. And remember this, above all: the bond market is not always right.