Busting the joint out

LI hopes, someday, to hammer with his little hammer and nails one little dictum into the American mind (that mountain of quivering balony, that Etna of bullshit): you can not indefinitely support an income spread a la 1900 and a social welfare network a la 1965. Yes, the neo-liberals will claim that the lion and the lamb can lie down together, and that a paradise of growth will infuse us all with the milk of human kindness and good medical coverage.

But besides the fact that growth, when one begins to examine the constituents out of which it is measured, seems to be a funny way of looking at human well being – and besides the fact that growth, inconveniently enough, was much better under the non neo-liberal bad times from 1945 to 1980 – there is, of course, a sort of blindness in this belief. It is as if the neo-libs want to defend the wealthy without ever asking themselves – why be wealthy?

After all, how many lunches can one highly overpaid CEO gobble in a day?

Wealth is power, and power is embedded in the social reproduction of classes. The wealthy need only use a small portion of their wealth to block upward social mobility – and they will gladly do so, if they can. Why shouldn’t they? Wealth, after all, responds to a positional as well as an accumulative logic. You don’t just ‘make a buncha money’ – you use that money to exert power. Which is to homo sapiens what the dew is to the daffodil.

All of which floods the mind in this, the second year of the Zona. As a Christmas gift, we were given the Federal reserve dump, Wednesday, showing how much they loaned and who to and with what interest in the 2007-2010 period. Of course, as Yves Smith has pointed out, they blatantly and illegally kept dark what they took for their loans – in other words, there is a pile of 885 billion dollars in collateral that the Fed, majestically, decided not to disclose to the unwashed. The Fed don’t work for the unwashed.

The numbers have a sort of operetta feeling – the comedy of Randian Wallstreeters running like, to use Dutch Reagan’s phrase, a Chicago Welfare Mother to the Fed should definitely be scored to Offenbach. Today’s Business Week contains this excellent quote:

“Magnetar Capital LLC, the hedge fund which profited from bets against mortgage securities during the financial collapse, participated in the program through Magnetar Funding II, which borrowed about $1.05 billion through seven TALF transactions.
“Magnetar participated in the program on the same terms as the hundreds of other participants in the TALF program, by Magnetar providing ‘first loss’ risk capital in these markets,” Steven Lipin, a spokesman for the Evanston, Illinois-based firm, said in an e-mail.
FrontPoint Partners, a hedge fund unit of New York-based Morgan Stanley, used the facility 48 times through its FrontPoint Strategic Credit Investments for a total of $1.09 billion.
,,,
“On behalf of clients, FrontPoint was an early participant in the government TALF program,” Steve Bruce, a spokesman for the firm said in an e-mailed statement. “With our clients, we were able to support the government in this important initiative.”

I’d like to support the government by taking out a 1 billion dollar loan for 0.0077 percent interest to. Please? I promise to be most patriotic.
This is even more rich for those of us Zona fans with that Long Term Memory – a most unpatriotic property. If there were an operation to get rid of it, I’m sure that , the Dems and Republicans would probably join together in bipartisan harmony to make it tax deductible.

But we remember Front Point from the excellent article by Michael Lewis about the firm that shorted the subprimemarket.
Here’s a quote to go out on. And, if I could only reproduce in prose what is so well done in cartoon, I’d like this quote to be read in a Woody Woodpecker laughing voice, please. The suckers are the American people, and if they don’t rise up and cast aside mock chains and the serious message mongers who insist on herding them into the killing stalls, they deserve what they get:

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.
Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.
Here’s where financial technology became suddenly, urgently relevant. The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.
But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.
The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’”
And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.”

WE SEE HENRY AND TWO HOODS from cabstand checking the cases
of liquor being delivered into the lounge. The entire room
is filled floor to ceiling with cases of whiskey, wine,
crates of lobster, and shrimp, and stacks of table linen
and sides of beef. The place looks like a warehouse.

HENRY (V.O.)
But now the guy has got to come up
with Paulie 's money every week,
no matter what. Business bad? Fuck
you, pay me. You had a fire? Fuck
you, pay ma. The place got hit by
lighting? Fuck you, pay me. Also,
Paulie could do anything. Especially
run up bills on the joint's credit.
Why not? Nobody's gonna pay for it
anyway.

