When the markets rebel – Finance

There has been much criticism of the financial markets. They have indeed a lot to be forgiven. The excesses, the greed, the cynicism of certain agents led to shocks that we could have done without. However, because of these mistakes that we must continue to combat by waging a merciless regulatory war, we should not consider that the markets are futile and their role useless. Yes, it is doubtful that markets are always the place where resources are best allocated. But imperfect as they are, they make it possible to collect savings and finance projects, even if not always optimally. And they emit signals.
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There has been much criticism of the financial markets. They have indeed a lot to be forgiven. The excesses, the greed, the cynicism of certain agents led to shocks that we could have done without. However, because of these mistakes that we must continue to combat by waging a merciless regulatory war, we should not consider that the markets are futile and their role useless. Yes, it is doubtful that markets are always the place where resources are best allocated. But imperfect as they are, they make it possible to collect savings and finance projects, even if not always optimally. And they emit signals. Like a crowd, the reaction of the markets is often emotional, sometimes irrational, but it is always regrettable to ignore it. It took a few hours for the City to sound the tocsin against Liz Truss’ mini-budget and her financial and social inanity. The message was powerful: the collapse of the pound sterling, the fall in the prices of British companies, rates rising sharply requiring the emergency intervention of the Bank of England, a shake-up of the pension system. Liz Truss only lasted 45 days. One might be surprised: the City wind up against the tax cuts of the richest and the uncapping of bonuses? It is not so paradoxical: these inept measures risked setting fire to an economy already weakened by covid and Brexit. “The markets have gone crazy,” we heard during the energy crisis this summer. Yes, the prices were skyrocketing, but they were simply reacting to the fact that when you have, for decades, recklessly built your prosperity on a cheap supply of gas from Russia, you cannot change industrial policy by one week. The madness of the energy markets has certainly enriched speculators, but above all it has encouraged massive and rapid investment in other forms of energy to ensure what can still be of the sovereignty and industrial competitiveness of the ‘Europe. This “signal” acted with much more efficiency or force than 100 councils of European economic ministers. And today, while the central banks are raising their rates to counter an inflation that is nevertheless largely imported, we are also seeing signs emerging from the markets which consider this policy extremely dangerous and are beginning to make it known. When the markets rebel, it’s rarely for nothing. Those who think they should be deleted would only be killing the messenger, ignoring the message. We certainly need long-term investments involving better cooperation between companies and the State. But a largely planned economy, in the complicated times we live in, would not do better than a market economy (look towards Beijing…). The rebellion of the markets, if we take it into account, can also lead to great successes. Take Greece. If everyone is pointing the finger at Germany today, few have the curiosity to look at what is happening on the side of the Peloponnese. However, a few days ago, Greece succeeded for the first time in covering all of its electricity needs thanks to renewable energies alone (solar, wind, hydraulic). Net zero! A tour de force which is the result of a shift that began in 2013, when Athens, excluded from the markets, was forced to listen to the message and roll up its sleeves.