pixley - emotions in finance; distrust and uncertainty in global markets (2004)

This page intentionally left blank Emotions in Finance Fear and greed are terms that make light of the uncertainty in the finance world. Huge global financial institutions rely on emotional relations of trust and distrust to suppress the uncertainties. Many financial firms develop policies towards risk, rather than accepting the reality of an uncertain future. Emotions in Finance examines the views of experienced elites in the international financial world. It argues the current financial era is driven by a utopianism–ahope – that the future can be collapsed into the present. It points out policy implications of this short-term view at the unstable peak of global finance. This book provides a timely account of the influence of emotion and speculation on the world’s increasingly volatile financial sector. The author includes absorbing interview material from public and private bankers in the United States, UK and Australia. Jocelyn Pixley is a senior lecturer in the School of Sociology and Anthropology at the University of New South Wales, Australia. She is the author of Citizenship and Employment. Emotions in Finance Distrust and Uncertainty in Global Markets Jocelyn Pixley    Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge  , UK First published in print format - ---- - ---- - ---- © Jocelyn Pixley 2004 © M. E. Sharpe Inc. for reproduction of p. 69 Information on this title: www.cambrid g e.or g /9780521827850 This book is in copyright. Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. - --- - --- - --- Cambridge University Press has no responsibility for the persistence or accuracy of s for external or third-party internet websites referred to in this book, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Published in the United States of America by Cambridge University Press, New York www.cambridge.org hardback p a p erback p a p erback eBook (NetLibrary) eBook (NetLibrary) hardback To the memory of my parents, Lorna and Neville Pixley Contents Figures viii Interviews 2000–2002 ix Preface xiii Abbreviations xv 1Global Markets or Social Relations of Money 1 2Emotion in the Kingdom of Rationality 17 3 The Financial Media as Institutional Trust Agencies 43 4Emotions in the Boardroom 67 5Credibility and Confidence in the Central Banks 94 6Hierarchies of Trust 113 7Overwhelmed by Numbers 133 8 The Time Utopia in Finance 157 9Implications: Emotions and Rationality 183 References 209 Index 219 vii Figures 4.1 Determinants of the State of Expectation page 69 4.2 Role of Emotions in Expectations and Decision-making 70 viii [...]... chains of relationships and the institutional world in which they are formed and sustained And when individuals lose, they are cast as consumers in markets on the ‘buyer beware’ principle Many may even experience shame for GLOBAL MARKETS losing, for having been ‘conned’, for being stupid Yet the problem lies not in individual miscalculation or in any personal misplacing of trust; its source lies in. .. Depending on the price of money (interest) and the ‘real’ value of money (whether it is in ating or disinflating), money always involves unequal relations between creditors and debtors In ation most hurts consumers with no debts living on fixed savings or unindexed pensions, and so on Long-term debts (business debts, state debts, or mortgages) and ‘real’ interest payments are alleviated by rising in ation,... credibility and trust appear newly stable and deserving of confidence than some new and unforeseen factor intrudes, and genuinely trustworthy reputations are destroyed As this book shows, these inter-organisational relations of trust and distrust among major institutions involve emotions, which fuel demands for, and even promises of, ‘risk-free’ money At each failure, this trust collapses into fear, and mistrust... necessity, and the inescapable insecurity, of ‘trust’ and its emotional consequences – within this mysterious world of the financial heartlands; it is not on whether individuals are willing punters or on the operation of markets per se Financial organisations are unavoidably involved in impersonal relations of trust and distrust But can routine projections of trust and distrust help to counteract uncertainty, ... But owners and corporations are highly impersonal today Chapter 2 also compares economic views on interest, risk and uncertainty with my views on the essential role emotions play in financial decisions All following chapters examine emotions in finance using the interview evidence about the outer to the inner world, and on to interdependencies between financial organisations and their trust in data Chapter... considered in Chapter 9 are recognising emotions as inevitably involved in attempts to act rationally towards the unknowable future Emotions cannot be removed from the social relations of money, but the question is which emotions are preferable Financial organisations are now so oriented to short-term horizons and the insanity of denying uncertainty that a number of otherwise interesting ideas, of imposing... in the 1970s which began the revival of large-scale financial dealing and excessive commodification of money, central bankers have had great difficulty specifying relationships in setting and maintaining standards of indebtedness Central banks stand ‘somewhere’ between government and the private sector, said a Deputy-Governor of the Bank of England (Pennant-Rea 1995: 219), at the same time as the burden... economic uncertainty and its attendant shocks; the current anti -in ationary policies attempt to reduce the uncertainty of money’s value as a financial asset But, as this study argues, uncertainty is not only inevitable in economic activity generally but is magnified in finance because money is based on a trust that is inherently problematic Uncertainty is unavoidable Squeezed in one place, it emerges in another... numbers and various forms of risk calculations are ultimately matters of judgement and screening, or rather trust and its collapse Underlying this whole situation is a cultural and emotional climate of short-term thinking within the financial heartland Chapter 8 explains it less from libertarian ideological dominance than from a present-oriented utopianism, a necessary, incessant hope that maintains contemporary... the unacknowledged implications of uncertainty, we expose and even undermine our trust in trust itself Our enforced reliance on trust makes trust itself increasingly insecure, fraught and unreliable We chop off the branch to which we are ever more desperately clinging So the quest for certainty is futile And even though recognising its existence, uncertainty must remain unacknowledged by financial organisations, . Edinburgh Building, Cambridge  , UK First published in print format  -   - -  -  -  -   - -  -  -  -   - -  -  - © Jocelyn Pixley 2004 © M. E. Sharpe Inc Press.  -  -  -  -  -  -  -  -  -  -  -  - Cambridge University Press has no responsibility for the persistence or accuracy of s for external or third-party internet. Citizenship and Employment. Emotions in Finance Distrust and Uncertainty in Global Markets Jocelyn Pixley    Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore,