Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
, explain how saying neoliberal pressure caused governments to borrow more is,

That isn't in doubt. But he also claimed that borrowing more gives markets or perhaps bond markets power. Power not to influence bond prices or yields but policy. And that this power is a new power and didn't exist prior to the turn to neoliberalism.

My argument, resting on empirical and historical evidence, is that the power of the "markets" is vastly overestimated. If governments are depended on bond markets, investors are dependent on public bonds.

Is e. g. the US federal government dependent on bond markets? A government that borrows 10% of gdp in a year obviously is. And what did "Mr. Market" or the "bond market vigilantes" do with this awesome power?

Accept more and more laughable yields.

One reason is the mutual dependence. Say insurers don't have much choice.    

The other perhaps more important reason is that there is no "market" "mister market" "vigilantes". Market participants want

  1. security

  2. yields

And the end yields beat security in 9 out of ten cases.

Now, as individuals these investors and their agents are rabid neolibs, if not austrians or whatnot. But as market participants one basis point beats that all.  

by IM on Mon Aug 25th, 2014 at 06:26:22 AM EST
[ Parent ]
Thanks for a fuller argument. Personally, I'm not taking issue with most of it (I don't know what Streeck would say to it).

However, I'd say that a government's fear of rising yields is an important parameter in decision-making. I think both Sarkozy and Hollande blindly followed a "stay under the parapet and hang on to Angela's hand" policy because it kept French bond yields miraculously low when others were seeing punitive highs (no, I'm not personifying market forces in "vigilante" form).

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Aug 25th, 2014 at 08:03:03 AM EST
[ Parent ]
 "I'd say that a government's fear of rising yields is an important parameter in decision-making."

Why, man, he doth bestride the narrow world
Like a Colossus, and we petty men
Walk under his huge legs and peep about
To find ourselves dishonorable graves.
Men at some time are masters of their fates.
The fault, dear Brutus, is not in our stars
But in ourselves, that we are underlings."

Yields or at least a permanent change in yields are real. "market sentiments" on the other hand....

by IM on Mon Aug 25th, 2014 at 09:43:58 AM EST
[ Parent ]
Worth considering that it's part of the financial-media complex.

The main sources media turn to for analysis of government finances come from the financial industries - the "bond investors."

They are not all vigilantes, but they have a very biased view of what is good...

So this is soft power of the bond vigilantes, rather than hard power... but still power...?

by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 25th, 2014 at 06:04:03 PM EST
[ Parent ]


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