“The old world is dying away, and the new world struggles to come forth: now is the time of monsters.”
The nation’s leaders are struggling to address an insolvent investment banking system with prescriptive measures that sidestep Main Street’s credit needs entirely. Gramsci’s monsters have arrived, it appears, to ransack America through a series of bail-out monstrosities. But look at me, Ma, I’m quoting a venerable Marxist in this season of strange bedfellows. George Bush, cowboy capitalist-turned-Christian Socialist, is taking cues from Un Hombre de Gentes Hugo Chavez. Intellectual consistency is dead. Long live chaos.
There’s little risk of hyperbole when we concede the conceptual carnage wrought by the current avalanche of events is momentous and revolutionary. Few cherished concepts have weathered the onslaught. Alas, globalization was a euphemism for stuffing every corner of the global mattress with Ponzi paper. Financial intermediation, far from propagating efficient capital flows to Main Street, crowded out legitimate credit needs, bringing the commercial paper market to a grinding halt. Risk diversified itself alright — right into the shakiest hands — adding yet more stress to a precariously leveraged system. Economic interdependency extinguished safe havens. Greenspan’s vaunted wealth creation was little more than asset inflation backfilled with debt.The platitudinous business cycle was usurped by a succession of bubble booms and busts, spurred on by what economist Eric Janszen has called the FIRE or finance, insurance and real estate economy. As asset values recede, the debt remains. The Party of Mao is the de facto lender of last resort to the U.S. Government, just as the latter is embarked on an aggressive nationalization campaign of its nation’s banks and mortgage lending institutions. Confused yet?
If you want more evidence of tectonic form-shifting, listen to formally staid bodies such as the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) expound upon looming abysses and financial Armageddons. Bankers are not prone to histrionics unless, of course, their world has tipped upside-down. Instructing on bank capitalizations and the delicate nature of the fractional reserve system, at least two recent CNBC commentators have made reference to the famous bank run in Capra’s It’s a Wonderful Life. George Bailey’s heroic efforts presaged the Great Depression. Exactly how far are we to take this analogy?
As Hunter S. Thompson once remarked, “When the going gets weird, the weird turn pro.” Tin-foil hats are suddenly haute couture. How delightful, though, that, for once, the elite’s terror exceeds our own. This is because they have far more to lose from (gulp) equitable distribution due to financial collapse. Even during the fat times vast numbers of Americans were one paycheck away from destitution. Quiet desperation has always been built into the project. For now, poverty is loving the company as it stalks some unfamiliar and perfumed quarters while deep shit threatens to engulf us all in a stultifying classless society. Might both Marxes — Karl and Groucho — find room for satisfaction, scratching their beards in bemusement at the long strange tragicomic trip it all turned out to be?
Ronald Reagan’s morning in America lasted right on through to dinner time. But the darkness is reassembling over the klieg lights. Fortunately, when the real gets surreal, the movies get mojo. Fritz Lang’s Metropolis can best be described as a myopic dystopia. Richard Gilzean is right to say, “We do not look at Fritz Lang’s silent films for any profound social meaning.” Besides, wife and screenwriter Thea von Harbou was the programmatic Marxist of the pair. Among many things, Metropolis misses the productivity gains of the computer age by a mile. Today’s overclass no longer requires thousands of toiling laborers. However, the Illuminati wish to pass along a big thanks for the plebeian offer of continued toil on their behalf, cinematically at least. So Lang’s futurism hasn’t rendezvoused seamlessly with the future. We are becoming slaves to Gordon Gekko’s Wall Street, not industrialism. Nonetheless, Lang’s austere German Expressionist vision continues to evoke an angsty and unfocused dread that dovetails nicely with recent macroeconomic events.
To the unalloyed capitalist, when money ceases to exist, his world has, for all intents and purposes, ceased to exist along with it. What the plutocracy means, of course, is that their beloved fiat-stacked-atop-fiat complex is sliding into a financial asset abyss. Let’s be clear. The world of real things is not in danger of being consumed by fire unless the resultant social unrest from financial asset meltdown creates real asset destruction (e.g. SUVs burnt in effigy), a plausible though collateral possibility.
Try imagining an I Am Legend corollary where the world is denuded, not of real people, but of investments bankers — Lehman Brothers’ Dick Fuld and his ilk; a neutron-bombed landscape that leaves real assets standing while vaporizing all paper, computer hard drives, and electronic handshakes (credit derivative swaps (CDS) et al.). David Lynch would relish the narrative discontinuities of a moneyless world — Mulholland Drive without the wad of dough. Baudrillard might call it a hyper-reality bomb. Suffice to say a world without financial markets exceeds the grasp of most present-day minds.
