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.

For Amie

And, just to add further to the sweetness of Amie's day, here's the headline in Figaro:
François Bayrou battu à Pau

Getting the dead bodies out before mom comes home

I have had no time to blog decently lately. But I have noticed a certain thing, a certain panic point spread between the political blogs, all eyes on the prize and the Obama Clinton slug orgy, and the financial blogs, where everybody is on code speedy, fleeing the Wall Street Chernobyl. Interesting discrepancy, there. It is the equivalent of slow motion in the flicks – the bullet travels ever so slowly towards the body. And so it is with this, the dramatic and entertaining part of the 3 trillion dollar recession.

The strategy of the Fed is a lot like the strategy of the guy who disposes of bodies in Pulp Fiction, although you have to imagine that guy trying to cover up for the St. Valentine’s day massacre. How does the Fed take out the dead bodies in full public view while pretending that nothing is happening? Very carefully. Some third party action here, a casual announcement that it is opening up half of its resources, 400 billion dollars, as a sort of charity fund for predatory meta-lenders there. And it is treating the dollar like skeet, of course –let’s shoot that value down and treat the American consumer to some real, good old fashioned inflation – ein bisschen Weimarmusik, if you will. Later on, maybe we will all sit down and try to figure out why the economy was put in the hands of Milton Friedman's mutant ejaculate. Fun while it lasted, boys!

Here’s the grit in the grift: if you keep saying shit that turns out not to be true and it turns out to be not true the very next day, it can get embarrassing. If you say we have no liquidity problem one day and the next you say, oh, did I say liquidity? I meant to say liquids – we have plenty of liquids here in the Boardroom. Single malts galore! Then people begin to suspect you not only don’t know your shit, you never knew your shit. Now, you can tell the yahoos and suckers out there almost anything – the last eight years have shown that. But the slightly more elevated yahoos and suckers who are aspiring to the yacht class get all panicy when they realize they have serious money in the Liars Club. Hence, they rush in to get it out. They start to shake the very bones of the system, moan, groan, and shit in public. It is very hard, in the midst of this freak show, to discretely dispose of the victims.

All of which leads me to this quote from Chernow’s biography of J.P. Morgan:

The 1907 panic would be the last time that bankers loomed so much larger than regulators in a crisis…

“The panic was blamed on many factors – tight money, Roosevelt’s Gridiron Club speech attacking the “malefactors of great wealth,” and excessive speculation in copper mining and railroad stocsk. The immediate weakness arose from the recklessness of the trust companies. In the early 1900s, national and most state-chartered banks couldn’t take trust accounts (wills, estates, and so on) but directed customers to trusts. Traditionally, these had been synonymous with safe investment. By 1907, however, they had exploited enough legal loopholes to become highly speculative. To draw money for risky ventures, they paid exorbitant interest rates, and trust executives operated like stock market plungers. They loaned out so much against stocks and bonds that by October 1907 as much as half the bank loans in New York were backed by securities as collateral – an extremely shaky base for the system.”

Pikers! in our new supersystem, places like Carlyle Capital thought nothing about being leverage 32 to 1 - keeping money as a sort of white elephant being so fucking passé.

Well, we will see what tricks in the body removal trade the Fed will come up with next week. This is the new, ”please don’t notice you are in a recession and your 401(k)s are crap” recession. There’s even a Faulknerian note – Birmingham, Alabama is rapidly becoming a sink hole as the stock market plunging done by the good uber-Christian city managers there have lost more money than anybody knew one midsized city could lose.

So this song goes out to my Birmingham Alabama buds who obviously were doing this whilst planning Jefferson County bond issues!

I love a millionaire

Lust corrodes my body
I’ve lost count of my lovers
but I can count my money
forever and forever…

Our far flung correspondent, Mr. T., being a hard boiled New Yorker, is ho humming Nostradamas’ prediction that Bear Stearns is toast. As he sees it, it just means someone’s going to get lucky at the fire sale – shed no tears for the scapy, déclassé financial house as it gets that look on its face like the wicked witch of the West after Dorothy slopped the pail of water on her.

