Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.
Reportage in The Wall Street Journal on April 4th states that “A fund owned by China’s foreign-exchange regulator has been taking stakes in some of the country’s biggest banks, raising speculation that it may be a new member of the so-called ‘national team’ of investors the Chinese government unleashes to support its stock market.”
Statists and interventionists around the world (read: `those who embrace State Capitalism) think “Big Players,” as the academic literature has dubbed them, will protect us from economic storms. While there is a budding and serious academic literature on Big Players – aka Market Disrupters – the financial press virtually ignores the Disrupters’ potential to bury us. Indeed, instead of stabilizing markets, the Big Players disrupt them. They are the purveyors of instability. For those who wish to grapple with the technical literature, I recommend: Roger Koppl. Big Players and the Economic Theory of Expectations. New York: Palgrave Macmillan, 2002.
Big Players have three defining characteristics. Firstly, they are big — big enough to influence markets. Secondly, they are largely insensitive to the discipline of profits and losses, insulating them from competitive pressures.
Big Players (Read: Governments) Make Markets Unsafe
April 7, 2016