Monday, September 22, 2008


I know embarrassingly little about the economy. It's never been a discussion topic in our house because we've never had enough money to warrant interest in the market, and if we ever do it will almost certainly be spent on a 10 acre monkey preserve and some kind of virtual solar powered piano/guitar/kazoo hybrid which also dispenses strawberry shortcake before you can say Bull. 

Plus those guys on Wallstreet don't do a great job of promoting the interesting side of the industry- all that swearing and bidding and sweating... A friend's dad once told me that on the day his wife gave birth to kid number 3, he lost $9 million of a client's money and was so deliriously distraught that he puked and passed out in the bathroom and didn't wake up till the janitor found him that night and the kid was already born. Cherished memories.

Anyway I'm admitting this deficiency in my knowledge base for two reasons: 

1. As our nation plummets even deeper into what would be a comedically meteoric clusterfuck if it weren't going to screw over everyone in my generation while all the idiots who at fault are contentedly dead, it seems prudent to be informed and 

2. I'm guessing most of you out there don't understand every in and out of the market either. It's big and numbery and, until recently, didn't seem to have a huge impact on day to day life if you weren't a high-rolling coke-snorting Rolex-wearing Wallstreet guy. And frankly, it seems to me that a lot of those guys are in those jobs at least partly due to the fact that it's easier to talk to numbers than to other humans. Maybe if you make enough monkey you can buy some friends...

But as I'd like to be the ultimate crunchy hippie whose ideal form of currency is macrame bracelets and hugs, I realize that finance is not all numbery drivel, and that even if it is, it's important to start getting real and getting informed. I went to the bookstore today with my brother to pick out something to inform me investment-wise, became achingly bored in 2 minutes, then wandered into the children's section in search of a colorful remedy where I came across this...

Reeeally? I mean Barack seems like a good guy, but does his story really merit shelf-space next to my beloved childhood One Fish Two Fish Red Fish Blue Fish? It freaks me out to think that our political system has become so reductive and polarized that candidates are either evil scum or the Harry Potter of politics. Then, not to be outdone, I find the republican counter...

Can you believe this shit? A children's book which features a whole four page watercolor spread of a guy in a cage being tortured for five years?! Who the hell would buy this? 

And, more importantly, where is the middleground? Neither men are complete saints, and canonizing them in children's books is a perfect example of how we're cultivating a nation of followers who don't look beyond the myth to demand the fact. If you want to read to your kids about Jesus or Moses or Santa then fine, but don't start shoveling pagefulls of kiddie-propaganda down their throats about real people who deserve critical, sophisticated analyses.

In such a black and white media circus it's easy to get caught up in absolutes. I've had to remind myself often that I can't constantly defend Obama just because he's not McCain- there are thousands of Obama quotes and interviews and policies which I know nothing about, and if I support him just because of who he is instead of what I know to be truth, I'm no better than the mindless Bush devotees who I've criticized so fervently in the past.  

I think that especially in the face of such unprecedented economic turmoil it's important not to get swept up in Obama-Mythology. He's just a guy like the rest of us with good and bad qualities, and if we mentally bestow him with every positive attribute from MLK to JFK's, we'll be as disappointed and disillusioned as ever. 

Plus, our generation cannot afford to be uninformed... we can't accept the children's book watercolor version of politics, economics, or anything we care about for that matter.  Thoughts? Suggestions? What do you feel uninformed about? Maybe we can do some virtual fact networking. And maybe if you're not as mathtarded as me you can explain how all of a sudden the entire economy can go tits up in one night like a tipsy sorority girl in stilettos? Keep me posted.



  1. I agree with you that there has to be more room for gray in our polarized political world. As a high school junior, I can't do much in the way of number crunching for you (although as a Marxist of sorts, I'm biased in my opinion that capitalism is just running itself into the ground again), but I seem uninformed about so much. That's partly my fault, because if I were to spent ten minutes on the internet trying to inform myself, I could probably know at least twice of what I do now, but I also feel that Americans as a whole don't really want to be informed--they want to hear what they already accept (e.g., O'Reilly Factor and Bill Maher). Public television might come the closest to providing something that isn't agenda-laden, but that's a generalization, considering I barely watch any TV. And I do feel very ignorant about the ins and outs of this Wall Street shit--I could give you a rough Marxist analysis of it, but to hell with that, it's not what's important right now. Sorry if this doesn't answer any of your questions--I'm more about questioning answers anyway.

