echoes of the britney age

NARVIK, Norway Nov. 30 — At this time of year, the sun does not rise at all this far north of the Arctic Circle. But Karen Margrethe Kuvaas says she has not been able to sleep well for days.

What is keeping her awake are the far-reaching ripple effects of the troubled housing market in sunny Florida, California and other parts of the United States.
Ms. Kuvaas is the mayor of Narvik, a remote seaport where the season’s perpetual gloom deepened even further in recent days after news that the town — along with three other Norwegian municipalities — had lost about $64 million, and potentially much more, in complex securities investments that went sour.

One of those apocryphal Lenin quotes that are passed around by rightwingers goes: “The Capitalists will sell us the rope with which we will hang them.” I doubt Lenin said this, however: he was smart enough to know that capitalists did a bang up job both of selling rope to each other and hanging each other already. Some extra twine shipped to the Soviets wasn't going to make a hell of a lotta difference.

At one time, however, the good old liberal state actually regulated the rope selling. We tend to forget that as recently as the seventies, the whole structure of financial speculation that we take as normal was, well, illegal. Up until the seventies, the institutional memory of what caused the Great Crash was still vivid. The conservative contention that what caused the great crash was too much government intervention with the natural processes of the laissez faire economy was treated with the contempt it deserved, since it was obvious then - and it might be put down as one of Jane Austin's truth universally to be observed - that the leaking of confidence from a market dependent on credit will crush the 'efficient mechanisms' that are in place to prevent panic with the same blind rush for the door that animates a crowd in a burning movie theater. In Edward Chancellor’s wonderful Devil Take the Hindmost: a history of financial speculation, he quotes an essay by F. Scott Fizgerald, Echoes from the Jazz Age, which we might want to pull out again as we watch the Bush regime employ the time tested variants used by every coup state to ward off the effect of economic misrule that has been its raison d’etre – in the same way that the raison d’etre of a pirate ship is pillage.

The Jazz Age had had a wild youth and a heady middle age. There was the phse of the necking parties, the Leopold-Loeb murder (I remember the time my wife was arrested on the Queensborough Bridge on the suspicion of being the “Bob-haired Bandit”) and the John Held Clothes. In the second phase such phenomena as sex and murder became more mature, if much more conventional. Middle age must be served and pajamas came to the beach to save fat thighs and flabby calves from competition with the one-piece bathing-suit. Finally skirts came down and everything was concealed. Everybody was at scratch now. Let’s go ---

‘But it was not to be. Somebody had blundered and the most expensive orgy in history was over.

It ended two years ago, because the utter confidence that was its essential prop received an enormous jolt, and it didn’t take long for the flimsy structure to settle earthward. And after two years the Jazz Age seems as far away as the days before the War. It was borrowed time anyhow – the whole upper tenth of a nation living with the insouciance of grand ducs and the casualness of chorus girls.”

Myself, I have a soft spot in my heart for the twenties – in fact, if you got me down in a wrestling match, sat on my chest, and forced me to say when I thought civilization had peaked, I’d opt for the twenties. Our own age – the Britney age – doesn’t have quite that insouciance of the grand dukes, even if we are fed a daily diet of the casualness of chorus girls.

Chancellor’s book traces the revival of the liberal economic theory – or the theory of the expensive orgies – through some amazing stories. None is, perhaps, as amazing as the story of Milton Friedman. In 1960, Friedman wrote an essay, In Defense of Destabilizing Speculation, which suggested that speculation would self-organize its own constraints due to the fact that speculations that were inefficient would lose money to people who had bet against those speculations. This is a variant of the efficient markets theory, which should really be renamed the “trust a drunk to get home’ theory. As we’ve seen over the last two weeks, the Stock market does operate on information – it just doesn’t distinguish between good and bad information. If you have ever tried, when extremely high, to sing a Neil Young song with other people who are also extremely high, you’ll have a wonderful model for explaining market activity – this should certainly be looked into by economists of the Chicago school. The probability of not realizing that you are out of tune, when high, singing songs that might have originally been sung out of tune, to boot, is very much like a market that supposedly exists to allocate, in the most efficient way possible, capital to industry.

So, here’s a golden moment from Chancellor’s book.

In 1967, Milton Friedman attempted to bet against the sterling price to Britain’s forced devaluation, but was turned down by the Chicago banks on the grounds that his action would encourage speculation. Afterwards, Friedman related his frustrating experience in print. His article attracted the attention of Leo Melamed, president of the Chicago Mercantile Exchange … the smaller of the city’s two agriculture futures markets. …

After the collapse of Bretton Woods, Melamed approached Friedman and asked him to write a paper justifying the creation of a market for currency futures. The professor obliged, demanding a payment of $5,000 for his services (he is reported as saying, I’m a capitalist. Remember that). Friedman had long argued against capital controls, in favor of floating exchange rates and the free movement of capital. In his paper for Melamed, entitled “the Need for Futures Markets in Foreign Currencies”, he claimed that currency futures would have a stabilizing effect on exchange rates and encourage the development “of other financial activities in this country.” Melamed’s money was well spent. Permission was granted by the U.S. Treasury and Federal Reserve to establish the new International Money Market at the Merc, which opened in May, 1972. The financial revolution had begun.”

Gatsby believed in the green light, the orgastic future that year by
year recedes before us. It eluded us then, but that's no matter—tomorrow we will run faster, stretch out our arms farther. . . . And one fine morning----

So we beat on, boats against the current, borne back ceaselessly into the past.

It’s Britney, bitch