After Money that Never Really Existed Anyway Disappears in a Puff of Steam, Investors Cry, “WTF?!”
Oh, the financial markets are ruined!
Could it be that the Wall Street brokers, the day traders, the speculators who have been shuttling and shuffling pretend money across the continents and back millions of times throughout the nanoseconds of the days, just had an “Oh, shit!” moment? After all, what was the substance of those bits of ‘earnings’ they were playing an infinite game of higher returns with? We know it wasn’t gold, that hallowed substance for which Europeans plundered and raped the New World and its indigenous peoples. Gold hasn’t backed money in America since at the latest the 1970s. If that so-called money had been based on something as concrete as oil, perhaps we could have an easier time understanding the current disintegration of the U.S. economy. Oil, after all, at least according to the Debbie Downers among our thinkers, such as M. King Hubbert, E.F. Schumacher, and Richard Heinberg, is a finite resource which we are probably beginning to run out of. So if barrels of oil were the measure of the dollar, we might have a clearer idea of why there seems to be so suddenly less viable money; i.e. less oil = less money.
But with good reason, it’s more complicated than that. I’ve even heard some say our money is based on capital, which strikes me as a dumb assertion, since it breaks down to a silly equation where money = money. While it’s clearly true, that equation in its raw form doesn’t get us any closer to understanding why the financial shit just hit the Big Fan. To grasp the complicated dynamics of the modern economy, we must first understand that not all money is created equal.
Some people who decided to make it their job to make more money from money seem to have made a collective decision that their money is worth more than regular money. What’s more shocking is that these people were backed in this assertion by other people, who indeed affirmed that their money was a special kind of money. This, as I understand it, is the reason those people could make transactions, equations, and statements that are hinged on the following elementary math problem: $1 + speculation = $30.1 Never mind that this is not the math that state-supported education usually teaches the general populace in school–this is math for special people!
What is Speculation?
Now there’s a funny question, and probably one on which some very clever financiers could make some money. From my perspective, it appears as if a mass of speculators have been pursuing the American Dream in one of its most raw forms: disregarding natural, political, and social boundaries, these American Pioneers of the Brave New Economy busied themselves by making split-second financial transactions in a convoluted, computerized, zig-zag of speculative chain lightning which could ring the globe fifty or one hundred times in a few hours.
On a concrete level, it might play out something like this, but with the speculator not really intimately involved with, or even aware of, the ground work; he’s a detached funder, if you will:
One hundred square miles of rainforest are felled, turning a profit for our financier. He takes those assets and adds them to a pool of money supporting the forced removal of indigenous Alaskans from their traditional lands so that a pipeline and several oil rigs may be built. As the native people settle uncomfortably into their allotted trailers crowded on a strip of land far to the north, the pipeline goes online and our financier profits from the extracted non-renewable resource. Ka-ching! Many people fill up their gas tanks. The financier celebrates with a large dinner, some friends, cigars, and a rented woman, then reinvests a large sum of his money the next day in Boeing, a corporation who has been profiting nicely for a while now in its business of making smart bombs which are used to eradicate people in countries which have been dubbed villainous and in need of “freedom” by the United States government. As freedom from their lives, or perhaps from a few limbs or family members, is delivered to these people from the sky, our financier casually moves his money along a profit chain felling ancient stands of trees; dragging massive nets to dredge the ocean of all varieties of life for consumption and waste; mining ores to be made into many machines; squashing peasant rebellions; inventing new and better pesticides; and funding advertising for a plethora of products; etc. until somebody, somewhere, registers surprise. Perhaps that surprise is something along the line of:
“It’s no longer economically feasible for us to pull this here oil out from the ground, chiefs! It’s going to, like, take more oil to get this oil out here than the oil that we’ll get when we get it all out! Know what I mean?”
Eyes popping and feeling light-headed, venture capitalists swoon.
There’s a blip, and burp, a gurgle. The oil stream chokes up in Alaska as elsewhere. A hurricane hits. That hurts. Newly homeless people sell shares. The market seizes up, free fall. It’s dizzy at the top and down we go. Bailouts and band-aids and plastic wrap are applied to stop the bleeding. “Do anything!!” scream the speculators, clutching their securities, which are washing away in the rain. Turns out that investment in corn starch packing peanuts isn’t paying off anymore.
“I’m melting! I’m melting!”
Big business’s bully ally, corrupted corporate government, rushes in. Whispers. Hushed meetings behind police barricades. Renegade camera flashes, tear gas.
“Tell them we’re helping,” squeaks one of the weasely, shiny kingpins of corporate capitalism. “Yes, yes.” The rubbing of hands, the scheming of shifty, yet dull, eyes. “Yes, yes. Yes, master.” The village idiot, representative of the will of the people, lurching forward like Igor, steps up to the podium. “We’re helping… you,” he drivels, the syllables coming out in long, stitched drones. Then he marches off.
Dog Fight at the Economic Corral
On Wall Street, a dog has been frantically chasing its tail. The investors egg it on. “Get the tail, boy! Get the tail! The good stuff is in the tail!” They place bets on the tail, some on the dog, but the majority on the tail. The leverage from tail to head is something like 30 to 1.
How long did they think it could last?
The dog bites its own backside, which bleeds. The head howls. The investors panic, stare around wild-eyed. “Oh. That wasn’t supposed to happen,” they say. They shake their heads. Some approach the dog, but it is a canine possessed, violently attacking itself with its body.
Someone gets a bright idea: “Our money’s in there somewhere!” The crowd echoes, “The good stuff!” They hold a dying dog up to the cameras and spotlights.
Big brothers come onto the scene, the village idiot lurching behind. “Let’s have a look at that injured dog,” they say professionally, grimly. One of them attempts some humor, “It sure is a dog-eat-dog world, huh? Hehe.” They take the dog to a table and begin butchering it, pass around the salvageable parts.
A small sigh escapes the brokers and speculators, the investors and traders. People are dissatisfied with their portions.
“Hey, I had more than this slab of liver. Where’s the rest?”
“Where’s our money?”
“Where’s our money?!”
“It’s gotta be around here somewhere,” muses the council of government elders.
“We’re on it,” claims the village idiot resolutely.
The crowd looks around, murmuring.
Perhaps there is another dog nearby.
1. See “Only a Roosevelt-Scale Counterrevolution Can Prevent Great Depression II” by Robert Kuttner, The American Prospect http://www.alternet.org/workplace/99241/ for a proper analysis of the economic meltdown.