  2. By the way, this is my blog: (in case you want to blog back and forth or something, I don't know). It's in dire need of updating, and I don't have that many posts, but I'm working on a draft of a post about looking for colleges. If you check in a month there might actually be something worthwhile there.

  3. The entire economy didn’t go tits up in one night anymore than the sorority girl’s alcohol was distilled in a single night. In both cases, the situation was brewing for years. It’s just that we don’t always notice the effects until things (e.g., the economy, the alcohol) start breaking down.

    Hannah says she has trouble understanding the economy because it’s “big and numbery and … [doesn’t] seem to have a huge impact on day to day life.” Her assessment is unerringly accurate, as this is precisely why the economy is in trouble. People—and by people I mean society at large, but especially people in elected office—don’t understand things that are big and numbery and don’t have immediate consequences. But then again, how could they? Numbers are made up. They don’t really exist.

    Don’t believe me? I’ll prove it. Show me ‘three.’ Go ahead. See? You can’t do it. You can’t, for instance, write the numeral, ‘3,’ because it’s just a symbol. Though we take it to mean three by convention, it isn’t actually three, just a written representation thereof. My signature is a symbol, too, but I assume that no one has ever tried to carry on a conversation with it. Similarly, you can’t form a set of three objects, point to any concrete attribute, and say, “There, THAT’S ‘three.’” Three what? You have to have the ‘what’ or the statement doesn’t mean anything at all. Numbers are handy for keeping track of what’s out there, but they are properties of the mind and not of the world itself. If you start pushing them around on a balance sheet and you lose track of what they stand for, then you’re just asking for it. If they never stood for anything in the first place… well, then you’re just stupid.

    It should come as no real surprise to anyone that the government is often, well, stupid. The current economic implosion is largely the result of the government playing with made-up numbers in the housing market. They were trying to address a problem known as redlining, which dates as far back as the 1930s and limits minorities’ access to housing. Back in the ‘90s, the government, caught up in the heady rush of a booming economy, started feeling their oats (read: interns). In an effort to make sure that it was just as easy to buy a house in Compton, California as in Beverly Hills, they forced the banking industry to start making risky housing loans with government backing. Where was the government’s money coming from? It’s not really clear. It’s possible they just made it up.

    More likely, they never thought it would become an issue. See, most loans are financed in something called the repo market, which works something like this. Let’s say that I’m Microsoft and, after balancing the checkbook at the end of the month, I’m left with a few million dollars in spare change. Now, more than likely, I don’t actually have this money on hand as cash in the first place. Instead, I have numbers at a bank. More than likely if I ever want to do anything with this money, my numbers will get pushed around to different accounts at a different bank. Nothing tangible ever changes hands, it’s just the numbers that move. But because these numbers represent money, I generally think bigger is better. Greed is, you know, good. Or something like that. So I go to a big bank on the repo market and front them the cash to buy the mortgage of John Q. Taxpayer. More than half of all mortgages are financed this way. Then, when I want my money back, the bank pays me back with interest, which is why this is more profitable for me than investing my fortunes in a simple bank account.

    Here’s where things get tricky. When I (as Microsoft) ask for my money back from the bank, the bank still doesn’t have that cash on hand, but they have to find numbers to push around from somewhere in order to pay me back. Usually they borrow again in the repo market from someone else, essentially rolling over the loan. This can happen countless times until John comes up with the dough. Because John pays the bank with interest, the bank can afford to pay their backers with interest and still turn a profit. Note that no actual money has changed hands here. With no government oversight, it’s not hard to see how this kind of thing can get out of hand.

