Indeed, analysts of the stock exchange brokers' psychology noted long ago that the heroes of the financial markets behave like a herd -- for all the technological sophistication that surrounds them, their operators follow the example of their peers. And even become rich by doing so.

But masked behind the misleading glamour of these flocks of lawyers and economists is something worse than the stupid attitude of a monkey copying the neighbour – without reflecting and without supporting its own actions on rational grounds: The financial market's monkey is both greedy and perfectly irresponsible.

By so being, both brokers and international financial markets summarize the worst vices of neoliberalism. An evidence is the mortgage crisis in the United States, which became a full-fledged global economic crisis due to deregulation, lack of transparency in financial markets, and its interconnection with all realms of the real economy, i.e. the production of goods and services. No sector of the economy is so globalised and deregulated as the financial market.

These features allow commercial financial institutions to operate without any control, and design complex trade processes of equities, swaps, mortgages, options, and so on, without worrying about national borders or customs. This fatal casino also allows stock traders -- pension funds, hedge, banks, and the like -- to pocket extraordinary profits, following the false slogan of "making the money work".

While officially the purpose of financial markets is to allocate money in the most efficient manner, and provide the real economy with financial resources for investments at accessible costs and easy ways, from its operations also regularly emerge perverse objectives: Make money irresponsibly, even criminally. The Enron case proved it several years ago. The banks and hedge funds -- with practices such as front running -- these days too.

Stock brokers know that their high-risk operations in the virtual financial economy involve destructive and incalculable consequences for the real economy. They also know that as long as there is no crisis and their rates of return remain high, they will earn the admiration of the innocent, without having to fear any control over their operations.

And when the fatal mistakes intrinsic to their deeds become obvious, as in the current crisis, central banks -- in other words, the state, the tax payer -- will jump to their rescue, to limit the adverse consequences for the real economy, by lowering the interest rates, by making money available to banks and funds to enable them to continue operating, by paying for the losses.

Sometimes all at once. It happened during the 1994 Mexican crisis, and again in the global financial crisis of 1997 and in 2001. And it is happening since early 2008. As long as governments do not have the courage to regulate and restrain financial markets, it will happen again.

MORAL HAZARD

This is what economists call moral hazard. Given that financial operators take for granted that the state cannot afford let a major financial crisis to make its destruction across the real economy, lest it accepts to deal with a depression, and therefore has to act as lender of last resort to socialize the financial losses, they act irresponsibly and take all kind of risks.

Therefore the so-called liberalization of financial markets -- the non-state intervention into its mechanisms -- only works one way: when it yields profits. When the financial markets fail, it is the state that has to throw the lifesaver. Such is the ethics of neo-liberalism. It is the same ethics that considers taxes illegitimate -- until neo-liberalism needs them, that is, other people's taxes.

The financial economy also disables all rational mechanisms traditionally used in other areas of human economic action. For example, in stock exchange transactions and up to the tipping point of crisis, trade increases with prices and risks -- and not vice versa.

Usually, if, say, sugar prices increase, consumers will tend to reduce their consumption of that good and search for replacement. Not in the stock exchange markets: The higher the prices of shares, the best they sell. In the mortgage crisis in the United States this discrepancy between risk, price, and demand resulted in an absurdity: The higher the risk a mortgage title carried, given that the debtor was actually insolvent, the more were hedge funds willing to pay for it, making it more profitable. But high-risk business only pays until the bubble bursts.

This has led Jeremy Grantham, a manager of an investment fund in the United States to emulate Kindleberger and make another contribution to the zoology of international finance.

Grantham compared the stock exchange markets with a brontosaur that has been bitten on the tail. "The pain slowly moves along the beast's spine, until it reaches the animal's tiny brain," Grantham said.

Then and only then, the monster waggles, provoking an earthquake, and chaos and destruction. After the shock, what remains is a ruined, inhospitable landscape, full of monkey's money, enormous social losses, and some extremely rich thieves.

[Source: IDN-InDepthNews | Analysis That Matters]