We posted this YouTube Short video this lunchtime:
This is the transcript:
The FTSE 100 has hit new highs in this, the first real trading week of 2026. So has the S&P 500 in the USA. Shares are skyrocketing, and yet the world is falling apart. There is no sense to seeing massive increases in the value of the world's share markets when we are literally seeing an increase in the risk of war and a breakdown in international relations all over the place.
What is going on? What we're seeing are markets that are being run quite deliberately and quite probably by Donald Trump for the benefit of the wealthy, and not for the benefit of international relationships, and most certainly not for the benefit of ordinary people, whether they be in Venezuela or anywhere else.
We are seeing a breakdown in rationality. Economics makes no sense when we can see that risk is not being properly priced in the world's stock markets.
There is something here that is profoundly wrong, and it's going to end in a crash.
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Time to short the major Anglo Saxon indices?
The world stock markets and other financial smarty pants schemes ( especially crypto) are in my view gambling pure and simple.
With the US tech stocks in particular there has been massive bank borrowing and cross financial commitments.
When the inevitable crash arrives, with the banks making massive loses expect a repeat of the Great Recession with huge state bailouts because the financial services industry is too big to fail.
Result, economic misery for the majority of the world population. Then guess what? That’s right, more austerity will be imposed on those financially least able to bear the pain.
Alternatively, a financial collapse may lead to a less negative trajectory. Neoliberalism collapses, and the Far Right is unable to separate itself from the economic fallout. Banks being bailed so soon after the last financial crash shows everyone who the real culprits in our misery are, and the anti-immigrant mindset gives way to an emphasis on putting power back into public hands and reigning in corporate power and the influence of the super wealthy. We get a more socially minded government swing and a brand new economic system.
One lives in hope that it would bring sense and a new beginning into play. We must have hope!
“The stock market is a graph of rich people’s feelings”
The crash or correction will be substantial when it arrives. Of course, in the UK it will be blamed on the luckless(inept) Starmer, even though he’s not wholly responsible. In the USA, who will be bold enough to blame Trump, who in contrast to Starmer, must bear a great deal of responsibility by dint of his ridiculous tariffs and sabre- rattling?
Here in Canada we will blame the current PM, Carney. We’re in a bad situation, not just with affordability but also the elephant in the room. IMO Carney is the first intelligent leader we’ve had in decades. Unfortunately the problem is a) bigger than him and b) the priority is investors. In the best case we have status quo. In the worst case we belong to someone else. This is the Canadian perspective.
Globally, everyone has the same problem. If you watch Jeff Snider of Eurodollar University the lackluster growth and impending collapse points to a decreasingly smaller piece of the pie for those of us who keep society afloat. This is not just a UK, Canada, EU or US problem. It’s a global problem and can only be solved by well intentioned politicians of all countries working together to solve it. And that will never happen. A global revolution will also never happen and if it did, welcome to anarchy. There is no real solution.
Politely, the claim that there are no solutions is obviously ridiculous. This is a human made problem as the consequence of a false ideology. Of course we can correct that. Why waste time posting such negativity?
OK .. I think that Cy’s wording is maybe overstating things. However, let’s not understate the magnitude of the concern that they are identifying.
– Is the problem confined to any one continent ? – suggest No.
– Are there problem agents within all identifiable ‘trade block’ (let’s say a ‘problem agent’ has characteristics we’d associate with autocrats, fascists, dictators, despots) – Suggest Yes.
– Unless it is against their immediate short term interest have the above ‘problem agents’ been mutually supportive even though it contradicts messages they’ve claimed at home – suggest Yes.
– Has the rest of the world countries had anyone that has been able to grab attention to highlight the concern and/or identify a route towards a better way of living – Suggest Not yet – Zelensky might be a bit pre-occupied.
So our issue is both a lack of leadership and an astonishing ability of the ‘problem agents’ to rally round to support their mutual cause – keeping them and their like in power (irrespective of how contradictory it is). The problem we have is that this has now been globalised – but the message of a solution /alternative is really effectively suppressed.
So — is it impossible – of course not.
But there isn’t an obvious road map that I could point to that people are working towards either……..
Richard, this is precisely why a small tax on short‑term financial trades deserves serious consideration. If markets are rising because speculation is being rewarded rather than because fundamentals are improving, then the public is effectively underwriting the risks created by private actors. In that situation, why shouldn’t the ordinary taxpayer benefit?
