trussed up /trəst əp/ adj. to wear tight clothes that make movement difficult.
Benjamin Netanyahu and his government are now facing the fate that befell Liz Truss and her government. People with very long memories will recall the name Liz Truss – she was prime minister of the United Kingdom for 50 days starting this past September before being obliged to resign.
Let’s be clear: there are very few similarities between Netanyahu and Truss, in fact, some of the differences are massive. However, I am suggesting that they and the governments they head may share the same fate.
Truss’s government collapsed in record time – but why? One can point to the narrow base of support she had within the Conservative party, to her lack of high-level experience and to other personal and institutional factors. None of these, however, explain the extraordinary speed with which she was swept from office. This was the result of exogenous factors – exogenous to the cabinet, the party and parliament as a whole.
Liz Truss was purged by the financial markets in general and the bond market in particular. What triggered this fierce reaction on the part of the financial sector – both in London and globally – was the manner in which she and her Chancellor of the Exchequer (Finance Minister) presented a very radical and ideologically extreme set of economic policies.
It is no exaggeration to say that the Bank of England played an important role in undermining the confidence of the markets in the government and thereby unleashing the financial tsunami that destroyed it (although the British central bank was instrumental in preventing that same tsunami from gutting the British pension system). That all sounds weird and implausible, but then most of what happened in the UK last September was weird and totally implausible to anyone with any prior knowledge of the British government and the City of London.
The parallels between Truss and Netanyahu should now be coming clearer:
a) a new right-wing government with an extremist, ideologically-driven agenda – check;
b) said agenda anathema to much of the country and all its elites – check;
c) also unacceptable to foreign investors and financial institutions active in the country – check;
d) central bank becomes a factor (at least) contributing to the erosion of confidence in the government – check; the dismissive and even insulting response on the part of Netanyahu and his parliamentary hit-men to the Governor of the Bank of Israel’s warning may have been the decisive event of the past remarkable week.
e) the markets start selling the currency, government bonds and financial assets generally of the country in whose government they have lost confidence – check, as of Thursday.
If the parallels continue along the same trajectory, Israel can expect:
f) the sell-off to become a tsunami;
g) the removal of the offending government to become the only way to stop the financial collapse, by restoring a measure of confidence – via the appointment of a premier who can command some degree of confidence.
The key points to note with respect to this comparison are that ‘the markets’ – as impersonal a term as exists in today’s world – don’t care about the domestic policy debate, or even about the specific country involved. They form a broad consensus opinion about the proposed policy package which, for whatever reason, they deem to be inimical to their interests as investors in – or lenders to – the government, corporations and households of the country. They then act, typically in herd-like fashion and with little regard to the damage such behavior inflicts on them, let alone on the country and its citizens. Finally, the last thing they care about is whether the prime minister in question has a large or small majority, a strong or tenuous hold on power, or any other domestic political factor. All they know is that They. Want. Out. NOW!
That is what Israel is now facing. It has nothing to do with antisemitism or BDS, although that is what is already being claimed, and everything to do with panic and the fear of losing money. Here’s an anecdote: In 1995 there was a serious financial crisis centered on Mexico – and hence called the ‘tequila crisis’. An American money manager was quoted in the Wall Street Journal as uttering the following immortal truth: “We’re all rushing to get out, we don’t know why. When we went in, we all rushed to get in, we didn’t know why.”
Plus ca change.
By the same token, the dire warnings that Israel will be treated like Turkey or Hungary also miss the mark. If they can do it to the UK, no one is safe. Nor is this a debate that will tsk and tut-tut in the UN or the EU. These are the financial markets, they don’t do debates. They shoot first and maybe ask questions later. And, unlike the UN et al, they really do run the world.
Here’s another quote to mull over as the markets re-open this week. James Carville was Bill Clinton’s chief political strategist, but even he learned a thing or two about reality when his boss reached the top: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.”