Harold Meyerson confuses them today in an otherwise useful column on how democratic governments are being forced aside due to economic pressures. He approvingly quotes Wall Street investment banker Roger Altman:

“financial markets have become ‘a global supra-government. They oust entrenched regimes where normal political processes could not do so. They force austerity, banking bail-outs and other major policy changes. . . . [L]eaving aside unusable nuclear weapons, they have become the most powerful force on earth.’”

This is not quite right. The circumstances under which the financial markets brought about a run first on the debt of Greece, Ireland and Portugal, and more recently on the debt of Italy and Spain were created by the policies pursued by the European Central Bank (ECB) and Mario Draghi and his predecessor Jean Claude Trichet.

The ECB has run a policy that is focused on containing inflation and forcing governments to reduce their deficits. It could have instead run a policy that placed its primary emphasis on promoting growth. It also could have played the role of lender of last resort. It was a quite deliberate policy decision by the ECB to impose a fiscal straightjacket on the heavily indebted countries of Europe. (Its policies have made this debt burden much worse.)

It is understandable that Draghi and the ECB would like to pretend that the problems facing Greece, Italy and other countries in the euro zone are simply the result of the market imposing its discipline. However, this is not true. They are responsible for the difficulties facing these countries.

[photo: Jo Chambers/Shutterstock.com]