EXT. BAMBOO LOUNGE - REAR ALLEYWAY - DAY

WE SEE cases of liquor, wine, etc., being carried out of
the rear door of the lounge by HOODS from the cabstand and
loaded onto U-Haul trucks.

HENRY (V.O.)
As soon as the deliveries are made
in the front door, you move the
stuff out the back and sell it at
a discount. You take a two hundred
dollar case of booze and sell it
for a hundred. It doesn't matter.
It's all profit.

INT. BAMBOO LOUNGE OFFICE

HENRY, JIMMY and TOMMY are standing around the small
workman's table. There is no desk. The office looks denuded
of furniture. A LAWYER is going over papers.

A terrified, unshaven SONNY BAMBOO is seated behind the
desk. The LAWYER is showing him where to sign.

HENRY (V.O.)
And, finally, when there's nothing
1 left, when you can't borrow
another buck from the bank or buy
another case of booze, you bust
the joint out.

The book is rejected, and LI is bummed

Well, the agent to whom I sent my proposal letter had one his factotums respond that it wasn’t the type of project for the agent’s “list”. No explanation, but I imagine that the factotum was the one assigned to the task of delicately warding off the cranks. And, admittedly, I am a crank.

Well, fuck it. I was bummed for a bit. But I still think that this small book works – it would be an excellent intro to my larger, more flou happiness book. If – I told myself, awake in the hollows of 3 a.m. as the snow began to really accumulate on the streets of Paris – if I just made a first chapter, some 10,000 word consideration of how, a, we moderns have come to at least accept the myth of homo economicus, and b., how economics, in its policy designs, has tried to impress the character of homo economicus upon capitalist societies.

Unfortunately, the story I want to tell has more than just one linear narrative – because in telling this story of the moderns, I am concerned to show that the moderns do not, contra the intellectual historians and the economists, make up one homogenous mass – that in fact in the everyday life of contemporary societies a number of exchange matrixes are in play – and in fact must be in play for capitalism to be liveable.

From the question and the thesis springs my drama – how HE has been fostered in society, and variously resisted by imagination armed.

So these are the elements I need to put into my first chapter.

Ireland and Pareto

Ireland and Pareto

It is a tale often told by the economist, this one of Pareto optimization. The tale goes that, in the Pareto optimal state, we reach a sort of distributional heaven, in which no person can gain any utility without that gain being made at the expense of somebody else in heaven. But the tale contains a paradox, of the kind associated with Zeno. To advance to this state, we must move through Pareto superior arrangements. These arrangements subtly reverse the terms of the optimum. A Pareto superior arrangement is one in which one party – or shall we say the owners? – may gain utility, but without any other party in our heaven losing it. This, we are assured, improves the entire set – all of heaven rejoices when one sinner is forgiven – or when one of the archangels receives a nice golden parachute and stock options amounting to 400 million dollars.

This, of course, is the neo-liberal heaven on earth, and the dispensation by which our rulers rule us. It is, however, a curious idea. For one thing, the ‘gain’ of utility seems to come ex nihilo – surely we are far removed from the labor theory of value here. Ex nihilo, in bureaucrat-speak, is exterior – it is an exogeneous gain. If it were, after all, endogenous, then we would have to ask about who created it, which would lead us to the question of whether, indeed, the other party wasn’t losing utility here. Which brings us to the other perplexing moment in this paradise. For the assumption, here, seems to be that there is no future - it is all present states. Heaven indeed! We transcend time, in Pareto superior states. For the inequality that must hold between the parties is eternally static.

But if our heaven is not in eternity, but in the sublunar flux of time – if all things in this heaven are mutable – then we see that, indeed, what looks like no skin off the nose of the drudge – what does he care if the boss makes his 400 million, as long as the drudge himself makes enough to buy the entertainment center, the car and the house on easy credit terms of 9 percent per annum (with the creditor holding the right to readjust interest at any time)? – might actually not be such a good deal. Heaven has a flaw. The devil’s disciples, from Machiavelli to Marx, have noticed it. The flaw is called power. In fact, a part of the 400 million dollars might well be used to block the poor drudge’s socially upward mobility, by making the cost of entry into a higher class too expensive – say, by making college tuition too expensive, or dentistry, etc. The boss may use part of the 400 million dollars to make tax loopholes for himself, to be paid for by either closing off social welfare programs that benefited the drudge (who will be scolded for his ‘special interests’ and his unwillingness to “share the sacrifice”). Or – and such are the wrecks of mutability – there may come a time, a horrible time, called a slump. Yes, in heaven on earth, it may be that the business cycle is not abolished, even if the economist angels have announced that God, that is, the free and competitive market, has abolished it.

