American Adam takes a header

Hyperreality is bullshit, in one way. Most people live, as I do, in the species crashing, bread eating reality for which you have to pay out of pocket most days. But it is real in another way. The form of life of the working class is another reality from the form of life of the superwealthy, and that form of life has gone down the class ladder, becoming a habit for millions of the middle class. Hyperreality has little to do with nerdy headsets and hyper real media, but a lot to do with derivatives and the pooling of mortgages. It has to do with the transformation of the economy by credit.

There is, supposedly, around 60 trillion dollars worth of derivatives out there. Now, that fact alone ought to crash the value of derivatives immediately. There isn’t 60 trillion dollars out there. It is like claiming that the distance from the earth to the sun is actually 400 million miles, if you simply leverage and compound it right. You can fold, spindle, and mutilate yourself, but the distance from the sun to the earth will remain 180 million miles (oops! see in comments below).

So what is that financial stuff made of? Well, it is a form of fiat money, made of collective belief. But the belief is itself leveraged. It isn’t belief in a nation. It isn’t a fetishistic belief in gold. It is simply a belief that a thing exists if it is traded. And if it is traded fast enough, disbelief will never catch up with it.

Bush’s presidency went rotten when two high towers in NYC were destroyed, and now we watch as another highrise, the Bear Stearns building, is, in essence, rifled, to bookend the reign of this man with the brainpower of a garbage fly.

I’d recommend my readers turn to Edward Chancellor’s Devil take the Hindmost for the entertaining account of the origin of derivatives out of the spirit of Goldwater’s America – or, actually, out of a deal between Lee Melamed, president of the Chicago Mercantile Exchange, and Milton Friedman to build a market for currency futures. At the time there was no market for such things, and strictly speaking, they were illegal. Friedman wrote a paper, for which he was paid by Melamed, justifying them – Nixon’s treasury department approved – and the International Money Market on the Merc was opened in 1972.

And so it was. In this American Adam’s fall, we sinned all.

ThomasVaughan puts it like this in Anthroposophia Theomagica: “ … his Fall had so bruised him in his best part that his Soule had no knowledge left to study him a cure, his punishment presently followed his trespass: “All things became hidden and oblivion, the mother of ignorance, did enter in.” This Lethe remained not in his body, but passing together with his nature made posterity her channel. Imperfection’s an easy inheritance, but vertue seldom finds any heirs.”

We’ve trusted the mother of ignorance. But her trick, that tricky bitch, is to not remain oblivion always. Sometimes there is the flash of what is inside. And it is nothing.

We have to get the veils up again, otherwise it will be pop goes the weasel.

PS – a lot of people out there in the heartland couldn’t sleep last night because – like me – they were worried about Alan D. Schwartz. He’s a mensch among menschen, the CEO of Bear Stearns, and according to this fluff piece in the NYT, a very well liked guy. A dancer? You talk about suave. A bridge player. Close personal friend of none other than Michael Eisner.

“But there’s some truth to the old aphorism that a financial firm’s assets go out the door every night. Citing people involved in the deal talks, The New York Times said Monday that up to a third of that work force may not come back, involuntarily.
Still, JPMorgan is trying to retain some of that human capital all the same. Up in the air, however, is whether the bank will retain one of Bear Stearns’ most valuable assets of all: its chief executive, Alan D. Schwartz.

It’s notable that in announcing the deal Sunday evening, JPMorgan made no mention of what would happen to Mr. Schwartz or other senior executives if the deal goes through. Bear Stearns has been similarly mum.
JPMorgan has floated a couple of ideas about how to retain Mr. Schwartz, according to people involved in the talks. One idea is to make him a vice chairman and, unofficially, a deal maker at large who can parachute into different situations. Such a position would similar to the post held by James B. Lee Jr., the JPMorgan banker known as Wall Street’s money man.”

So – how are you going to keep a multi-talented guy like this? He’s probably looking around, and let’s face it, he may suffer a little emotionally from presiding over the fall of Bear Stearns, whose value went from 80 dollars a share to 2 dollars per under his golden leadership in the last two months. So, given that the tax payers are making the loan here, and the vig is like whatever you say, JPM – perhaps we could set aside a hundred million, carrying around money for Mr. Schwartz. It would be sweet. Maybe we could have a photo op of Treasury secretary Paulsen, all smiles, writing the check.

I love these people. I really love these people. America does give a guy a second chance is all I have to say.


Brian said…
Ah, roger...given that our elites have offshored the entire economy (as have the British elites), derivatives and nfancy paper shuffling are the only base for the economy anymore! That and 100 YEAR WAR, of course. President McCain will save us all. John Hagee said so!
roger said…
Now now Brian, it is time to keep the stiff upper lip!

Things aren't as dire as all that! I think you need to watch this video.
P.M.Lawrence said…
"You can fold, spindle, and mutilate yourself, but the distance from the sun to the earth will remain 180 million miles" - no it won't; that's more like Mars's distance from the sun (very roughly).

It reminds me of the story of how Gertrude Lawrence once wrote in a child's autograph book, "remember, great elms from little acorns grow"; underneath which, her agent added "and also remember, Miss Lawrence is no botanist".

When you wrote "pop goes the weasel", were you just being colourful or were you aware that it is a coded decription of pawning one's coat in a longer coded account of life bumping along the bottom of old London?
roger said…
Ah, Mr. Lawrence, one of those school facts that blur with time.

But a very nice quote from Gertrude Lawrence.

Anyway, in my defense, I'll bring in the great Sherlock Holmes. This is from Study in Scarlet, Watson's first impressions of his apartment mate:

"His ignorance was as remarkable as his knowledge.
Of contemporary literature, philosophy and politics he appeared
to know next to nothing. Upon my quoting Thomas Carlyle,
he inquired in the naivest way who he might be and what he had
done. My surprise reached a climax, however, when I found
incidentally that he was ignorant of the Copernican Theory
and of the composition of the Solar System. That any
civilized human being in this nineteenth century should not
be aware that the earth travelled round the sun appeared to
be to me such an extraordinary fact that I could hardly
realize it.

"You appear to be astonished," he said, smiling at my expression of surprise. "Now that I do know it I shall do my best to forget it."

"To forget it!"

"You see," he explained, "I consider that a man's brain
originally is like a little empty attic, and you have to stock it with such furniture as you choose. A fool takes in all the lumber of every sort that he comes across, so that the knowledge which might be useful to him gets crowded out,
or at best is jumbled up with a lot of other things so that he has a difficulty in laying his hands upon it."