Hmm. I can never impress the wise guy crowd. You Gothamites! eating raw steel spikes for breakfast. They talk out of the side of their mouths up there, and never say howdy.

Unfortunately, there is no video for the most appropriate song for today – the Mekon’s Soldier from the Retreat from Memphis album, which I’ve quoted before.

But here’s a link to the second most appropriate song for today – which is a song that stands outside from the society of men in chains, and men who hang themselves in chains. An impossible dream of the past!

Men of chains

“The Roman law as to the payment of borrowed money (pecunia certa credita) was very strict. A curious passage of Gellius (xx.1) gives us the ancient mode of legal procedure in the case of debt, as fixed by the Twelve tables. If the debtor admitted the debt, or had been condemned in the amount of the debt by a judex, he had thirty days allowed him for payment. At the expiration of this time, he was liable to the Manus Injectio and ultimately to be assigned over to the creditor (addictus) by the sentence of the praetor. The creditor was required to keep him for sixty days in chains, during which time he publicly exposed the debtor on three nundinea, and proclaimed the amount of his debt. In no person release the prisoner by paying the debt, the creditor might sell him as a slave or put him to death."

This story, under the entry Nexum in William Smith’s Dictionary of Greek and Roman antiquities, is of interest not only for the amusingly suggestive idea that the creditor was named an addictus, but for the idea that the chains worn by the debtor were simply the visual and material endpoint of the chain he had invisibly agreed to wear when he took on debt. Nexus comes from necto, to bond. The nexum is often coupled with mancipium, sale, which is of course at the center of emancipation.

The image of the man in chains is a powerful one. Dickens, that great instinctive mythmaker, brilliantly switches the chains to the addictus in A Christmas Carol:

The bells ceased as they had begun, together. They were succeeded by a clanking noise, deep down below; as if some person were dragging a heavy chain over the casks in the wine-merchant's cellar. Scrooge then remembered to have heard that ghosts in haunted houses were described as dragging chains.

The cellar-door flew open with a booming sound,and then he heard the noise much louder, on the floors below; then coming up the stairs; then coming straight towards his door.

"It's humbug still!" said Scrooge. "I won't believe it."

His colour changed though, when, without a pause,it came on through the heavy door, and passed into the room before his eyes. Upon its coming in, the dying flame leaped up, as though it cried, "I know him; Marley's Ghost!" and fell again.

The same face: the very same. Marley in his pigtail, usual waistcoat, tights and boots; the tassels on the latter bristling, like his pigtail, and his coat-skirts, and the hair upon his head. The chain he drew was clasped about his middle. It was long, and wound about him like a tail; and it was made (for Scrooge observed it closely) of cash-boxes, keys, padlocks, ledgers, deeds, and heavy purses wrought in steel. His body was transparent; so that Scrooge, observing him,
and looking through his waistcoat, could see the two buttons on his coat behind.”

Now, nexum wasn’t the literal Latin for chains – but as the transaction it named could all end in chains, the figurative here is like Marley’s ghost – the nexum is transparent, and you could look through it to the chains wound about the exposed debtor.

In philosophy, the notion of the chain of being is well known, especially since A.O. Lovejoy’s book. However, Lovejoy was a traditional intellectual historian. He wasn’t one to ask about the shifting between the material and the figurative, that interplay which, of course, is as ice cream and pie to a deconstructionist minded guy like LI. However, though we have pored in libraries over various books on archaeology and anthropology and ancient history, we still have not come across an account of the invention of the chain. The wheel, writing, bronze, the chariot – you can always find speculative accounts of these things. The chain, on the other hand, seems to have been forever familiar. In the Iliad, Book 8, one of the most famous references to chains occurs in Zeus’s flyte:

“Now Dawn the saffron-robed was spreading over the face of all the earth, and Zeus that hurleth the thunderbolt made a gathering of the gods upon the topmost peak of many-ridged Olympus, and himself addressed their gathering; and all the gods gave ear: "Hearken unto me, all ye gods and goddesses, that I may speak what the heart in my breast biddeth me. Let not any goddess nor yet any god essay this thing, to thwart my word, but do ye all alike assent thereto, that with all speed I may bring these deeds to pass. Whomsoever I shall mark minded apart from the gods to go and bear aid either to Trojans or Danaans, smitten in no seemly wise shall he come back to Olympus, or I shall take and hurl him into murky Tartarus, far, far away, where is the deepest gulf beneath the earth, the gates whereof are of iron and the threshold of bronze, as far beneath Hades as heaven is above earth: then shall ye know how far the mightiest am I of all gods. Nay, come, make trial, ye gods, that ye all may know. Make ye fast from heaven a chain of gold, and lay ye hold thereof, all ye gods and all goddesses; yet could ye not drag to earth from out of heaven Zeus the counsellor most high, not though ye laboured sore. But whenso I were minded to draw of a ready heart, then with earth itself should I draw you and with sea withal; and the rope should I thereafter bind about a peak of Olympus and all those things should hang in space. By so much am I above gods and above men."

Macrobius’ comments on this passage are the locus classicus of the chain of being – for, in his Neo-Platonic way, Macrobius metaphorized and metaphysicalized the chain simultaneously. Lovejoy seized on the passage in Macrobius as his starting point:

“When, for example, Macrobius, in the early fifth century, gives, under the guise of a commentary on a work of Cicero’s, a Latin abridgment of much of the doctrine of Plotinus, he sums up the conception in a concise passage which was probably one of the chief vehicles through which it was transmitted to medieval writers; and he employs two metaphors – of the chain and of the series of mirrors – which were to recur for centuries as figurative expressions of this conception:

Since, from the Supreme God Mind arises, and from Mind, Soul, and since this in turn creates all subsequent things and fills them all with life, and since this single radiance illumines all and is reflected in each, as a single face might be reflected in many mirrors placed in a series; and since all things follow in continuous succession, degenerating in sequence to the very bottom of the series, the attentive observer will discover a connection of parts from the Supreme God down to the last dregs of things, mutually linked together and without a break. And this is Homer’s golden chain, which God, he says, bade hang down from heaven to earth.”

Now, I spy with my little eye a curious thing. The curious thing is that the divine order of being uses, as its organizing metaphor, an instrument associated with debt slavery and capture. It is said that the Roman armies traveled with chains for their prisoners of three types, iron, silver and gold, which corresponded to the prisoners they expected to take, with Princes and Kings getting the gold chain. To conquer was not just to abolish the property relations holding in the conquered territory – the law of res nullius exposed all to the chain, to the property one holds in oneself.

Well, I haven’t gotten to Livy’s men in chains running in the streets of Rome, where they ran and ran until they appeared in Rousseau’s essay on social contract – but I’ll get there some day. I am struggling with work, at the moment, and barely have time to do research! Sorry, sorry, sorry.

To finish off, a quote from Henry Maine:

“The Law of Warlike Capture derives its rules from the assumption that communities are remitted to a state of nature by the outbreak of hostilities, and that, in the artificial natural condition thus produced, the institution of private property falls into abeyance so far as concerns the belligerents. As the later writers on the Law of
Nature have always been anxious to maintain that private property
was in some sense sanctioned by the system which they were expounding, the hypothesis that an enemy's property is res nullius has seemed to them perverse and shocking, and they are careful to stigmatise it as a mere fiction of jurisprudence. But, as soon as the Law of Nature is traced to its source in the Jus Gentium, we see at once how the goods of an enemy came to be looked upon as nobody's property, and therefore as capable of being acquired by the first occupant.

me and my nostradamus

In other news – LI’s estimate of a three trillion dollar recession is the same sum talked about in Martin Wolf’s new Financial Times column. We get to that sum in different ways – Roubini, who Wolf quotes, comes, as it were, from the grassroots up, estimating the fallout from an extreme estimate of mortgage failures, whereas LI came to it from the top down, taking the figure of the excess of consumer spending and borrowing over income over the last ten years. Well, my fine readers, there you go – whilst some might take this for amateurish wankery, others will find my figures to be eerily prescient. Why? Because every night, the ghost of Nostradamus visits me and whispers sweet apocalyptic nothings in to my ear.

