Jean-Claude And The Invisibles: One of these days someone will write a sequel to Liaquat Ahamed’s Lords Of Finance... about the men who helped turn the financial crisis of 2008 into a lost decade of high unemployment and deflation. And Jean-Claude Trichet will clearly be among the main protagonists. His column in today’s FT is almost a caricature of the austerity genre. Trichet’s explanation of why we must fear the invisible bond vigilantes would be funny if it didn’t have such serious consequences:
In extraordinary times, the economy may be close to non-linear phenomena such as a rapid deterioration of confidence among broad constituencies of households, enterprises, savers and investors. My understanding is that an overwhelming majority of industrial countries are now in those uncharted waters, where confidence is potentially at stake. Consolidation is a must in such circumstances.
Ask yourself, what evidence does he present in that passage? None, because the reality is that bond markets don’t look at all worried. What model does he refer to? None; the vague reference to “non-linear phenomena” is a giveaway that there’s no there there. So what are we to rely on for his definitive judgment that “consolidation is a must”? His “understanding” that “confidence is potentially at stake.” This is a basis for policy that affects hundreds of millions of workers?... [T]he message is now free-standing, relying neither on theory nor on evidence: austerity now now now.