We are testing the effect of creeping from one Pareto superior position to another in Ireland. Here, indeed, the gains in utility seemed to be exogenous. A low corporate tax brought in companies from outside the country. And then, look at how easy credit terms were offered through banks that were flooded with cash from foreign investors! Why, drudge and millionaire could dance to the pleasing pipes of some Celtic Tiger rock band and lay down, afterwards, in one another’s arms, like the proverbial lion and the lamb.

But it turns out that, while the lamb was asleep, he was being trussed up, and now he wakes up to discover, to his horror, the boiling pot and the butcher’s blade. For it is the drudge, the lamb, the one who was gaining utility in spirit whenever his boss’s board of directors gave the boss another raise, who is going to be sacrificed in the feast. Pareto superior states, it turns out, are heavens for the peculator, and they end in fricassee for the drudge. Who doesn’t understand, and turns to the economist who proclaimed the end of the business cycle. Only to hear that now the business cycle must end by the drudge, a., paying for all his boss’s parties, and b., lowering his wages and paying the debts (the not so easy credit term debts) that the economist, just last week, was telling him was the great reason he was the most fortunate drudge in all of Emerald heaven!

And the poor drudge turns to the right (where the words are the same) and the left (where sympathetic leaders should that the drudge has been mishandled, but (sotto voce) that really, there’s nothing one can do, and we do depend on the boss for all good things in life, don’t we?) and discovers that not only is his credit worthless, but so is his vote!

One of Pareto’s admirers wrote an article – oh, I should find the buckos name – to defend the great man from the accusation he was a fascist. The accusation comes from the fact that, at the end of his life, Pareto embraced Mussolini. The admirer wrote that Pareto was a great lover of liberty – of entrepreneurial freedom! – and thus, the fascist business was all a misunderstanding. But, he also wrote, Pareto also hated democracy.

The love of liberty, the hatred of democracy, stir a little and you get Pinochet. Or Klein’s shock doctrine. Or the current state of Ireland, as the drudges are auctioned off to the bankers.

Harpagon 1

The miser is a figure, a character, who exists, in the ancient world and the early modern world, in terms of comedy and vice. He is usually old. He is usually miserable. In terms of Simmel’s schema of money, he is perverted in a key way: he has forgotten the function of money as a means, and in this way, he has forgotten the ends of life.

“When one wants to grasp human fate in the schema of the relationships between the wish and its object, one must say that money, in relation to the stopping point in the series of ends, is really the most inadequate, as well as the most adequate object of our desire.”

Moliere’s miser, Harpagon, can certainly be seen from this side of things. If we look at the sexual objects of desire in play, here, from the beginning we have two secret love matches - of Harpagon’s daughter and son – that contrast with Harpagon’s own overt desire for his son’s choice, Mariane, a space that has been opened by a fact mentioned in the very first scenes – the mother in this household has died. Elise replies to her brother Cleante’s recital of griefs received from their father, Harpagon:

“It is really true that, every day, he gives us more and more reason to regret the death of our mother, and…”

At which point she is interrupted by Cleante who hears the voice of their father.

The death of the mother/wife is both the occasion of the removal of a certain limit to the existential perversion that now characterizes Harpagon – his avarice – and allows the father, an old man, to reverse the natural order by seeking to marry a young woman, Mariane. I want to make a little more business of this competition between the love match and the old man’s money – but I’ll do that later. At the moment, let’s note that the mythic background, here, of an underground god raping a young woman – Pluto/Persephone – fits with certain features of Harpagon’s character that seem borrowed from Aristonphanes Ploutus – the ragged clothes, for instance. And, in particular, the buried treasure.

Harpagon’s two-fold perversion has one source – forgetting the ends of life. Sexually, the end of life, in the seventeenth century, is reproduction. Ever more life. Similarly, the end of money, as Boisguilbert will show in 1690, is commodities – use values.

