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Über dieses Buch

This book offers a comprehensive analysis of the ways that politics and financial markets impact one another. In this relationship, politics is the ultimate controlling force. The kinds and prices of financial instruments that get traded and the individuals and institutions that get to trade them, not to mention the rules under which everyone trades, are all matters decisively influenced by an array of political variables - sometimes for the better, but all too often for the worse. The fault for this political skewing of the markets chiefly lies with democracy. Through its commitment to equality and its inclination towards fiscal profligacy, democracy hinders the markets from acting as a greater force for social good. To fix this skewing of finance, democracy’s troubling tendencies must be squarely faced and curbed by a return to its monetary roots. Democracy must reinstall gold at the monetary foundations of our financial markets.


Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction: Why the Markets Must Be Politically Investigated

Abstract
In recounting some recent interactions between politics and financial markets, I outline the ongoing relationship between the two realms. I state the book’s thesis that democracy fundamentally structures and distorts the nature and operation of financial markets. Financial markets and politics are then defined. The organization of topics to be discussed in the book is summarized.
George Bragues

Chapter 2. Money Before Liberal Democracy

Abstract
I survey how governments dealt with money from the time that it first emerged until the beginnings of liberal democracy in the eighteenth century. Money’s origin out of labor specialization, trade, and barter is explained. Money’s representation in various objects is described through to the emergence of paper currency. The historical tendency of governments to debase their currencies, made much easier with the adoption of paper, is outlined by reference to John Law’s Mississippi Company and the aftermath of the French Revolution.
George Bragues

Chapter 3. Money in Liberal Democracy

Abstract
I tell the story of liberal democracy’s evolving approach to money from the eighteenth century to the present day. Two approaches to managing money are distinguished: the natural and the artificial. The natural approach is equated to the gold standard and the artificial approach to the discretionary control of the money supply by a central bank. A class conflict is posited between taxpayers and tax consumers. I argue that democracy inherently favors the interests of tax consumers which propels it toward the artificial approach to money. Democracy is also led in this direction by its commitment to principle of equality. The upshot is that the gold standard runs against the grain of democracy.
George Bragues

Chapter 4. The Bond Market

Abstract
I explore the linkages between democracy and the bond market. My main contention is that democracy, far from being constrained by the bond market, mostly exploits it in order to manage an ever-growing public debt. Democracy is shown to be conducive to the legitimation and growth of interest bearing debt in society, a tendency exemplified in the recent US sub-prime mortgage crisis. Rather than being inhabited by bond vigilantes, the bond market is an all-too-willing accomplice in democracy’s susceptibility to excessive debt accumulation.
George Bragues

Chapter 5. The Stock Market

Abstract
In analyzing the connections between democracy and the stock market, I note how the trading of equities really only exists because of a political decision in favor of limited liability for corporations. I then explain the political drivers of stock prices, including elections and wars. The main pillars of the government’s regulation of the stock market are described. These pillars—including mandated disclosure, short-selling restrictions, and insider trading laws—are found wanting. I end the chapter by suggesting that the state, through the central bank, is primarily responsible for bull and bear market cycles.
George Bragues

6. The Derivatives Markets

Abstract
The reason why derivative markets have grown so stupendously is democracy. By its natural evolution toward a fiat currency, democracy has increased market volatility, forcing individuals and firms to seek protection in a whole new array of derivative instruments. Among those are gold futures, which I put forward here as a measure of the depreciation of the US dollar since the move to fiat money. Oil’s price gyrations are explained as a product of that move as well. I isolate the options embedded in Collateralized Debt Obligations (CDOs) to show that the US sub-prime mortgage crisis resulted from a knowledge problem faced by investors. And I discuss the role of credit default swaps in that crisis, while pointing to the dangers of new derivatives regulations.
George Bragues

Chapter 7. The Currency Markets

Abstract
Foreign exchange (FX) rates are more under the control of governments than is commonly thought. Outlining the political factors driving FX rates, I explore to what extent political instability, coalition governments, and the ideological character of the reigning administration affect currency prices. I acknowledge the existence of an international monetary system, sometimes referred to as Bretton Woods II. Between fixed versus floating exchange rates, I argue that fixed is theoretically best, but that as a practical matter, it must give way to a floating regime in democracy, at least so long as money is not equated to gold. To end the chapter, I interpret the recent Euro crisis as demonstrating gold’s tension with democracy.
George Bragues

Chapter 8. It’s All About the Money

Abstract
Democracy’s troubling predilections in the area of finance should be not be accepted as a fact of life. Its worst tendencies need to be curbed. The best way to go about this is by going down to the atomic level of finance and redefining the essence of money. Just as it was at the beginning of liberal democracy, gold must once again ground our money.
George Bragues

Backmatter

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