Nationalism and speculation have seldom had a better opportunity to combine forces as the one riding today on the coattails of Covid-19, known as the coronavirus.
By Yannis Varoufakis and cross-posted from his blog.
When Covid-19 leapfrogged from China to Italy, even ardent Europeanists normally appreciative of open borders joined the deafening calls to end freedom of movement across Europe’s national borders – a longstanding demand of nationalists. Meanwhile, the money men speculating on government debt are performing a classic flight from Italian to German government bonds, seeking the financial safety that only the continent’s hegemon can offer during any crisis. As if in a bid to remind us of the great contradiction of our times, Covid-19 is illuminating gloriously the freedom of money to transcend a borderless financial universe while humans remain as fenced in as ever.
Meanwhile in the United States, President Trump is combining his standard call for taller walls with a fresh instruction to moneymen to “buy the dip” in Wall Street, rather than to follow their natural instinct to seek refuge in the boring but safe bond markets. A great deal will depend on whether financiers believe Mr Trump or not, and not just because this is an election year.
If speculators do believe the American president, Wall Street will recover swiftly even before the epidemic subsides. The forces of xenophobic financialisation will then have triumphed and America’s progressives will face an uphill struggle on every political front. As for the European Union, ruling elites will breathe a sigh of relief that a new depression was avoided and return to managing as best as they can the economic stagnation of recent times, tinged this time with a large dose of additional, coronavirus-reinforced, xenophobia.
Will Wall Street follow Mr Trump’s advice to “buy the dip”? For now, the large players are in two minds. The drop in the stock market does not worry them as such. Their concern is that the recent bull market was running on increasingly suspect debt and that Covid-19 may have pricked a bubble that was going to burst anyway. Similarly in Europe, the worst spectre hovering over investors’ heads is that large corporations, relying for too long on free money from the European Central Bank, may be downgraded from investment to junk-grade – especially so at a time of stagnant domestic demand and a collapsed Chinese import market.
Taking a leaf out of the aftermath of the crash of 2008, and the Eurozone crisis that followed, bullish speculators are looking at their central banks, primarily the Fed and the ECB, to do, once again, “whatever it takes” to re-float their flagging fortunes. Two questions keep them up at night: will the central banks oblige? And if they do, will it be enough?…