Simmel interprets this curious synthesis of sterility and desire as the logical result of making a sort of category mistake – mistaking the absolute means for the absolute end:

“If therefore the mediated character of money has the effect that it emerges as the abstract form of pleasures that one does not yet enjoy, then the valuing of its possession in as much as it is not expended preserves a coloring of objectivity, it costumes itself with that fine charm of resignation, that accompanies al objective end goals, and combines the positivity and negativity of enjoyment in a peculiar unity that words can hardly express.
Both moments achieve in avarice their most extreme tension with each other, because the money has an aspect like an absolute means to unbounded possibilities of enjoyment and at the same time as the absolute means can still be completely untouched in its function as the unexploited possession of pleasure.”

Simmel is touching, here, on the ascetic life style of thrift that Weber will later emphasize – and yet the miser does not seem to be a normal bourgeois, even if his character does enter into all descriptions of the bourgeois up to the twentieth century. And even, among outlier fortunes – for instance, those having to do with suddenly gained primary product wealth, like the Texas oil billionaires of the 19302-1960s - the miser figure pops up again, in all its archaic glory, as does its companion, the spendthrift.

Simmel on money and the devil

In early modern Europe, money was the determining factor in creating the literary and moral character types of the spendthrift and the miser. Characters are not vocations, but vocations can accord with or be in discord with characters – and evidently the miser was the character type drawn to middleman professions, ones in which the circulation of commodities, or money itself, is privileged at the expense of production. Misers are also associated with age – whereas the spendthrift was associated with, on the one hand, disdain for a profession – a sort of aristocratic pretence – and youth. Simmel’s essay on the avaricious, the spendthrift and the poor takes its bearings from the social meaning of money as a medium of exchange – as a means – which is why he also includes the poor, a group “in its purest and most specific appearance” defined by “the measurements of the money economy.”

Simmel comes at the problem from the perspective of philosophical anthropology: man is a purposive – a purpose setting – animal. But in as much as purposes give birth to intermediate stages – in as much as the mechanism that leads to a purpose can, in fact, create a middle ground of steps that have to be taken until the purpose is achieved – man is also an ‘indirect being’, the one who is always struggling with the means to ends, as Laocoon and his sons struggled with the snakes. The snakes, in the story, won – they strangled the prophet. Means, in Simmel’s story, also tend to win, as our social lives become so entangled in them, accommodate the distancing of ends and purposes so much, that ends and purposes become faint, distant, and irrelevant.

I think of Simmel’s essay (Über Geiz, Verschwendung und Armut, which is here), evidently hived off the great mass of Philosophy of Money, as being one kind of interpretation of a phenomenon – the role of the cash nexus as the great modernizing element in the world - that, from another side, was interpreted by Weber as inner worldly asceticism. Of course, in Marx, the penetration of all spheres of private life by exchange value receives another interpretation, for Marx sees the role of the cash nexus as a thing, in modernity, that can’t be understood without bringing it into relation to class differentiation, the division of labor, and the freeing of labor from feudal constraints.

Simmel recognizes that unlike the barter economy (or what he romantically calls the ‘natural’ economy), the money economy is not characterized by simply making money another kind of commodity. Rather, it is a commodity that loses all the sensual and, as it were, hedonistic features of a commodity in order to embody, as it were, substitution itself. He makes an interesting remark about that feature of money in relation to ascetic religions – a remark that foreshadows (and conflicts with) Weber’s thesis. Simmel is explaining the irreplaceability of money for living in a society that is fully monetized even though the gaining of money is only the gaining of a means to the things that make for living:

“It is because of this fact, where in principle only indifference reigns against all external things, that it is easy to slip into hatred against money.
Thus, secondly, the tempting character of money works all the more decisively. Because it is ready in every second to be applied, it is the most terrible trap of the weak hours, and since it seems to serve to create everything, it represents to the soul the most seductive of things; and all of this is such an uncanny danger as money, so long as it simply remains as money in our hands, is the most innocent and indifferent thing in the world.

Thus, for the ascetic sensibility, it becomes the appropriate symbol of the devil, who seduces us in her mask of harmlessness and impartiality; so that against the devil, like money, the only security lies in absolute distance, in the renunciation of any kind of relation, so harmless as it may seem.”
To be continued.

as astronomers to the stars, are economists to the economy.

We can easily imagine DNA replicating itself without molecular biologists, and the planets revolving around the sun without astronomers. But can we imagine capitalism without economists?

On the one hand, we are always identifying proto-forms of capitalism without contemporaries making a formal theory of it. On the other hand, would the kind of capitalism we know, that which appears in the 17th and 18th century in Europe and America, have developed as it did without the appearance, at the same time, of the political economists? And as political economists developed their discourse – as economics began to regard itself as a science – was capitalism merely a parallel development, one that they studied, or was it a development in which they played a role?

