Markets are always spooked. Period.

Well, well. It seems that the collapse of the Dutch government and the prospect of a new French president has “spooked” the markets. Well, of course it has: markets are fundamentally irrational organisms — as Keynes pointed out many decades ago. One moment the bond market is spooked by the thought that governments might not be able to implement the ‘austerity’ programs that will push their countries into downward economic spirals. The next moment, the market is spooked by the thought that the prospect of economic growth is rendered less likely by austerity measures. So trying to run a country in such a way that the bond markets are satisfied is not only absurd, but impossible. Yet that is the essence of the Cameron/Osborne economic strategy.