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All Consuming March 27, 2009

Posted by dailyegg in 1.
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For at least the past thirty years the media, as well as participatory entities on Wall Street and Hollywood, have rarely referred to the American people as citizens. We were consumers, or as some would term it, rational purchasing agents. But isn’t there something strange, and something perhaps a little unhealthy for the collective psyche, about the population of the world’s oldest democracy—citizens—being cast so actively into a role that means (according to Webster’s):

 1. to do away with completely: DESTROY 2a: to spend wastefully: SQUANDER; b USE UP 3. to eat or drink esp. in great quantity. 4. to engage fully: engross vi 1. to waste or burn away: PERISH

 A market correction of the sort we are experiencing now naturally makes us begin to question how we got here. I imagine this discussion will continue for some time. And the real question remains: Can the market correct itself back into health and functionality? So far the Fed has decided that the answer to this question is No. Meaning:  the market working on its own can’t, at least not without incurring systemic damage severe enough to cause all the economies of the world to sputter. (Q: didn’t that happen anyway?)  A nonmarket force—the tax rolls—must therefore be called up to “contain” and ”absorb” the over-leveraged, gorgeously abstract financial products engineered by the best and the brightest to reap huge short-term profits for themselves—while hanging everyone else out to dry. Is that fair to say?

        In the coming days we will try to understand if the crisis spilling over into every sector of the economy is a symptom of some inherent weakness in the financial model or if the downturn is the result of something more like a random geological event, a tsunami or earthquake, a more-or-less routine planetary force that can suddenly erupt and heap random devastation upon the masses (every 50 to 70 years). Some would say such striking fluctuations we’re now experiencing in the downturn are the inevitable by-product of the touchy dynamic inherent in any vast interpenetrating globalized system that routinely synthesizes so much minute fiscal activity into trackable daily trends, and then buys or sells based upon some (often dubious but decisive) interpretation of those trends. To these thinkers, the fractal-like patterns of deviance from the norm that are now propelling the market downward are occurring mainly because, as they see it, that’s how huge systems of finance work over long periods of time. In defense of this idea, they can point to the economic downturns of 1981, 1973; the 1930s; the long depression of 1873-96, and the panic of 1837 as historical records to make their point. Translation? All we need to do is hold steady until the ship rights herself once again.
        But others will wonder if the downturn itself is not a symptom of a larger disease. They will begin to question the efficacy of a free-market system whose deliberately complex products were designed to conceal their dubious value, and wonder about the soundness of an industry who took these dubious entities and bundled them into products it then sold as securities, insured them, and if that wasn’t enough, went on to create another dimension of shadow marketing—selling bets on each product (a market that one pundit compared to fantasy baseball)—all around the original sketchy-yet-secured bundles. For these critics, the resulting sub-prime boom was a kind of feeding-frenzy euphoria that took place when a spirit of recklessness and plundering and greed sponsored a party whose resulting fiduciary cacophony—the boom—was then used as an incentive to ignore warning signs and pursue even more risk-taking. These critics, who perhaps too simply see only a culture of greed gone wild, argue that these corrosive practices are actually so deeply rooted in the marketing-business mindset of today’s America—a mindset that sees human existence and consumption as synonymous and exploitable—as to be functionally non-separatable from the rest of the system. Just like those old Warner Brothers cartoons were Bugs Bunny mails a bomb to Elmer Fudd, who then opens it and is blown to bits believing it is a gift (over and over again), these thinkers will judge that the whole model of late-capitalistic free-market enterprise is stuck in concentric circles of misperception and is therefore quite beyond the pale of reformation. The whole culture, they will proclaim, is demented by its prolonged allegiance to insane financial objectives. (But is Fudd really blown to bits? Doesn’t he always eventually re-emerge as healthy and prosperous and befuddled as before?)
        At the current moment, the needle of judgment appears to be wavering between these two extremes; time will tell which one gains tipping-point credence over the other.

