1. When measuring an age by the size of its heroes, it's important to keep in mind that heroes, like assets, like securities, have both a notational value and a mark-to-market value. In the discrepancy between those two, notational and market, values is everything we need to know about size, direction, and velocity, of the age and the heroes.
Measured by its heroes, and adjusted for the market vs. notational values, clearly this is an age of, not advanced capitalism, but advanced capitalist dwarfism.
So..... Alan Greenspan, once a genius, a colossus, a wizard, a fountainhead gets carried in the financiers' books of positions on that notational value. Meanwhile the mark-to-market value shrinks; not just shrinks, evaporates, withers, disappears and finally Greenspan is "uncovered" in all senses.
Marked-to-market he's back to being just another ugly face wobbling down the runway of riches-to-rags capitalism, flogging his faux erudition for the chance at another meal. "Will obscure, equivocate for food" says the blurb beneath his picture in the fashion/finance guide.
What else can we expect? What heroes can be produced by a system so venal, so petty, so miserable that it at its peak, that its peak, that its moments of greatest profit and power are measured not by the collective advance of the human species but in the reversal of those previous advances; that its moments of greatness are just that reversal? What can be expected where a "golden age in financial freedom" is accompanied, fed, sustained by another dark age in which all of science, art, humanity is politicized in the service of its own destruction?
2. So... in its plunge into the abyss of declining asset values, capitalism's financial oracles, heroes of digital and analog media, propose a rescue that consists, on paper, of a single solution-- "Don't Look Down"-- as if the acceleration of a falling body due to gravity, as if terminal velocity, depended on an orientation of the head.
Comedy, horror, unintended and intended, ripple through the despair of the traders, brokers, economists, bankers, like shivers in forensic chill of a morgue.
The Wall Street Journal advises that shotguns and canned goods are sound investments in times like these.
The Financial Times advises Lehman Bros. (before bankruptcy): "When seized by a panic attack, focus on breathing slowly and deeply."
It reports on Washington Mutual: "The destruction of shareholder wealth in the US financial sector is relentless. Washington Mutual, which parted company with chief executive Kerry Killinger [great name, bet he chose it himself --s.a.] on Monday, is joining Lehman on the rack."
It wonders out loud: "If propping up the banking system is not a socially useful role, what is?"
Finally! Finally the bourgeoisie, blubbering all the way home from the bank, grasp Marx's analysis of capitalist commodity production as private property but realizable only in a social role.
Socially useful role? Obviously, the market is judging the social usefulness of the banks, and deciding that such usefulness has been grossly overvalued. Far too much time has been expended on the capitalist reproduction of value.
And finally, none other than the shaved head knight in a white Dodge Charger (dual quads, Hurst four speed, 6 miles to the gallon), Secretary of the Treasury Paulson, mutters aloud, channeling Stevie Wonder, "Heaven help us all."
3. So...what distinguishes the present predicament of capitalism from previous predicaments? Why is this dark night different from all other dark nights in which all cats are black? In a word, nothing. In a word, everything. In a word, magnitude.
Global finanical instruments have been measured at 167 trillion dollars, almost 3 times world GDP. In 1980 world GDP and global financial instruments were approximately the same size.
Total global financial instruments were measured at 53 trillion in 1993.
Credit default swaps are at 62 trillion-- that is to say the "bets" on defaults have a notational value far greater than the market values of the securities at risk of default. Homeowners have negative equity when the amount due on their mortgages exceeds the value of their homes. It makes more "economic sense" to walk away from the home. Credit default issuers are in exactly the same position except they want to run, not walk.
All eyes and sighs turn to the "lender of last resort," that creator of windows, that builder of bridges, the Federal Reserve. And the Fed itself? After opening its windows, after accepting lower rated collateral, what about the doctor's own health?
The FRB, which one year ago, had 90% of its assets in US Treasury Securities has undergone, with the opening of the Primary Dealer Credit Facility and other mechanisms, an inflation in the notational value of assets with a decline in the quality of such assets-- to the point that now only 50% of the Fed's assets are in US Treasury instruments. And the market value of the other assets? Nobody knows.
However, the source for this distress, the predicament in capital is not in the overleveraging of the capitalist economy, the reproduction of expanding debt levels designed to parse, to chop, and ration available profit. These are manifestations, appearances of the real predicament, the real conflict beween expanded capitalist reproduction and profit; between private property and the accumulation of capital.
Next: Of Hats and Rabbits, 3. Roots and Prospects
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