It is the only way to do predictions, man. Oh, one other thing Nostradamus told me: Bear Stearns is toast. Or was it that he said all men will turn to toasteating as the Angel of Death, looking remarkably like Gloria Graham playing in a movie that prefigures Elliot Spitzer’s downfall, sounds the last trumpet? I couldn’t quite understand the lang d’oc he was muttering in.

the Götterdämmerung as staged by Disney’s seven dwarves

LI can only regard the current festuche, the harmonic convergence of lavender buncombe (Mencken’s phrase) and the thug masters, with something approaching that musical feeling Nietzsche used to get from hiking around Switzerland in his fancy boots. It the Götterdämmerung as staged by Disney’s seven dwarves. We have, on the one hand, our vice president, fresh, apparently, from having some new virgin’s heart tucked into his breast cavity, going to Saudi Arabia to ask them to kindly give us cheaper oil Tuesday for repayment on Friday, on the same day the Fed decrees that banks can trade old socks, diaries, lamps, and broken chairs for loans in a brand spanking new entity that is determined to pump 200 billion dollars into the system. Everywhere one looks, the governing class is displaying a totally cute imbecility. Gosh, that CEO class, which has gotten so awful smart over the last two decades that they had to increase their compensation packages by a good 1000 percent, are showing what they are made of.

Cheney’s joke hejira and the Fed’s determination to have the middle and working class pay not only for the party the Ponzi rich have been throwing for themselves, but even for the cleanup afterwards, are treated with the usual awe by the royal stenographers of the press – but outside the gated community, the boobs are getting restive. They got all their Hummers. They got all that great equity out of their houses, which was a-gonna appreciate in price forever. They got their yellow ribbons supporting the soldiers, and some of them even know where Iraq is on the map. Their kids googled it! And now everything does seem to be tumbling down. How could this have happened, after we so terrifically won our war on terrorism and freed the downtrodden Islamic people – didn’t we buy them all bibles or something? Surely they’ve learned to believe in Jesus and watch Dancing with the Stars like a civilized group? Inexplicable that they resist, and we did it all out of the goodness of our hearts!

The boobs have still not quite understood what it means for them when the President energetically shits on the dollar, but they are getting a nice little lesson at the gas pump. And eventually the boobs might even start asking who, exactly, the Fed works for. So the question is: what kind of crowd control is the gated community going to exert?

“They are mad; they are fools,” said the Dog-man. “Even now they talk together beyond there. They say, ‘The Master is dead. The Other with the Whip is dead. That Other who walked in the Sea is as we are. We have no Master, no Whips, no House of Pain, any more. There is an end. We love the Law, and will keep it; but there is no Pain, no Master, no Whips for ever again.’ So they say. But I know, Master, I know.”

I felt in the darkness, and patted the Dog-man's head. “It is well,” I said again.
“Presently you will slay them all,” said the Dog-man.

“Presently,” I answered, “I will slay them all,—after certain days and certain things have come to pass. Every one of them save those you spare, every one of them shall be slain.”

“What the Master wishes to kill, the Master kills,” said the Dog-man with a certain satisfaction in his voice.

“And that their sins may grow,” I said, “let them live in their folly until their time is ripe. Let them not know that I am the Master.”

“The Master's will is sweet,” said the Dog-man, with the ready tact of his canine blood.

“But one has sinned,” said I. “Him I will kill, whenever I may meet him. When I say to you, ‘That is he,’ see that you fall upon him. And now I will go to the men and women who are assembled together.”

ps - here's a little ditty we wrote on November 6, 2004 - after Bushypoo was elected. Somehow, it seems to fit, here.



The Snopes and the freeriders

If LI were a Democratic Party strategist (brrr!), this weekend we would settle down with our Faulkner. The utter rubbish being tossed around by the talking heads about the Democrats adopting Republican moral values to win presidential elections has been untempered by reality. Moral values, we think, had little to do with this election. Rather, what brought out the hicks was the promise of entertainment. Instead of cockfighting or bearbaiting, gaybashing of a high and rare type was on the ticket. This was as irresistible to your average Snopes as a guest appearance on the Jerry Springer show used to be to your average overweight stripper.