        It may seem jejune to some to point out that CNBC, or for that matter the whole instant-news cycle itself, may play a role in the way these gains and losses are magnified and made worse—or better if we’re in an upswing—by spreading little blips of perception through the televisual Portals of Truth hanging ubiquitously over the trading floors across the globe. But perhaps the real problem is not so much that everyone responds to the tiniest tick, enlarging that tick into an spasm, as the fact that the pronouncements made by the news channels are pitched only to the task of monitoring the immediacies of the market and dong so these immediacies are delivered in a manner that the mediators know is glib but some portions of the overall audience may not; they may be considering what they see and hear to be more along the lines of what we might call the traditionally journalistic, actual or “real” news spots understood to be uber-trustworthy (in the way Peter Jennings, say, was perceived to be trustworthy). That what in hindsight does not seem to be a wise or even thoughtful speech-act is not the point of this criticism so much as how the question of whether speed and reportorial reliability can dependably co-exist. The instant-newscasters play a game of “getting there first” and their pronouncements may be ill-considered or even wrong, but they say them anyway and spread the influence (because it might be right) and because someone else will do it if they don’t. After all, they have a show to produce and viewers to stimulate: and to an increasing, and some would think distressing degree, they seem to consider themselves a part of the entertainment industry. And because of the influence of these instant-media venues—with all their adrenal-laden avidity and immediate reactive intensity—and because of the way their pronouncements are picked up and spread instantaneously all across the world (and how the initial reportage, simply because it is the first, often becomes the primary source material for successive entries)—we begin to see effects that are often ridiculous. We all remember how 9/11 supposedly “changed everything.” Viewers heard this canard repeated on the news outlets hour after hour, day after day. Heavyweights from all sectors were called in to inveigh upon How It All Had Changed. The conclusion was reached within five minutes of the events themselves. To a certain extent, it may be that the speed at which we communicate compromises our perceptions of what is actually happening (around the globe) and then sets in motion behaviors that are a response to those same ill-considered pronouncements, creating circumstances that may be significantly harder to undo. It may be that the messages in our telecommunications are more than just truth talking to power, more than referees calling out bad plays from the sidelines. It may be that the touchy cyborg genie of instant-news is sparking synaptic fireworks at the center of our global telecommunications punditry. And that these fireworks are more like a gooey hormone-drenched spasm of the amygdala than they are a cool breezeway of enlightened rationality issuing from the pre-frontal cortex. Sometime you have to wonder: Are we taking our fiduciary cue from some vestige in our reptilian brains?

        As it is now breathtakingly apparent, the ’80s and ’90s were a time when free-market capitalism, aided by deregulation, escaped into a newer, more brutally elegant conceptual form. With it’s serpentine imagination unleashed, the New Economy swelled magnificent gaudy bubbles which floated us aloft into one ridiculous prosperity after another. Tech bubble. Real-estate bubble. Housing bubble. Credit-Card bubble. Whatever. Inside those bubbles we began to get a bit light-headed. Maybe reality was as permeable and top-down as postmodern academics had theorized it was. For whatever the reason, it looks like we began to believe reality was anything we wanted it to be. Maybe that’s why during televised interviews so many market speculator’s eyes glowed like they’d just put down the crack-pipe. They could conjure their own success through the smoke and mirrors of buzz management. Of course as these giddy highs progressed we began to behave less practically, which is always rather exciting, at first. But somewhere along the line we started valuing dealmaking over trust-making. We drank our own Cool-Aid. We could fly.
We know what happened next.
        In The Annals, Tacitus, remarking about the changing, destructive inclinations of those who were in power at the imperial court of Rome at the time, wrote that “Perhaps there are spheres of influence which just turn on their own, independently of politcal will.” And perhaps we find ourselves in one of these periods today.

        We need to reverse that trend. But to do so we may need to revise the way we think about our currency and the forces that make it flow: not the immediate open-heart surgery view of that flow, but the organic system-wide daily incremental flow that operates beneath the sensitivity levels of the behaviorist probes and the chatter of the instant-news cycle. We need to begin to grapple with the nihilism at the core of our philosophy of materialistic instrumentalism, and the efficacy of the so-called rational self-interest that frames the ethics of the New Economy.
        We also need to look at the problem with economics as it is currently conceived and practiced and to question ideas that are based on broad-stroke macro-mechanistic models that conceptually overvalue rationalist assumptions about human behavior. We need to reconsider why these conceptions are couched in machine and machine-like metaphors, which, from this observer’s point of view, tend to distort signification and provide a potentially harmful illusion that they can be wielded with machinelike controls. As we know, credit markets are “jammed” or “frozen” and at times it can seem almost as if using those words makes them so. Cash infusions will “free up” markets or “get credit moving.” Collapsing forces in the whole system can be “contained.” (we also thought Vietnam could be “contained.”) None of these descriptions quite fit the bill.

        What is perhaps not sufficiently acknowleged is that beneath these economic mechanisms is the human mind itself perceiving events and making decisions, judgments, determinations, and coming to those determinations through a sometimes-rational process that is itself based in a process of perception that occurs beneath the level of conscious awareness. Predicting perception is a bit like predicting the location of a sub-atomic particle: you can only make and educated guess where it will wind up. As David Brooks points out in an article written for The New York Times late last fall, “Looking at and perceiving the world is an active process of meaning-making that shapes and biases the rest of the decision-making chain.” Perhaps the most important unsung step in the move toward un-take-backable economic action is the question of how and why we perceive what we perceive.

