“We are experiencing a casino economy worldwide with ever more complex financial arrangements”

2023-12-27 14:15:13

French economic news is neurotically subordinated to the evaluations given by the rating agencies on French debt. After a week of anxiety awaiting the decision of the Standard and Poor’s agency, it maintained its previous assessment on Friday, December 1, albeit with a negative outlook.

Commentators have not stopped recalling the previous decisions of other agencies, the downgrade made by Fitch in April and the lesser severity of Moody’s a few months later. The government, for its part, spared no effort to convince financial market players of its fierce determination to reduce public deficits.

This obsession with tracking public debt leaves us perplexed. These agencies, which evaluate the management of States by encouraging them to respect the budgetary balance supposed to embody virtue, are those which in no way anticipated the fall of the Lehman Brothers bank in 2008. Furthermore, market players financiers, who impatiently await the verdict of these same agencies to better ensure that liberal orthodoxy reigns, are the same ones who were saved by public money in 2008, then in 2020.

Magic money has favored speculation and the stock market

In 2008, to avoid the collapse of economies on the model of what we experienced in the 1930s, States and central banks spared no effort to support banks, financial markets and businesses, so much so that the American public deficit will plunge to 11.2% of GDP in 2009 while central banks will deploy treasures of ingenuity to multiply injections of money towards private actors.

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Modestly we named “unconventional” these policies which should have been described as totally heterodox, to the point that Jens Weidman, the former president of the German central bank, described them as diabolical. In total, twenty-five years later, central bank balance sheets are still four, six, even eight times higher than in 2008.

This magically distributed money has certainly avoided the collapse of economies, but above all it has encouraged speculation and, therefore, the surge in stock prices unrelated to the health of world economies, but also that of real estate prices, master paintings, cryptocurrencies and even high-level athletes.

Concern about private debt

The abundance of free or almost free liquidity until 2021 has favored the leverage effects which funds of all kinds have abused to the point of no longer knowing where to invest and where to place their money in the areas of education, health, sport or cryptocurrencies.

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