Markets do not fight! Flee!. Part 1

This post is aimed at more or less paranoid friends, journalists repetitive and unimaginative, but especially to the pundits of all 100 of the media.

The transition dels commercial-industrial capitalism-financial information capitalism we are living has us all a little misplaced. At this point, money has become the object of trade away from its original condition as an instrument to facilitate trade and commercial transactions.

This holiday Biel playing with my nephew, a very savvy guy, asked me to play "and Spanish markets." How is this, I asked. Easy, I said, markets are attacking us and we defend.

I tried to explain that markets do not like the Indians attack the caravans, in the old Wild West movies, but faster flee, and the weaker you are perceived. Anyway, I said, "fugim Nosaltres millor, per if cas".

A friend told me very convinced that behind all these movements and tension generators crisis, there was a "black hand". I told him that when it comes to financial markets, not the invisible hand of Adam Smith was able to balance them, being very imperfect markets not faithfully obey the laws of supply and demand. What if there are many hands dirty act according to their convenience and without any regulation or control.

Not succeed with my nephew, or my friend, who remains convinced that the club Bilderberg, conspiracy paranoia generator par excellence (Friends of the D d Cospedal) is the culprit.

In Google, if you do the test, you will find almost 28 million results, if you seek: Attack of the markets. The cliches, slogans, stick to information and social discourse in a way formidable. I'm no expert on the subject, but following the line of this blog and try to shed some light on another point of view, without diletar too, on the crisis and show that the system scale on fragile items, random and little or no regulated.

It is urgent to change direction and pick up the threads from the political institutions that, despite being complicit in framing, media-political and financial, at least its members have voted. To the Board of Standard & Poor's or Moody's, Fitch, etc. .. do not even know it (except a friend of mine who is a distant cousin at Moody's, but not speak). S & P and Moody's dominate 80% of the market and if we include Finch reached a market share of 90%. The existence of these agencies is essential for network markets work, but accumulate immense power, which can, as we have seen this August, desentabilizar economies of countries including Spain, experts say did not disclose the methodology used (like the secret formula for Coke, but fewer gastrointestinal). Furthermore, it seems, are marking not only the political agenda and the economic future, but the content of the constitution and the worst politicians are quick to do without consulting us, I think it'll end up voting for the cousin of my friend.

From the point of view of the networks, which is what gives meaning to this blog, what is happening in the real system is its conversion to a global financial network in all directions woven planetary: North - South - East - West. Converges network hubs in: USA, Europe, Japan and now China .. A huge network with presence in over 200 countries, with their productive economic systems and societies of consumption leveled in the same operating system and a single " program, "" capitalist "who operate from a few nodes (commercial and financial centers, London, New York, Tokyo ..). The existence of this network (easy to verify research-productive economic systems and financial and trade of central and peripheral) is superimposed on any philosophical reflection or qualification macro to do, a priori, on the capitalist system we construido.La transitions of socio-economic systems generate their own dynamics that has multiple causalities, which generate trends and build models. It happened, when it built the foundations of industrial capitalism and it's happening when building global financial capitalism. These trends are not products of black hands but the logical result of multifactorial applied.

My role as a teacher I impose order and contextualize the concepts, blogging my heart prompts me to be a little more, well, .. passionate and radical. I'll try to find a balance: I will in several installments, not to bore or bored staff lentamente.La current crisis revolves mainly around the following concepts: capital market changes, interest rates, sovereign debt and havens tax in addition to other peculiarities of each country, as is the case in Spain.

I propose a complex exercise because of paradoxes rather difficult to elucidate:

• Why is the debt problem by borrowing more than we intend to correct in the USA and is prevented by constitutional decree in America? The United States can increase the debt ceiling and calm their creditors more remarkable as the People's Bank of China, which has financial assets of $ 2.1316 billion, which is the largest debt supported by a public financial institution in the history of the world. This increase may not cause the budget deficit because increased. ¿Makeup?, no, because the commitment is here accompanied by a deficit reduction program to ten years. Europe refuses to accept this challenge, technically complex to implement, the EU is not a country, and further compresses the deficit countries by forcing them to privatize many public services and adopt draconian austerity plans.

The Republican position of not raising taxes on the rich contrasts with the position of Warren Buffett, representing the American egofilatropia filers will be willing to raise taxes, and now four wealthy Europeans (The owners of L'Oreal, Société Générale or Air France) is also expressed in this line. Should not be as democratic method and not the exception egofilatropica?. A posteriori (the world upside down) governments have been doing their homework, Obama proposes law and Sarkozy and Merkel Buffett also advocate the rise, while in Spain the PP said that the proposed increase in Spain Rubalcava is a hoax .

• Why do financial markets behave like shoals of sardines?, That the slightest impact on the way they change direction, fleeing situations sometimes unrealistic, as has happened in France this August.

• Why do institutions that attempted to eliminate the crisis as the IMF or the WTO, have not only achieved, but contribute in part by ultra-liberal recipes, with apologies necessary balance to indebted countries and social tensions, especially the 3rd world.?

• Why do they say publicly, from the governments that tax havens must disappear and otherwise consolidate the foundations laid for its perpetuation?. Etc, etc. ........

Total nonsense: It is not easy but it is necessary to reflect on global nonsense whose construction we are all a little guilty. I hope my nephew does not have to remind Biel as the generation that plunged the planet into the darkness of a permanent economic and environmental crisis.

Globalization and Markets: Globalization, is evident in the integration of the various domestic financial markets into a single international financial market, which in principle allows institutions to seek funding from any country not limited to locating them in their own market doméstico.El exchange market is a network that is not physically located in a specific place, takes the form of an international electronic network (which has become possible by advances in telecommunications), which runs continuously 24 hours (this thanks to the Earth rotates , for the moment!) and five days a week. The foreign exchange market is only one electronic networking: I learned this in Agencia Efe when the 80 analyzed the reference provider is and was Reuter's, which wanted naively emulate, and whose product is to connect tables arbitration in all planet (an arbitration board is the place where the operators, money changers, or brokers, working in a bank).