        Simply put, it may be that our metaphors need to move from the mechanistic Newtonian age to the quantum-particle Einsteinian age if they are to accurately reflect the reality on the economic ground in the 21st century, with it’s host of through-the-looking-glass financial products. We need to ask ourselves if understanding the vast whelm of economic activity in terms of a giant mechanism, with different parts of the machine, i.e. different markets, moving the flow of energy-giving capital around the globe, is helping or hurting our efforts to conceptualize the key dynamics of the new marketplace actuality.
        To update the metaphor, to bring our economists out of the Newtonian age, we need to understand that it’s not that the mechanic is unable to fix the machine with the gears and wrenches he has at his disposal, it’s that the machine he is working on can mutate and slip around outside the grasp of his tools because it’s not really a machine. It’s alive, and the way we talk about the problem may initiate causalities that can reshape the problem even as we’re fixing it. Too many economists today have yet to examine the distorting assumptions lurking inside their mechanistic models: it’s almost as if they fail to realize it’s an Einsteinian Universe out there now. What they don’t see is that their economic orthodoxy has built a movie theater out of it’s own inside-the-box probes, polls, indexes and instant-news cycles. It’s as if their scholarship has led their thinking in to one of those 180-degree movie theaters and they are caught up in the illusion that they are flying with the Blue Angels or plummeting down the tracks of a roller coaster in Disneyland. In many ways much of our recent prosperity has, in fact, been a mass delusion, a vision of Lourdes, or, in more American vernacular, A Coney Island of The Mind. And those capital infusions—the economic wrench in Ben Bernanke’s hand—may be more like a light-and-sound simulation connecting him to the light-and-sound gear he attaches it to than actual assistance on the ground. Yet sometimes it works—in a way—as long at the movie is playing. As long as we are all looking up at the same screen. A screen that last fall showed Hank Paulson turning on the lights to places we did not know existed. And then he tried to turned them off again. Oops.

       After Fannie and Freddie, Lehman went up in smoke and took AIG with it. The illusion was shattered. Systemic risk trumped moral hazard. And the instant news-bites, with their glib analyses of the moment-to-moment happenings are probably a lot more like Cassandra inveighing over the wishing well than they are like street signs indicating actual twists and turns of the road ahead. Relying on them as the sole means of reckoning the financial world, we begin to experience that world almost as if on a basis of imprecation and seance. Strangely, in this particular crisis, presentation and perception are in some important ways the real sink holes on the turf of systemic risk. In the weird alchemy of late-capitalist value-assignment, credit default swaps were once more valuable than gold. Now they’ve become lead. Changing perceptions changed the reality, but only because that reality was to a large extent gamed and fabricated from the onset.

        To approach the question from a different angle, one that is not exclusively located within a policy of strategic opportunity, we need to consider the value we give to things, and why and how those values are instantiated and encoded the way they are, a question that goes deeply into the way we enculturate our populations and how we rely on them to respond accurately to the nuances of an ever-dynamic but more-or-less reliable social actuality. Before that process of socialization works it’s way into our behavior we’ve also built up complicated conceptions for the way the world itself holds and expresses the relationship between cause and effect. And it is these underlying conceptions taken together that go a long way toward making us see things the way we see them, and the way we see things leads to the way we may be counted on to behave. Economics, therefore, begins in self-concepts and self-images and ideas and values about the self in relation to other selves. And all of those things are operating beneath the traditionally observed mechanisms of economic theory. We probably have the economic systems we have today because of things that we don’t really think about much anymore, things like The Reformation and The Enlightenment, and other social and religious and philosophic movements that changed the way people experienced the world down at the level of their conceptions surrounding cause and effect. Without those changes in our relational conceptions, centuries ago, there might never have been the behavioral and perceptural foundations for Wall Street to build the illusions of the the New Economy on. Perhaps the engineers of the bubble thought of their actions as being infinitly repeatable, that their supply of trust was an unlimited commodity and that they need not behave in ways that perpetuated traditional trust because they did not see traditional trust as something that could be abused into nonexistence.

        People are now in the process of asking themselves where this leaves us philosophically, and sometimes they don’t like what they see. Could it be we’ve been so busy putting a dollar sign on everything on the planet that we no longer know how to value and reward more modest and realistic virtues? And could it be that’s why no capital is flowing? Not that’s it’s jammed. Not that it’s frozen. Instead, perhaps what is frozen is our basic trust in what we’re up to, long-term, globally, in a time when the imperatives of industrial growth conflict heavily with the organic realities of the biosphere. Beyond the plight of our shaken faith in the cross-corrective powers of a market allegedly reportable to the dictates of rational self-interest, beyond the set of practices and beliefs which wound up making it all too easy for us to confuse the prospects of cash with prerogatives of class, we must realize that any system of leadership implies a system of self management. And when leadership roles become fixed to promote a few at the expense of all, important and corrosive messages are sent down through the webs of power and influence to individuals wanting to penetrate those webs of power and influence, and what results is a system that rewards the players who successfully make themselves resemble the potentates at the top who may be serving a system that values plundering almost exclusively. Merit becomes distorted—that’s one way of looking at it, another would be incentives are disarranged—as rewards are distributed to perpetuate a power structure whose objectives are corroded by short-term tactical considerations exclusively. What can be taken from this exchange? The establishment of an economic plutocracy built from grandly deceptive intentions justified as economic opportunity gradually begins to decay after a certain period of over-leveraged success, primarily because it becomes known that big banks don’t trust each other very deeply. Or at least not enough to keep lending significant chunks of cash.                                                                                      When the blue chips are down.

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