Markets Stay Calm.
Do Investors Not Understand Religion?

Late Monday I happened to catch an interview with Bill Gross. Along with Mohamed El-Erian, Gross runs the ginormous private investment firm known as PIMCO. Even more than Moody’s Investment Service and Standard and Poor’s, people like Bill Gross decide the creditworthiness of these United States.

What Gross said was straight to the point. Investors like him have always expected rational behavior from U.S. political leaders. Our politicians might be stupid and stupidly divided about many other things, but about real things (i.e., money) they can be counted upon to behave rationally. So in a case like this, for example, they can be counted upon to settle, albeit at the 11th hour, on some kind of compromise around deficit reduction.

Gross said specifically that markets have already discounted the possibility of a default: that is why we aren’t seeing a massive selloff following the collapse of the Obama-Boehner talks. But then, just as coolly, Gross questioned whether extreme partisan deadlock might now render the U.S. constitutional system unworkable. He mentioned how parliamentary systems deal decisively, if harshly, with situations like the one we now face. He implied that investors might begin to stop buying U.S. debt if they see systemic governance failure taking root.

My take about the relative calm of international markets is that investors are too smart for their own good. Because they are ultra-rational agents (we’re leaving morality aside here), they assume that politicians are closer to them than to the passionately religious in their basic makeup. Investors imagine that everyone thinks like Jeremy Bentham. They forget that Bentham’s long life spanned not one but two Great Awakenings.

Truly shrewd investors might wish to take the religion factor more seriously. As Gary Laderman explained recently in these pages, the “Republicanity” of Tea Party types and their enablers contains more than a dollop of religious faith.

One need only begin with the idea that super-high-income Americans are job creators and that too much federal spending is what is now holding back a robust recovery. People like me might scoff at this kind of talk. But polls show that remarkable numbers of low-income folks have bought into it. These are matters of pure faith that many are willing to accept as “the evidence of things not seen.”

Thomas Frank takes it further. Echoing Job’s expression of ultimate faith in a punishing God, Frank says that we understand how the predatory rich betray us and we invite them to go ahead and do it to us: “Though he slays our bank account, yet will we trust him: aspiring to his lifestyle, emulating his swaggering ways.”

All of which suggests that progressives are up against much more than a bad summer movie and some degree of temporary insanity on the part of the warring parties in DC. We are up against a powerful religious devotion. It seems that a great many Americans not only don’t want to pull the rich down from their thrones: they want to supplicate them, offering their own bodies as burnt offerings if necessary.

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