Marx, in the Grundrisse, working in the shadow of the disputes in Germany about theory and ‘materialism’, wrote:

daß die einfachre Kategorie herrschende Verhältnisse eines unentwickeltern Ganzen oder untergeordnete Verhältnisse eines entwickeltem Ganzen ausdrücken kann, die historisch schon Existenz hatten, eh das Ganze sich nach der Seite entwickelte, die in einer konkretem Kategorie ausgedrückt ist. Insofern entspräche der Gang des abstrakten Denkens, das vom Einfachsten zum Kombinierten aufsteigt, dem wirk||16|lichen historischen Prozeß…

“…the simpler categories can express the dominant relationships of an undeveloped whole or the subordinate relationships of a developed whole, which historically already exists, before the whole has developed towards the side that is expressed in a concrete category. Just in so far may the course of abstract thought, which ascends from the simplest to the combined, be correspondent to the real historical process.” – Marx, Grundrisse

I take it that the intellectual space, here, is opened up by the uncertain position of the ‘categories’ by which social life is understood vis-à-vis the dominant relationships of the social whole. Marx doesn’t seem to believe that there is a natural tendency within the social whole to move in a given direction – in this way, he does not have a classically liberal view of progress – but instead, given the presence of subordinate and dominate relationships, posits conflicts in which some agent figures.

Boldly, I take the concrete categories to be expressed in character-making. Or as all the boys and girls like to say now, in the construction of the subject. However, for obscure reasons, I prefer the vocabulary of the character to the subject. Maybe I will be able to explain this later.

the miser to the egotist

This morning I am finishing up my query letter on the book. I’m going to blog a lot of my work in progress, naturally. I’ve been thinking, over the last couple weeks, about misers. To this end, I’ve been reading Moliere’s L’avare and watching Louis de Funès version of it – which is quite funny. I was interested in seeing how Funès would make it funny, as, if you go by the play’s critical interpretation, it is a play in which the unfortunate spectator is put in the grip of an unrelievedly horrible monster, the miser Harpagon. Marcel Gutwirth begins his 1961 essay on the play – perhaps the best essay in English – like this:

“L'AVARE is probably Moliere's harshest play. Scheming love suits, openly rebellious chil-dren, an unloving father, a sordid theme hardly leave our sympathies any acceptable resting-place. Harpagon, moreover, is a monster who, unlike Tartuffe, is firmly anchored to the center of the stage. No jail, not even an omniscient King can rid the unhappy family of the man who is its head. His power may wither, as it must for the comedy to end on a note of relief, but his presence cannot be so decisively expunged from the lives of those around him. When Tartuffe is dragged to jail in Orgon's stead, justice is restored in the state, as is solidarity to the once bitterly divided family. Har-pagon leaving the stage to go see his chere cassette is merely shedding his family without another thought, allowing it to find unhoped for reunion under the wing of a new father, Don Thomas d'Alburcy, as generous and loving as the real father had been mean and hateful. “

It is easy to see, from the text, Harpagon’s meanness and lack of family feeling. In the very first scene, Harpagon’s daughter, Élise, mentions to her brother that the family has changed since their mother died – and certainly one feels that the death of the mother sets the mood for the entire play, which, in some ways, plays out an Oedipal struggle between father and son that the mother no doubt suppressed. Yet as Funès’ version shows, what may be monstrous, judged from the viewpoint of bourgeois drama, can be transformed into comedy when we remember how closely comedy is connected to puppetry. Wyndham Lewis remarks, somewhere, that he constructed the characters in his novels as puppets, in order to display both their monstrosity and their inherent ludicrousness. Lewis’s novels have never been popular for that very reason – but on the stage, especially a stage that has just emerged from the people’s plays of the foire, this works very well. Even as a text, it works – a couple of nights ago, reading the scene that plays out between Valere and Harpogon after Harpagon’s treasure has been stolen, I couldn’t stop laughing. Moliere knew how funny misunderstanding is – and – this is the uncanny thing about him as a writer - how it erodes our confidence in understanding.

So my next post will be about the miser. I think I will, firstly, bring into the discussion Simmel’s essay on Geiz – avarice, and then advance to Moliere.