Denying Reality: Financial Markets on the edge

It's not healthy to deny what is happening around you. Reality is more than just perception, it is what happens while you ignore it until some event forces you to reconsider that perception.

However, the financial markets are built on perception and that has given us the boom in property prices here in the UK and in the US, plus the dramatic "credit crunch" we are now experiencing. Northern Rock was the prelude, a little taster of what was to come. The real performance started this year on Wall Street: the collapse of Bear Sterns with its rescue with public money, the nationalisation ("Conservatorship") of Fannie Mae and Freddie Mac, and now the imminent collapse of Lehman Brothers bank and perhaps the buyout of Merril Lynch.

All these institutions got in to their current predicaments by short term thinking, using massive bonus to reward investments with no long term viability. This was fuelled by irrational group psychology of the trading floors, which in turn is fuelled by testosterone. This clouds the perceptions of not only the dealers but the executives who control the organisations. As one investor has commented "Lehman tried to deny reality until the bitter end."

"Competition and growth" are the bywords of free market capitalism, not "co-operation and sustainability." Competition is a masculine mindset, the same testosterone fuelled psychology that bought us the zero-sum game.

Will it change? That depends on how cynical you are. Hope is normally lumped together with Idealism by those who prefer the status quo. But if the credit crunch tells us one thing, it is that if you live by the market; you die by the market.

When all we had was our labour-power to sell, we banded together to form labour unions. They worked so well that by the 1970s they were too powerful for the ruling elites. The pendulum has now swung back towards the property owners. Capital, the financial markets are all powerful and it seems there is no way we can change things. But we can: We own the means of consumption.

We can choose to borrow. We can choose what to spend our money on. We can even save it. If this financial crisis proves anything, it proves we can take control of the financial markets by withholding our participation within them. By choosing how and where we spend our money, we can starve the markets of what they need: financially ignorant players from whom they can fuel their cancer-like growth.

Change is in our hands. What will we do with it?