Remora

The unwinding


LI recommends a Schopenhauerian article in the Economist today. War, depression, and a moronic leader -- it sounds like Austria in 1935, but no, my good buds, no. It is our own beloved superpower, or hyperpower, or mononucleus macronuclear power, the US of A, which seems destined for a bad period. Although we aren�t totally convinced by this kind of talk � after all, during the last bad period, 1991, there was talk of the collapse of US banking. The better bet is that we will eke out this time. But odds wouldn�t be odds if there wasn�t a chance of the losing end:

"The unwinding of America's economic and financial imbalances has barely begun. Share prices are still overvalued by many measures. Companies still need to prune much more excess capacity. Most worryingly, debts still loom dangerously large. Although much of the increase in reported profits in the late 1990s was illusory, the increase in corporate debt to finance that unprofitable investment was horribly real. Dresdner Kleinwort Wasserstein, an investment bank, estimates that American corporate balance sheets are more stretched than at any time during the past half-century.


"American households' net worth is likely to shrink again this year, for the third year running, after a long, uninterrupted rise since the second world war. If lower share prices cause households to increase their saving sharply, America could be pushed back into recession. Even if saving rises more gradually, the economy is headed for several years of below-trend growth. A weaker dollar would help to cushion the economy, but only by squeezing growth in other countries. The rest of the world, which benefited so handsomely from America's speculative binge, will now have to share its hangover."


Isn't that a lovely word, "unwinding"? It has the crisp techno-beauty of one of those words so cleverly collected by Don Delillo � an artificial flower of rhetoric. All those snappy terms that derive distantly from the impression managers, the think tank, the game theorists. Unwinding should remind us of yarn, and homemakers, and cats; oddly enough, it evokes none of those things. My guess is that unwinding comes from a more clockwork world, one in which the key can go in the slot and uncoil the mechanism. We don�t know when "unwinding a position" became a wall street phrase of art, although we�ve looked around. Where are the lexicographers of tomorrow? Here�s a puzzle for you.

Swift uses a prototype of the phrase in "The tale of a tub;"




"However, that neither the world nor our selves, may any longer suffer by such misunderstandings, I have been prevailed on, after much importunity from my friends, to travel in a complete and laborious dissertation upon the prime productions of our society, which, beside their beautiful externals, for the gratification of superficial readers, have darkly and deeply couched under them the most finished and refined systems of all sciences and arts; as I do not doubt to lay open by untwisting or unwinding, and either to draw up by exantlation, or display by incision."


LI knows that Wall Street does have its litterateurs. However, we doubt that the term came from Swift, however nicely this would fit our sense of the, uh, impostures of high finance