The Arrogance and Ignorance of the Political Elite: A Case History

German Chancellor Angela Merkel clearly understands what the financial crisis fight is about, but she is severely overestimating her chances of wining. Given that she is a member in good standing of the global political elite, it is fascinating to analyze how absurd her arrogant and economic illiterate comments are about the ongoing crisis.

Merkel said on Thursday:

In some ways, it’s a battle of the politicians against the markets. I'm determined to win. The speculators are our adversaries. That’s why we have to weigh our words more carefully than ever and stand united.

Could she possibly understand the impossibility of what she is saying? She is going to fight the markets, she says. Does she understand that "the markets" are millions of people transacting business for their mutual benefit? Does she really believe that politicians have the power to reverse markets? Does she understand that throughout history governments have attempted to stop market activity, but have only succeeded in distorting market activity, but never killing it. From price controls to drug laws, the history books are filled with attempts by governments to move markets in a way they do not want to go. The history books are also filled with the failure of these attempts. Yet, the Chancellor tells us that by politicians weighing their words and standing united that they are going to somehow beat "the markets."

 Let us look at  the current crisis where the Chancellor wants to battle ""the"markets.". Specifically, let's look at Greece. The government of Greece does not have enough money to pay all its bills. As this becomes more and more obvious, fewer and fewer people want to hold Greek debt. Thus, the interest rate on Greek debt continues to climb to attract buyers of that debt, who are willing to bet that Germany and other countries are going to be  bailed out by Greece and others. How is the Chancellor going to battle this by weighing her words? What does standing united mean? Other countries either pony up to pay the Greek government's tab or they don't and Greece defaults. Those are the options. To speak of battling "the markets" in this situation, pretty much means that by "weighing her words" she thinks she is going to convince investors to buy Greek debt without Germany, or anyone else, ponying up and paying the difference that exists between what Greece owes and what it has available to pay its debt.

Looked at it from this perspective, the Chancellor sounds like a short-game con artist. She will say or do anything to keep the con going one more day. That is the long and short of what she really means when she talks about weighing her words. It's a con, a not very sophisticated con, but a con none the less.

It is only a supreme arrogance and ignorance that could result in the Chancellor declaring that it is politicians against the markets and that she wants to win. She doesn't have a chance. At the end of the day, she and her political global cronies are going to have to either pony up with more money or they will see some defaulting PIIGS.