Why Are We Forced to Worship at the Feet of 'Mythical' Financial Markets Controlled by the Elite?

The markets are “jittery,” “upset,” “skittish” and “unnerved.” They are “confident” or “unsure.” They are “demanding” that political leaders “put up or shut up.” And they are “reacting unfavorably” to Obama’s newfound populism.

These are just a few of the many ways financial markets are described each and every day by the media, financial players and public officials. At first it seems as if these markets are humanoids onto which we project our feelings. Yet, on closer inspection, it’s more like we have ascribed to them god-like powers. We are told to appease the market gods or face eternal financial damnation. As President Obama warned Europe recently, they must “muster the political will” to “settle markets down.”

Why do we worship these angry market gods?

Trading has been around for as long as humans. We, no doubt, increased our chances of survival through trading what we had more of for what we needed or wanted. The more complex our societies became the more markets grew. At some point during the Renaissance, markets emerged that traded money as well as goods, as city-states and nations sought ways to fund wars. But these markets were far from god-like. Sovereign nations ruled supreme and money-lenders had to do their bidding if they hoped to be repaid or in some cases, if they hoped to avoid execution. Even Adam Smith didn’t suggest that financial markets had god-like powers. In fact, these markets seemed more like petulant children throwing tantrums as they puffed up tulip bubbles, South Sea bubbles, railroad bubbles and periodic financial panics.

When the mother of all financial crashes struck in 1929, it seemed as if markets would forever lose their god-like status. A consensus emerged that financial speculation was a major cause of the Great Depression, and tight controls were established during the New Deal to teach these petulant children a lesson they would never forget.

They forgot. We forgot.

After WWII, a new generation of economists emerged who worshiped the markets and detested any and all government interference. For these true believers, markets were infallible, blessed by what they called the “efficient markets” theory. Financial markets, they claimed, always got prices right. They always provided the best allocation of society’s scarce resources, and most importantly, they undermined bad government decisions. And all of this happened without any guidance and without anyone exercising any control whatsoever. These great autonomous and anonymous forces of modern economies ruled supreme and that was absolutely wonderful, according to these worshipers– praise the lord!

Led by economist Milton Friedman, these market apostles undermined any and all regulations that were put in place during the Great Depression to contain the diabolical impacts of markets run wild. “Let them run wild,” we were told, “and we’ll get an economic boom to make all boats rise.” Starting with President Carter, each and every president unleashed financial markets more and more until the financial sector towered over the global economy. Not only were the new financial market gods, bigger and more powerful than ever before, but the new high priests -- our financial elites -- earned millions of dollars, then hundreds of millions, and then billions as they collected modern-day tithes from all of us for tending to the financial gods. While markets were said to be intermediaries between our savings and needed investment, the financial elites became the intermediaries between our money and their own pockets.