A modest levy on rapid‑fire trading wouldn’t touch long‑term investment or pension funds. It would simply ensure that when markets behave in ways that amplify instability, a fraction of that activity contributes back to the society that ultimately absorbs the consequences. At the moment, the gains from speculative surges are privatised, while the costs of crashes — lost jobs, lost savings, austerity, weakened public services — are socialised.
If markets are going to operate in a way that ignores geopolitical risk and rewards volatility, then it is entirely reasonable for the public to receive a share of the upside. A transaction tax is not about penalising markets; it is about restoring balance in a system where the risks are collective but the rewards are concentrated.
Thanks, Paul. See https://www.taxresearch.org.uk/Blog/2025/12/10/new-glossary-entry-spahn-taxation/ and related entries. We need such taxes.
The key point is that this is NOT revenue raising exercise but a market management exercise designed to protect the real economy…. the revenue would be small.
The challenge is to introduce measures that can’t be circumvented by “off shoring” speculation via Contracts for difference (CFDs) or similar.
Agreed
I wonder what Goldman Sachs is doing. They called it right in 2007/2008 & I am sure there will be internal docs making sure they are on the right side of the fence when it all goes south. To give some “colour” to this, Vestas the wind turbine mob, were trading @ Euro11.5/share in April 2025. Now? Euro24. Has the company doubled its WT output? nope. Of course we can argue that 11.5 was under valued – but what is fair value? This illustrates the irrationality of markets. Mad times.
Richard, I have found hope in learning about MMT. I was seeking an alternative to ‘the bond markets run Britain’ narrative – if that was true, what was done to Truss/Kwarteng would also have been done to Corbyn/McDonnell and undoubtedly to any future progressive government. If any other than a centre-right government would be toppled, there would be no further point to politics. The hope I have found in Stephanie Kelton’s work and yours allows me to imagine something better.
However, there is an issue in the challenge that Alistair Campbell posed to Zak Polanski: ‘how do you get from here to there?’ This was also expressed in a response to your blog on 3rd September last year:
‘…In short, governments have complete control over interest rates – both Base Rates (set by the MPC) and gilt rates (by altering issuance patterns or QE) and quite a lot of control over how much the “interest bill” is – first by controlling the level of rates and, second, by reducing the interest paid on CBRAs.
This sounds “too good to be true” and it is. What would happen if we chose to set base rates at 1% and conduct QE to keep 30 year gilts at 2% and chose to cut interest paid on reserves? Well GBP would take the strain.’
Would a progressive government who dared challenge the gravy train face a run on the pound? The US is somewhat different but the UK is very dependent on imports and so is fiscal sovereignty in practice compromised? I’m convinced by the economics of MMT but still struggling with the politics of how the UK frees itself from neoliberalism.
Thanks for this. The reality is that a progressive UK government might face pressure on sterling although whether that is sustainable is open to doubt. See the glossary entry on bond vigilantes.
That said, any change in policy would need to be managed.
First, what happened to Truss/Kwarteng not all their fault. Markets largely collapsed because of the announcement of the end of the QE the day before Kwarteng spoke.
That said, their budget was exceptional in its incoherence. There were unfunded tax cuts for the wealthy, no inflation strategy, no institutional preparation, and conflict with the OBR. That incoherence impacted gilt markets. A progressive programme that raised capacity, controlled rents, taxed excess wealth and managed inflation risk would be categorically different. It would imply control, but its abandonment.
Second, sterling pressure is a price adjustment, not a solvency constraint. Remember, if the pound falls, first the issue is whether this is temporary, and if so what is the impact on import prices and inflation, not bankruptcy. That is a real constraint, but it is one that can be managed through policy: energy independence, food security, industrial strategy, selective capital controls, reserve management, and, crucially, credibility about inflation control that does not rely solely on interest rates.
Third, this is why “how do we get from here to there?” matters. A progressive government cannot simply announce low rates, QE and reserve reform on day one and hope for the best. It would need sequencing (some things first, others later), institutional preparation (BoE coordination and reform, debt management reform), visible anti-inflation measures that don’t rely on austerity, and public honesty about trade-offs.
Fourth, fiscal sovereignty could be constrained in practice, but definitely not nullified. The UK’s import dependence is a real vulnerability; bond markets are not. That means the long-term route out of neoliberalism is not just monetary reform, needed as it is, but reduced reliance on imports through energy, housing, transport and supply-chain rebuilding. That is slow, political work.
So the hope MMT offers is not that markets magically lose power overnight. It is that their power is conditional, political, and contestable, not absolute, and real economics matter. Politics still matters, but it matters most when it is patient, prepared, and honest about the transition costs.
You are right to feel both hope and unease. That tension is the real terrain of change, but change cn happen.