Daily volume traded in the global network of capital market, is equivalent to 2.75 times the Spanish GDP ... every day or, which is the same, 1,000 Spain in one year. In just three and a half days it will make transactions for an amount equivalent to U.S. GDP. In a year you have the time to give back 25 times the GDP mundial.Todo not decide that a power elite, not a political group, but a diffuse structural logic and dehumanized all the time looking for maximum performance. Therefore, the tendency of those who govern, who are technocrats (brokers), is to flee from where there are no guarantees of return (Many but cowards, Biel).

Fundamentals: These operators are based on what the experts called "fundamentals": they are composed of diverse information on the economic health of the country concerned (inflation, trade balance, public debt ...).

But behaviors are also influenced by psychological influences generated by the network media, through news, developed in laboratories of large public relations office, lobby groups like the Bilderberg Club, G8 etc. .. Hence the conspiracy legend hand black (Habermas, Hayles). Reuter's screens and other operators combine the data provided in real time, with news relating to this data for each country or sector. Specifically define the fundamentals of risk rating agencies of which I spoke earlier and as I have indicated are a powerful and influential elements for interconnection of financial markets. These private organizations, by qualifying titles and often national economies or countries, according to some accepted norms of estimation, curiously, often, provide, at their own risk, reference standards for operators and global markets they represent the exercise of power over the states. Sometimes, the publication of such ratings triggers waves of large comings or goings market funds, which determine the direction of capital movements and even credit and borrowing capacity of the countries. An illustrative example of the consequences of these ratings has been in Spain, following the successive reductions in the Spanish debt rating by the rating agency Standard & Poor's in April 2010 and most recently in August 2011 mind.

The network effects are easily produced in these environments and the spread of a change in a reference hub, Wall Street, London, Paris or Tokyo, a major player, Soros, for example, a negative rating to push risk many shareholders to follow their behavior. Money is a coward and runs away from where they perceived profitability, at the least sign of danger fund managers withdraw their investments in a given area change local currency for dollars, or another safe haven and reinvest their money in savings behavior estables.El of these networks is similar to the swarms, flocks of birds or schools of sardines. When for any one hazardous input component changes direction the group followed. Dragging these changes to the less speculative secondary market dealers. (The explosion of a recession depends on some subjects that behave like sardines, sobering).

Each node establishes connections with other nodes, exchange information, come and go, and eventually form a complex dynamic network behavior, the flock. That's not a hierarchical organization that obeys general slogans (Black Hand), but decentralized, since no node determines the overall behavior of the same. And it shows the properties of an individual organism from infection by the appearance of a group behavior.

This process of financial globalization has been, among others, according to experts, the following effects: (According to sources at the Institute of Fiscal Studies) .1. Increased difficulty in maintaining freedom of trade flows to the magnitude and volatility of financieros.2 movements. Problems continue with the welfare state as an element of legitimacy and greater opportunities to extend the deregulatory process for tax evasion that necessarily draws the State.3. Threats to economic policy autonomy in the sense that those who control the mobility of financial funds (pension fund managers and investment, multinational corporations and banking institutions) have an increasing power to indirectly influence the use of various financial instruments according to their preferencias.4. Explosive growth of derivatives transactions, growth that far exceeds both the capital flows as foreign direct investment. The transactions have grown as a result of the search for systems to protect against financial investments increased volatility problems, both in the field of changes in interest rates on currencies, and lso for the possibility of relaxing maturities of such investments.

From the crash of 29 is regulated such markets, especially after World War 2 and the Bretton Woods agreements. But since the termination of such agreements, the model complexity has multiplied exponentially generating structural changes in the financial system of enormous significance, but still characteristic features appear in the new financial structures that are capable of providing stable, long-term financing essential for the expansion of productive capacities of paises.Como have described, it is a meta-reality power, made electronic circuit breakers that respond to turbulence of unpredictable information. We have created a golem: the global financial market is difficult to control by sovereign states. This is not to say that there are no mechanisms to conseguirlo.Pero am convinced that the deterministic view prevailing in the mass media, it favors only the beneficiaries of the situation and those who aspire to refound capitalism from the beginning. Mechanisms such as the Tobin tax would help the speculation involved in deregulation braking. That if, if applied globally, not the markets themselves and in others, because then the consequences would be dire, would be to legalize hard drugs in a single country.

Sarkozy and Merkel have made a proposal in this line, but so diffuse that really looks like a smoke screen to look like a lead on a situation that has been exceeded.



In the financial system, more than 90% of transactions are speculative (ie, not for productive investment). It also estimated that 80% of operations in the foreign exchange market are for a duration of less than four or five days (many still are for a shorter duration, sometimes several hours). The Tobin tax is thus aimed at reducing the benefits of short-term speculators, without affecting the longer-term operations related to international trade.

But the important thing, the solution of the problem lies not only in curbing speculation as testimonial France and Spain have made this August, but in a change of model, speculators aside, is not stable and reliable as we would wish to ensure a real solution to the crisis and future.

This transition dels commercial-industrial capitalism-financial information capitalism we are living, will produce an unprecedented speed and frequency passing situations recession growth will generate tensions for which we are not prepared. Entropy in this maelstrom in which we need to place ourselves into new and social benchmarks, perhaps different from those in force so far (progress, solidarity, aspiration, values, ..) but no doubt, is a pending work we face.

Next: Tax havens and their accomplices neoliberal

Sources: fiscales.Resulta studies Institto ironic that government is the font used.

Albert Perez Novell