There is very interesting morality play unfolding in the financial markets as central banks are being increasingly forced to play hand-maiden to the expectations of the financial markets and by extension engage in asset (equity) price stabilization. The FED maintains that today’s move by the large CBs was planned months ago. If you believe that I have another asset bubble to sell you (or what central banks now seem to think what is meant by price stability).
It would be funny if I could not remember a time not so long ago when price stability was so dear to the heart of central bankers that interest rates could not be lowered just to put a few million workers back to work. But then that is why they are called workers and the others are called …
However, this is indeed a dire moment in neoliberal financial regulation. The near total dominance of the Anglo-Saxon financial model and its reputation is, as Martin Wolf notes, at stake. That is, there is more than just “economics” at stake. In fact there is more than just system maintenance going on here–there is a rear-guard ideological battle being fought between the pundits of what is rapidly becoming a clepto-cratic and oversold neoliberal Anglo-Saxon financial model and more moderate voices calling for thorough and restrictive public oversight over financial markets.
For the neoliberals the stakes may be high but they hold one Ace in their hand: the financial markets are now, thanks to neoliberalization, so central to the global capitalist system they cannot be allowed to come even close to failing and the financial boys know it: they have fully captured the state.
The fed gave 25bp yesterday and the markets cried like little children who refused to accept and then pay for their own mistakes. Good thing mother likes to reward bad behaviour and boy does she ever.
In the coming months we will see if all the king’s horses and all the king’s men can put humpty dumpty back together again. Meanwhile if you are a Shorty watch out for the king’s horses.