Commentary
Disaster ‘investors’ have already deployed into the financial markets
Death, disease, natural disasters and all kinds of misfortunes have joined the list of things and events on which one can speculate, place bets, and in which one might even ‘invest.’
The contemporary economy is defined by the voraciousness of the financial markets. This is where the real power lies. As a result, it’s no wonder that, as tensions escalate between the US and Iran, some speculative funds are already rubbing their hands in anticipation. In a war, there are always winners and losers, including on the money market.
And that’s how it will be this time around as well. In fact, it’s already happening: the price of oil, mostly driven by the derivatives market, had risen to over $70 a barrel after the US strike against General Soleimani. No wells or refineries have been shut down or blown up—at least not yet—but the mere possibility that the crisis between Iran and the US might lead to open armed conflict has already led many “analysts” to revise their estimates upward on the price of crude oil in the short term, including gasoline as part of the market of the so-called commodity derivatives, the financial instruments that have raw natural resources as their underlying commodities.
It is also true that the thrill of gambling and making risky bets is not for everyone, which is why other investors are taking the cautious path and moving toward safer shores—such as gold, whose price has reached a seven-year maximum ($1,588.13 an ounce), but also palladium (which now costs $2,020 an ounce), a rarer metal, which is thus more sheltered against sudden drops in price. Money has long freed itself from the ties to gold and other raw materials, but when times get perilous, the precious metal always offers a guarantee. That’s when “money” and “gold” tend to become the same thing once again—although obviously not for everyone, and certainly not for the popular classes.
To use the jargon of the financial operators, one might say, in short, that in this context, both “bearish” and “bullish” investors, although playing different games, are reacting to the same set of expectations. These, in turn, are tied to the risk that the situation could in some way escalate all the way to disaster (or almost).
However, when combined, these extremes of euphoria and uncertainty, speculative impulses and defensive retreats might have terrible effects on a world economy that is already footing the bill for a senseless trade war, as well as the aftereffects of a crisis which, in some areas of the capitalist world economy—i.e. Europe—still cannot be eradicated (for instance, in Germany, the production of cars in 2019 fell to 1996 levels, with a decrease of 9%).
This is the fear expressed by the American rating agency Moody’s when it talks about the possibility of “broad economic and financial shock” in the case of lasting conflict between the world’s leading economic and military power and the country led by the Ayatollahs.
This doesn’t concern just the direct effects on the economy of an uncontrolled, and uncontrollable, increase in the price of oil (which might be combined with an equally uncontrolled increase in the price of other hydrocarbons, such as natural gas, given the chaos in Libya), but also, and most crucially, the danger of a worsening of the “operating and financing conditions,” an obscure technical expression which can be translated to mean a contraction of the capital market, which would immediately affect some of the productive sectors of the economy, as well as employment levels.
For companies in the energy sector, according to Moody’s, all this could translate into “increasingly tight access to the capital markets in 2020, raising their cost of capital and weakening liquidity, while also heightening default risk for firms with looming maturities.”
There is little that can be done about this: the philosophy that the financial markets take their cue from is indifferent to possible collapses in the real economy and in the living conditions of millions of people.
Only starting from this realization is it possible to explain how death, disease, natural disasters and all kinds of misfortunes have joined the list of things and events on which one can speculate, place bets, and in which one might even “invest.” This is another kind of war, an everyday one being waged on the financial markets and parallel markets all over the world. And it can reap great profits from a real war, or a potential one, or even one that is threatened or sought after.
Originally published at https://ilmanifesto.it/chi-investe-sulla-guerra-e-gia-in-azione/ on 2020-01-08