Derivatives markets can punish elected governments via currency depreciation

Evidence

At this scale and scope, it is necessary to consider that we may be witnessing, as LiPuma and Lee argue, “a planetary shift in power away from national state political systems, or perhaps political systems of any kind, and toward the global financial markets.” As the structural form that circulates and globalizes risk, derivatives are a key determinant in this paradigm shift. This destructive power is perhaps most evident in the many countries of the Global South that have felt the wrath of derivatives markets. For example, the election of Luiz Inácio Lula da Silva of the Workers’ Party in Brazil in 2002 set off a wave of depreciation of Brazil’s currency driven by the derivatives markets. The Brazilian real fell by 30 percent compared to the dollar and euro, swelling Brazil’s debt obligations and severely limiting Lula da Silva’s ability to remedy the country’s economic and social injustices, the platform for which he was elected. — Andrew deWaard, Derivative Media, 161

Categorization

• XREF: Connects to the reader’s known Frankfurt School interest in how market structure constrains political agency and to postcolonial critique of financial dominance over the Global South.
• QUESTION: Would be worth verifying whether Lula’s own 2002 letter ‘Carta ao povo brasileiro’ (appeasing markets) preceded or followed this depreciation - the causal sequencing matters for how tightly derivatives drove it.