The Snopes sullenly populated the backreaches of Yoknapatawpha County in the days before the New Deal. Faulkner’s preferred novelistic time period was the twenties, which brought a lot of changes to Mississippi – but not like the Great Depression and the New Deal did. In the post WWII period, going through the Great Society, the Snopes, with their rabid angers and short term views and long term grudges, grew used to benefiting from multitudinous government entitlements that they never properly contributed to. They have continued to revel in the whole system. But there is a problem here that the system’s designers never considered. It is the problem of the freerider.

The freerider – the user of a public good who does not contribute to the maintenance of that good – has deep resonance in the Snopes culture. It is one of the reasons Jesus is so popular among them – he elevates the status of the freerider to a divine principle, in which, for no real act, a man can be forgiven for his sins simply by prostrating himself before Jesus and declaring to all and sundry the uninteresting mental tidbit that he believes Jesus is the son of God. This, from a man whose beliefs on any cosmological question have been unleavened by reading material since the age of ten. Given the amount of sinning that Snopes like to engage in (q.v. any c & w station in your vicinity), this is the kind of deal Snopeses can’t refuse.

The government, however, is different from Jesus. The government does come in and try to change your behavior, instead of knocking ineffectually at your heart. For instance, lynching, poll taxes, and other useful means of keeping down blacks were all knocked down by the government. This made the government very unpopular. They were against having fun. A moral libertarian, confronted with the government interfering with his behavior, would perhaps try to free himself from dependence on the government. This is why Snopeses can never be real libertarians. They have no sense of integrity. They don’t even understand the problem. For the Snopeses, Bush’s career looked unblemished – he got away with everything he ever did. That counts as a blessed sign of consanguinity among that crowd.

Your average Snopes, then, has no motive to get away from depending on the government, but every reason to denounce it. And this is how your Snopes votes. He sends his Republican congressman to Washington to do two things. One is to interfere with the lives of people that Snopes have no use for – gays, blacks, feminists, New Yorkers, Hollywood types. The other is to reward the Snopes with ever deeper experiences of freeriding. This is done by cutting his taxes – the Snopes, although they don’t make a lot, rely on those refunds to get them out of the most pressing of the enormous mass of debts they have piled up in lives unrelieved by any intellectual activity that goes beyond shopping at the mall and the aforesaid Jesus idolatry – and by borrowing money. Thus, the whole system, with its trillion dollar stockpiles of arms and its special pill provisions for the elderly Snopeses, runs of itself. When it starts to choke, some Democrat will step in and sacrifice his sense of the social welfare to the necessity of taming the deficit. The Snopeses call this God's country for a reason.

The Snopeses have been fortunate in that their opponents, the Liberals, have generally misunderstood the relationship. For instance, the Liberals were the ones denouncing the Bush tax cuts for privileging the wealthy. The odd thing about that is that the wealthy generally don’t live in Snopes places. There truly are a great many limosine liberals. One actually just ran for president. And the even odder thing about that is that the Liberals think that they have developed a credo that represents the income strata that encompasses the Snopes. So that your average Liberal is making an economic sacrifice of a certain sort on behalf of a people who dislike nothing more than a Liberal. This is a true comedy of errors. It is also American history, circa 1980-2004.

So the question for the next four years is: have the Snopes misjudged the situation. Having decimated the Liberals so that they cannot possibly defend the income strata of the Snopes, the rhetoric of conservatism can now become a reality. The Snopes always relied, partly, on the fact that their enemy/defenders were powerful enough to defend them. That’s done with. So will the reckoning finally come? Will reality bite? are the Snopes finally about to learn about the world outside free riderdom? It wouldn’t really hurt the Liberal, except morally.

LI has been enraged by the election, but we are fascinated by the aftermath. We’ve lived around the Snopes most of our life. And we were, until maybe three days ago, in the Liberal position. We were blind. Now we see. And what we see is the enemy. We want to see them suffer. Badly. And we want to see the self-destroying machinery they have set up work – oh so gloriously. So slowly, painfully, we are regaining our joie de vivre. This might not be so bad after all.