ANYBODY CAN AFFECT MONETARY POLICY.

The real debt ceiling is creaking and groaning, and Common Dreams contributor Les Leopold sees oligarchy at work.  (No, I don't know if he pronounces it "awl-uh-gawky.")

Are you up in arms about the existential threat Trump poses to democracy—about how he stomps on the courts, usurps the congressional power of the purse, recklessly fires government workers, kisses up to autocrats, attacks free speech, and deports immigrants on trumped-up charges? Isn't Trump the new face of fascism?

Maybe, but the bond market vigilantes showed us what undemocratic power really looks like.

The bond market is gigantic, $140 trillion worth of interest-bearing IOUs. Every nation and every large institution holds government bonds. And the most sought-after bonds come from the U.S. Treasury, especially the 10-year Treasury note, which has for a long time been considered as risk-free as any investment can be.

The joy of being the world's reserve currency, and even with over thirty years of unserious people serving as president, I have trouble identifying any other ten-year bond with a better risk profile than a Treasury. You can't believe Chinese accounting, and a European Union offering a convex combination of the Reichsmark and the Greek drachma, not to mention whatever residual noise there is in the franc and the lire doesn't inspire confidence.

In addition to other nations and major banks holding Treasuries, individuals either through their money-market funds on their own accounts hold Treasuries.  At the margin, any such individual can decide not to hold them, either directly by selling them, or indirectly by redeeming money market shares, say to finance a house or a car.  Keep that in mind as Les continues to rant.

While tens of millions of people and institutions own government bonds, the vigilantes, a subset of bond traders spread across the world, place bets on whether they expect bond prices will be going up or down. Their buying and selling guides market prices higher or lower. No one knows how many vigilantes it actually takes to move the market, but it’s not just a few people in a back room somewhere.

Wherever they are located, the vigilantes share an understanding—a profound group-think—of what makes for strong government bonds. If the large holders of capital in a particular country are threatened, the vigilantes demand a higher interest rate on existing bonds, thereby putting downward pressure on the value of those bonds. They are demanding a higher interest rate because they believe the bonds, due to what they believe are bad government policies, just got riskier. (By definition, if the interest rates go up, the price of existing bonds goes down.)

The decline in the value of these bonds immediately inflicts financial pain on millions upon millions of bondholders all over the world. The message is impossible to ignore.

If "it's not a few people in a back room," it might well be emergence.  Right now, for instance, if I'm portfolio manager for the Bank of Japan I might offload a few Treasuries as a friendly warning; if I have the same job for Communist China I have a more serious problem as my Comrade Commissars might not want the dollar devalued and if I displease them my family pays for the bullet tomorrow.  On the other hand, I might be a private holder of capital and nervous about the trade situation, and I thin my holding of Treasuries.  Put another way, no matter what sort of investor I am, I share with other investors the same understanding of what makes a bond strong; but there are different margins along which those investors decide to hold Treasuries.  So much for group-think to lower the value of government bonds.

Naturally, Les has to be a good communist.

These vigilantes are not anti-government populists. What they think harms the economy is usually the opposite of what the rest of us believe is good. They are anti-populists who care only about protecting the interests of capital and maximizing their own profits. They punish the bonds of countries that want to increase social spending, improve worker wages, and curtail corporate power, even if that means undermining the policies established by duly elected officials. Democracy is irrelevant, if not a hindrance, to bond vigilantes. They are the global enforcers of runaway inequality.

Nice try.  Political leaders in Cuba or Venezuela or the old Soviet Union didn't have to worry about bond traders, and still they couldn't raise the standard of living in those countries.  All financial markets do is provide reality checks on public officials who would rather conduct experiments against reality.

Similarly, the vigilantes, in effect, told Trump this week he could not continue with his poorly thought-out Liberation Day tariffs. They demonstrated disapproval by crashing the value of U.S. government bonds, and evaporating, at least temporarily, trillions of dollars of wealth. Even Trump, who believes he can browbeat Congress and intimidate the courts, was forced to retreat.

The vigilantes said kneel, and he did.

Let's consider what this means. An unelected group of people, who control the investments of millions of wealthy people and institutions, has apparent veto power over elected officials the world over. The vigilantes have become an unelected branch of every government on the planet, with the supreme power to control economic policy.

Well, no, governments derive their powers from the consent of the governed, and that includes the governed giving their consent to hold government debt, or to pay taxes.  To Common Dreams types, that's not a good thing.  "That may not be fascism, but it sure isn't democracy."  No, it's emergence.