Thus when you awake the morning after, your car is still in the driveway, the office buildings behind your house still stand, the power and water lines are all intact. Inquiring financial minds want to know, yes, but what are they worth? George Orwell said “to see what’s in front of one’s nose needs a constant struggle.” Here’s a reality that shouldn’t require glasses, but often does: Economic value is inherently utilitarian. That is, when the received wisdom on value wanders from utilitarian metrics, markets have strayed into the realm of speculation, i.e., tulip country. Ever try eating a put option? Not in the abstract — say as a capital loss — but with ketchup. There are times when every good portfolio should have an ample stock of tuna fish — and an underweighting of collateralized mortgage obligations.
Are the meek on the verge of re-inheriting the earth? Those who kept faith with real things may be onto a windfall. America has an enviable supply of housing stock, real bricks and mortar stuff. One in ten homes built since 2000 is vacant. A financial holocaust? You bet. Shelter for the homeless? Of course, why not — if we can only shutter Countrywide’s byzantine loss mitigation department and get to the real business of filling those houses. Given this surfeit of above-ground dwelling space, there’s little need for Lang’s subterranean sweatshop, unless, of course, we destroy the atmosphere, in which case it’ll be the well-heeled who repair underground while the plebes toil away beneath a pitiless sun.
So don’t let Ben Bernanke’s existential fear infect you. A few field mice notwithstanding, the housing stock is not under siege. It’s the financial superstructure (which, in fairness, allowed brick to be stacked upon superfluous brick in the first place) that’s in peril of imminent demise. Soon it will be great to be real again. Soon real will be all we have left.
In an egalitarian world, Warren Buffet, that quirky billionaire who retained his modest suburban home — becomes even less distinguishable from everyone else. This is a populist’s — if not a neo-Marxist’s — wet dream. The radical curtailment or outright extinction of financial assets would be a tsunamic redistributive event; Rumplestiltskin’s gold “de-alchemizing” back into straw. The bean counters have a name for it: financial de-leveraging. Last year, Satyajit Das, former Wall Street derivatives guru and author of Traders, Guns and Money, estimated each dollar of real capital supports $20 to $30 of loans. That’s a lot of unwinding, not to mention a helluva lot of rich people.
Then there’s the not-so-small matter of sheer scale. Ever try stuffing $1 billion under your mattress? Yes, the uber-rich have problems we can only dream of! Financial assets are both their lifeblood and their primary means of differentiation. Score one for an emboldened simple life as our class system looks increasingly to be constructed on the thinnest of airs and graces. Lang was right not to clutter the Metropolis landscape with an overly complex social structure. There have always been two essential camps: those who leverage the sweat of others and the sweaty others themselves.
As for the teeming underclass, does anyone really believe the whole world will accept 100 years of debt peonage to service what was essentially a financial phantom — ephemeral, “structured finance” instruments heaped beyond any sense of proportion to the world’s intrinsic wealth? Try explaining to a French kid in 2100 that he can’t have shoes because the decades-old hubris of some erstwhile Masters of the Universe on an entire other continent must be assuaged. Che Guevara could ride this sort of epic inequity with his eyes wide shut. Half the world would have to become enforcers because the rest will surely not submit to decades of servitude to pay off the greed of a tiny few.
When the Rothschilds facilitated the bankrupt royal families of Europe, they were wise enough not to make the debt burdens existentially unattainable. Kings, no less than serfs, need to see some light at the end of the loan. A collapsing derivatives market — estimated in an October 12 Independent article at a staggering $516 trillion is analogous to the burst reservoir that engulfs Metropolis’ subterranean city. Rising waters are impervious to class distinctions, drowning rich and poor alike. Indeed a number with nine (some say twelve) zeroes may lie beyond the reach even of the most rapacious hyper-inflation. It is a patently absurd figure in any context — ten times the annual GDP of the whole world. Even more absurd is to express this amorphous asset class in fiat currency form since, if it was ever to descend into the realm of transactional currency, it would submerge the most diligent printing press like a thousand-year flood. Scientific notation meets high finance — or high farce if you prefer.
Far better to repeal the financial order, re-calibrate the planes, trains, and automobiles in some as-yet unknown currency and START OVER. When greed broke bread with computer algorithms, it broke the bank. Now that same greed, leavened in no small measure by fear, bellows from some back room like Seymour in Little Shop of Horrors — feed me! Soon the storehouses will be empty like grain poured into an abyss.
