Monday, March 30, 2009

And this is how we died.

Three years ago, I began keeping track of numbers. I heard the price of gold one day and found it unbelievably high. It has only gone up since then. I followed silver and crude oil, the dollar and foreign currencies, their climbs and plummets, all of them completely detached from reality as far as I could see. I had no money of my own to invest, nor any idea of what would be the best bet. I just knew something was very wrong.

I wasn’t looking at the right numbers. Until just a few months ago, I never heard mention in all my reading of the thing that would kill us.

A trillion is a very big number. Only physicists, mathematicians and astronomers should have to give a fig about a one followed by twelve zeroes. A light year is about six trillion miles, or nine and a half trillion kilometers. Not a scale for the good and simple people of earth, only for those of us counting the atoms and molecules, or calculating strange probabilities, or looking at the stars.

In all the world, all the wealth of all the nations is roughly fifty six trillion dollars. One dollar for every mile in ten light years.

Here is the number I didn’t know about, the one I didn’t see. Here is the size of the credit default swap market. Early this century, we could measure the size of this market in billions of dollars, the kind of numbers that are thrown around every day.

There are now over sixty four trillion dollars in this market. More than all the money in the world.

Some say these markets are hard to understand. They aren’t. It’s just a casino. A very big one. The main thing people bet on is who is going to pay their bills, and who isn’t.

How can a market have more money than the wealth of all nations combined? It’s very simple. It’s a magic casino. The casino will sell you a dollar’s worth of chips for three cents. If you can make an even money bet and win, and you will get your three cents back and a real dollar more.

What did I tell you? It’s magic.

What if you lose your bet? Then the casino wants the extra ninety seven cents you neglected to give them earlier. Or maybe less if you were able to make other bets to cover the one that went bad.

And this is how we died. A casino that dwarfed the world economy started filling up with losers. Where did they get the money? From your bank accounts, from your 401K accounts, from pensions and insurance companies and the investments of anyone who did anything more risky than keep their cash under their mattresses, or spend their paychecks on food, shelter and clothing.

Can’t we just close the casino down? Maybe not. It’s a very big house of cards. Are you sure which way it will fall?

No you’re not. No one is.

The graph above is the progress chart of the real war of terror. The terrorists won.

Besides keeping track of the numbers, I also started paying attention to the deniers. Much like tobacco companies years ago denied the link between cigarettes and disease, there were paid shills telling us there is no link between what humans do and the degradation of the environment, or the changing climate. Last year, the shill industry turned its energy to denying that we were in a recession, spewing the same sort of venom on those who said the economy was in free fall as it had on people discussing climate change.

Here’s the thing. The shills are just suckers. The people with the money know how deep the shit is, and they are doing everything they can to steal anything that isn’t nailed down or surrounded by armed guards. They do not give a rat’s ass if the shills die with the rest of us. They just want a diversion to continue looting the treasury.

Thirteen years ago on a rainy winter’s night, I was there in Oakland when one of America’s greatest living poets sang a song titled The Earth Died Screaming. This is a recording from that evening. I was there with my good friends the Dresbachs.

The Dresbachs are good people as well as good friends. They have a loving God they can pray to. That is one of the many luxuries I now do without. Like many of the things I have given up, I no longer think it does much good.


namastenancy said...

There are days when I understand what it must have felt like to be in ancient Rome, watching their world fall apart day by day as the parade of incompetent emperors came and went and the barbarians massed on the borders. Unlike the ancient Romans, we've got a very competent ruler and many good people with ethics and skills but who knows if that's going to be enough.

FranIAm said...

Holy crap.

Beyond. Fucking. Imagining.

I actually feel more than a little bit sick right now.

Border Explorer said...

Cogent. Believable. No, unbelievable. We are so screwed.

Karlacita! said...

I jes wanna know where the puppies and kittehs are???

sfmike said...

Just had lunch with a fellow ex-coworker from Wells Fargo where we reminisced about "casino capitalism" where the two of us literally worked in Las Vegas casino convention centers pumping out propaganda for Wells Fargo executives. It felt like organized crime back at the turn of the 20th/21st century, and everything we've seen in the last year only confirms that the "financial services industry" is just that. Meyer Lansky is the key figure, I've decided, not the Italians.

Karlacita! said...

A hedgehog? A squirrel?

A cute little squirrel?

BobManDo said...

Chris Martenson has a crash course that shows the convergence of the Economy, Energy and Environment...
He has it in bite sizes on his website and explains stuff really well... There is an aspect of this that makes one consider the idea of being a survivalist.

The math part of you will love his examples and a good review of the history.

The Course is here:

Wanna good explaination of "How Much is a Trillion"?


dguzman said...

Amen to that, Matty Boy. Thanks for the succinct summary.

I wonder: what is the true cause, the true motive for those involved with the casino? Greed? Stupidity? Desperation? Why would these people knowingly wreck our country? Are those thirty pieces of silver really worth it?

Anonymous said...

I ponder the same thoughts dguzman writes about above. This is a great post Matty Boy. It do splain it for dummies like me. Although I had already lost my 401k a year before all this hit the wall, a victim of another black, black Friday. So I lost nothing to these criminals from Harvard and Yale who we put our trust in. I will be like most, amazed, if we come out of this whole again.

Debbie said...

I am missin' your 'splainin' Matty Boy. Please learn me about some more stuff...

no_slappz said...

matty boy,

A few of your points about Credit Default Swaps are true. And some are false. Your mistakes are critical when it comes to the reality of financial derivatives.

Meanwhile, you and millions of others seem oblivious to the public/private -- government/corporate tango that brought us to where we are today.

Would we be where we are today if EVERY person who borrowed to buy a house was required to have a decent credit score, a reasonable job AND a meaningful downpayment?

The answer is obvious. What happened? The tail wagged the dog. When the Community Reinvestment Act was approved in 1977, the government ordered lenders to ignore traditional lending standards to ensure the blacks and hispanics were issued mortgages even though they were not creditworthy.

Time passed and eventually lenders realized the huge door Congress had opened. The door to the slippery slope. And down we went. Helped along by Barney Frank who pushed for lower credit standards at Fannie Mae and Freddie Mac.

Borrowing became a game when people realized that when you borrow 100% of the money to purchase an asset, the personal risks are actually low. With no skin in the game, even a default and foreclosure means very little.

After all, those who made no downpayment exploited their opportunity to use infinite leverage, understanding, if only intuitively, that heads they win, tails, the lender loses. That's a set-up you never get in a casino. But the government makes it possible all too often.

Anonymous said...

And no spappz

Phil Graham had absolutely nothing to do with it, right? Again you prove you're full of shit.

Karlacita! said...

Come back now!

Squirrels, kittahs, pups, maths, and, well okay, those wacked giant women if you MUST.

But just come back.