Wednesday, 8 October 2008

The Meltdown and Fordist Nostalgia

Does anyone really understand credit default swaps? "Arcane" is really an understatement, and yet it seems that the market in credit default swaps rose to something like three times the U.S. gross domestic product. From what we can gather, credit default swaps are effectively a way of betting that a company will go bust.

Then there is the degree of leverage. Everyone, it seems, speculating with huge sums of borrowed money. Why just invest the thousand dollars you own when you can borrow another 99 and play the tables in the capitalist casino with $100,000? Apparently, this kind of leverage ratio (around 100:1) was behind the collapse of the two largest companies in the mortgage business in the U.S. (Fanny May and Freddie Mac - and who chose the names by the way?).

Trying to make sense of this huge parasitic economy almost makes you nostalgic for the old image of the capitalist who built a real business with bricks and mortar and employed people (even if there was a questionable extraction of surplus value) to manufacture real things that could go in a showroom or on a shelf. Heck, that almost seems like an idyllic state of affairs in comparison to the crazy business of pure speculation where there is no commitment to the kind of real economic activity that creates jobs and keeps communities together.


Suicide rates were used by Durkheim as an indication of levels of anomie (if I remember correctly). Now that the economy is collapsing, aren't levels of anomie rising? Shouldn't a small percentage of players in the leveraged lido of speculative capitalism feel some of that anomie?

In the media, at least, I haven't come across any reports of suicides. Wall St, it seems, is a long way from India, where we heard of the farmers who had taken out loans (miniscule by Western standards) to buy new GM produce from Monsanto promising an unprecedented yield and invulnerability to pests - crops that were then destroyed by pests, plunging the farmers into debt - a debt which was so shameful for them that they chose to drink lethal quantities of pesticide rather than contintue to live.

Does no one in the credit default swaps business feel like drinking pesticide? Is it just impoverished Indian farmers who have a sense of honour?

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