The stage seems set for demagogues more than it does mediator figures in the vein of Metropolis’ Feder. The young men of Wall Street, like the young men of Metropolis, have become effete and desperately out of touch. It’s no small irony that Lang’s initial inspiration for the Metropolis skyline was Manhattan. Grassroots global rage will coalesce as the initial panic subsides and people realize just how much they’ve been done unto. And they’ve been done unto a lot. During this Gramscian interregnum, various pretenders to the throne will emerge to galvanize billions of pissed-off humans; debt repudiation — or at least a disavowal of Main Street’s peonage to credit derivative exposure — offers rich populist terrain. This much seems sure: Some violent re-assertion of the Real from beneath crushing numerical imaginariness will be attempted. Meanwhile, the poor old plutocracy, shrinking in numbers every day, will swear the anti-Christ is behind every bid to disavow derived wealth. Were Lang’s Mediator to arrive at this particular inflection point, he would find the Brain lost in a maze of hubristic computer programs to which neither Brain nor Hands hold the upper hand. The world is buried beneath a Frankensteinian superstructure of electronic handshakes from which there is no certainty modern society will emerge intact. The better film analogy might be Kubrick’s HAL 9000 — the computer as functional sociopath.
“The crisis,” Gramsci wrote, “consists precisely in the fact that the old is dying and the new cannot be born: in this interregnum, morbid phenomena of the most varied kind come to pass.” The original Paulson bail-out was a morbid symptom. Master of a Prior Universe, Hank Paulson (Frank Capra’s Mr. Potter writ large) is striving mightily to breathe life into a corpse. Denial is the prevailing mindset of the elite. Without levered and derived wealth, their elite status is finished. They will enforce the bail-out with whatever means they have at their disposal.
Nelson Rockefeller would be heartsick at the New World Order’s evolving socialist complexion. But this is not the heralded workers’ revolt. As it turned out, a proletarian vanguard was hardly necessary. Good thing too, as they collect their soma every Friday night at Blockbuster Video and frankly couldn’t seem to care less. Hurray for Hollywood! No, it was capitalism — biting off more of Ezra Pound’s mammon than it could chew — that destroyed capitalism. The most sublime tragedy is tinged with irony. Wall Street, practicing a bastardized variant of capitalism, may destroy Main Street’s more sociable capitalist model. To refute Wall Street‘s Gekko, greed is the sickness that swims through capitalism, not capitalism itself. The world may end not with a bang or a whimper, to paraphrase a famous Pound disciple, but rather in an orgy of Mammon:
Canto XLV (With Usura)
With usura hath no man a house of good stone
each block cut smooth and well fitting that design might cover their face, with usura
hath no man a painted paradise on his church wall
harpes et luthes
or where virgin receiveth message
and halo projects from incision,
seeth no man Gonzaga his heirs and his concubines
no picture is made to endure nor to live with
but it is made to sell and sell quickly
with usura, sin against nature,
is thy bread ever more of stale rags
is thy bread dry as paper
with no mountain wheat, no strong flour
with usura the line grows thick
with usura is no clear demarcation
and no man can find site for his dwelling.
stone cutter is kept from his stone
weaver is kept from his loom
wool comes not to market
sheep bringeth no gain with usura
Usura is a murrain, usura
blunteth the needle in the maid’s hand
and stoppeth the spinner’s cunning. Pietro Lombardo
came not by usura
Duccio came not by usura nor Pier della Francesca; Zuan Bellin’ not by usura
nor was “La Calunnia”painted.
Came not by usura Angelico; came not Ambrogio Praedis,
Came no church of cut stone signed: ADAMO ME FECIT.
Not by usura ST. TROPHIME Not by usura SAINT HILAIRE,
Usura rusteth the chisel
It rusteth the craft and the craftsman
It gnaweth the thread in the loom
None learneth to weave gold in her pattern;
Azure hath a canker by usura; cramoisi is unbroidered
Emerald findeth no Memling
Usura stayeth the young man’s courting
It hath brought the young bride and her bridegroom
CONTRA NATURAM They have brought whores for ELEUSIS
Corpses are set to banquet
at behest of usura.
by Ezra Pound (text and embedded links from here)
In the aftermath of pathologic greed — prophesied by Ezra Pound — what third way looms on the horizon? It’s possible we may muddle through a protracted Gramscian interregnum before a cohesive new system forms in the vacuum. As for Metropolis, it ends on a rather treacly note, everyone living blissfully mediated ever after. The same assurance hardly exists for a present-day world of biologic agents, suitcase nukes, and recalcitrant greed. Still, one can hope.
Far easier than speculating on what we will get is acknowledging what no longer exists. A traditionally stratified world will not accede peaceably to flatland status even if financial asset collapse all but assures a flatter landscape. So batten the hatches. Lang’s atmospheric darkness, if not his journeyman Marxian storyline and climactic gush, fulfills its task well enough as cautionary tale.