The Medium That Steers Everyone

Money does not rule. But whoever needs it falls in line.

I. An Adviser’s Remark

James Carville had helped bring Bill Clinton into the White House in 1992. Shortly afterwards he watched the new president shelve his promise of a tax cut for the middle class and cut the deficit instead, because the interest rates on government bonds were rising. Carville said at the time that he used to want to be reincarnated as the president or the pope. Now he wanted to come back as the bond market: “You can intimidate everybody.”

The remark is a joke, but it describes something serious. The most powerful man in the world had just learned that there was something he could neither elect nor dismiss and still had to obey.

II. Five Governments, One Outcome

Paris 1983. François Mitterrand had taken office in 1981 with a programme of nationalisations, higher wages and more public spending. Capital fled, and the franc had to be devalued three times in eighteen months. In March 1983 the Socialist abandoned his course and switched to austerity. In France it is still called “le tournant de la rigueur”, the turn to rigour.

Rome 2011. In the autumn the interest rates on Italian government bonds rose above seven per cent, a threshold beyond which a state can hardly service its debts. In November Silvio Berlusconi resigned, a man who had survived every scandal before. He was followed by a cabinet of experts whom nobody had elected.

Athens 2015. In July the Greek government held a vote on the creditors’ austerity conditions. A good sixty per cent voted No. Eight days later the same government accepted a programme that was harsher than the one rejected. The banks were closed, and the money was running out.

London 2022. In September Liz Truss presented a budget with large tax cuts without saying how they would be paid for. The pound fell to the lowest level in its history, the interest rates on British government bonds shot up, pension funds began to totter, and the Bank of England had to step in. Seven weeks after taking office, Truss resigned.

Washington 2025. On 2 April Donald Trump announced tariffs on imports from almost the whole world. A week later the interest rates on American government bonds rose faster than they had for a long time. The same day he suspended most of the tariffs for ninety days. People had got “a little bit yippy”, he said.

A Socialist, a right-wing populist, a left-wing government, a Conservative, a nationalist. A large country, a medium one, a small one, a former empire and the world power itself. All of them lost to the same thing, and none of them took years to do so. It took weeks or months.

III. How the Medium Works

It is tempting to imagine money as a ruler, with a seat in New York or London and people there who decide which government falls. That is not how it is, and whoever tells it that way misses what is dangerous about it. There is no meeting and no order. There are millions of individual decisions by funds, banks, insurers and savers who all want the same thing: their money back, with interest.

The sociologist Niklas Luhmann described money as a medium of communication. It transmits a single message, namely whether someone can pay, and it transmits it quickly and everywhere. Whoever depends on it must follow it, whether he wants to or not. No one has to tell him.

A state with debts is a customer who has to come back every month. Old bonds expire and must be replaced by new ones. Think of a farmer who buys on credit from the merchant until the harvest comes. He can give the merchant a piece of his mind once. At the next purchase he is standing in front of him again. Every government is in the same position: it can defy the markets, but only until the next auction.

That is why the medium usually works without being seen. The five cases above are the exceptions, in which a government let it come to a showdown. In all the others, it weighed beforehand what the markets would say and wrote the programme so that it would not come to that.

IV. Who Can Resist

There is a way out, but the ways out show how high the price is.

Sealing oneself off. In September 1998, in the middle of the Asian crisis, Malaysia introduced capital controls and pegged the ringgit firmly to the dollar, against the advice of the International Monetary Fund. It went surprisingly well. In 2003 the then head of the IMF, Horst Köhler, conceded that Mahathir had been right. But the last controls had already been lifted in 2001, because a country that locks capital in no longer gets any either. China keeps its controls to this day and pays for them with a currency that hardly anyone outside the country wants.

Making the money oneself. In July 2012 the President of the European Central Bank, Mario Draghi, said in London that he would do whatever it takes to preserve the euro. The interest rates for Italy and Spain fell without his having to spend a single euro. Only whoever produces the medium can stand up to it. But that is not governments, it is central banks, which nobody has elected and which are meant to be independent for precisely that reason. So power does not move back to politics. It moves from one unelected place to another.

Owning the world currency. The United States can resist longer than anyone else, because half the world needs dollars, as we described in “The War for the Dollar”. But even Trump needed only a week in April 2025 to give way.

So the medium can be ignored, but only in three ways: by cutting oneself off from the rest of the world, by handing the decision to a central bank, or by issuing the world currency oneself. And none of them lasts.

V. What the Medium Does Not See

This would be bearable if the medium measured correctly. It does not.

It transmits only what can be expressed in a price today. A school that will produce better engineers in twenty years has no price today, only costs. An invention that still needs ten years of development, likewise. A corporation, by contrast, that puts its reserves into buying back its own shares is rewarded at once. In “Market Price and Future Price” we showed how Siemens sold 150 years of motor building at the market price and bought American software at the future price. The medium valued both correctly, by its own standard.

On top of this, the medium reinforces itself. Rising prices attract money that drives prices higher still, until the bubble bursts. We described this positive feedback in “The Carousel” and in “The Loop That Relocates Itself”. And when the bubble bursts, the money does not lose its value. It changes hands, as we showed in “Is It ’29 Again?”.

That is the core. Whoever measures growth gets growth, we wrote in “Market, Plan, Tournament”. Whoever measures the ability to pay tomorrow gets the ability to pay tomorrow, and everything that only takes effect the day after falls through.

VI. What Follows

The medium cannot be abolished, and whoever tries ends up with Malaysia or with Mitterrand. But one can reduce the dependence and build something alongside it that measures what the medium does not.

Less dependent is whoever does not have to come back every month. A state whose citizens put their savings to work in their own country owes them to itself. Japan has more debt than any other large country and is still hardly pressed by the markets, because almost all of it is held at home. Germany has done the opposite. Its savings have flowed abroad for decades and been badly invested there, as we described in “Stupid German Money” and “The Richest Poor Country”.

Alongside this we need owners with staying power who are not valued every month, and feedback that reports what will be missing in twenty years, not just what falls due tomorrow. Politics has so far left both to the medium.

Money does not rule. But whoever needs it falls in line. And whoever needs it permanently has already decided whom he obeys.