    In meddling with the housing loan industry, the government basically guaranteed the repo market. Here’s the problem: if the big companies like Microsoft notice that John is buying fewer computers (or cars or houses or airline tickets or any other big purchases), they might start to wonder if John will be able to make all the payments he’s supposed to make. They’ll be damned if they’re going to lose their money on account of John, so they start to pull out of the market. But if too many people pull out of the market, there’s not enough money (read: numbers) to go around. More and more people start to get nervous, and panic sets in. Banks are forced to close because they can’t pay everyone back all at once. This is exactly what happened, and the government got stuck with the bill. (Coincidentally, this is also what happened following Black Monday to kick off the Great Depression. For a review, see It’s A Wonderful Life.)

    What makes this problem even more fun is that a lot of the companies on the repo market are actually foreign investors. Your housing mortgage just as likely belongs to a company in China or India or Pakistan as it does to Microsoft. If all the loans were held in the US, the government could more or less reset the national economy. Hit ‘tare’ on the scale and forget the whole thing ever happened. But because there are international economies involved, the government can’t just void the debt, because that would cause the collapse of economies around the world. This, in turn, would cause the collapse of our own economy, as the global economy is highly interdependent. We sit atop the food chain as a refiner of raw materials and producer of specialized goods. However, we need trading partners to provide us with raw materials and consumers for our finished products. We are not by any means a self-sufficient economy (and nor should we be), but this means that our fate is tied to theirs. Imagine playing Jenga and taking out everything underneath the top few rows in one fell swoop.

    So while we can’t void the debt, we also can’t just eat it, because this implies that the government will actually *pay* someone, and again, we just don’t have that kind of money sitting around anywhere. I’m pretty sure of this, given that I grew up less than an hour from Fort Knox.

    Instead, the proposed bailout will just get tacked onto the skyrocketing national debt. Alexander Hamilton originally envisioned maintaining a small national debt as a boon to trade. However, massive debt on the current scale ($9,854,451,393,553.70 as of this writing) can never be paid back. Compared to that, the bailout is just a drop in the bucket. At least, that’s how Congress will see it. Why not? It will likely be instantiated by printing more money, but if the money isn’t backed by anything of real value it will only dilute what’s already out there, reducing our buying power and further weakening the dollar against foreign currencies. This is the definition of inflation.

    At this point, there are no good options, only less bad options. It seems that debt, like entropy, always increases.

    P.S.: Hannah, I’m sorry it took me so long to get this response up. I blame it on med school (two finals next week) and beg your forgiveness. I’m going to work on my contest entries now.

    P.P.S.: I’m more than happy to continue this discussion thread should anyone have further questions or, better yet, disagree with me.

    P.P.P.S.: In response to cici, this should not be seen as capitalism running itself into the ground, because history has shown that capitalism works best when the market is left to its own devices. In this case, the government tried to interfere with the natural forces at work in the market in order to achieve a desired outcome, and the market collapsed. All throughout history artificial limits have weakened the free market economy, because limits mean that the market is not truly free. Tariffs, embargoes, subsidies, etc. all generally work in counterintuitive ways. Sure, perhaps we want to create and maintain American jobs, American industry, American agriculture, but if someone else can do the same job for a significantly lower cost, than perhaps it’s time we reinvest the money in finding something that we do better. This kind of self-correction is how the market stays strong.

    Marxism is great in theory but has never actually worked in practice. Absolute power corrupts absolutely. The temptation of an authoritarian state seems to be far too great. This is the practical objection to Marxism. The philosophical objection gets to the heart of what is meant by equality. Marxist thought prizes equality, but that equality usually takes the form of equal outcomes. Everybody gets the same things. This raises the question of performance rewards: if I do something that is of more value to the state, should I not be proportionately compensated for this? Instead of equal outcomes, perhaps a fairer system would be concerned with ensuring equality of opportunity. In such a state, every person would be afforded a level playing field, but would then be compensated based on merit. This is the ideal of a democratic society, and it is directly tied in many ways to the workings of capitalist economies. If you are interested in these ideas, you should look for any book by John Rawls, who came up with the idea of equality of opportunity.

  4. I've never seen those books, that's pretty funny.

    In response to your question, it depends on whether you want to construct your own site's html. Wordpress doesn't allow that, so I found it restrictive in that sense.

    They do have attractive templates, however, and a collection of widgets, so if you're just looking to pick a design and go with it, WP is fine.