Are we not losing the plot, the meta-narrative in which a story of market folly is allowed to amplify itself via the Internet in an interconnected world, thus driving more foreclosures, as investors lose confidence in the system? How much of what we see, is the result of computer technology, virtualisation and the ephemeral? Yes the West is in crisis, and the US banking fiasco has not been averted as bad debt is offloaded onto markets around the world.
Computers have the ability to telescope the most trivial of data, until what you know, the mole-hill is a mountain, and the mountain is the biggest mountain in the world — it would seem there is no escape from decisions made in the virtual world — objects in the rear-view mirror may appear closer than they seem?
If anything the US property crisis is the result, not simply of the increasing virtualisation of commerce, but the way in which the virtual economy has impacted on the concrete world. After the Dot.Bomb, property was supposed to be the great saviour, “bricks and mortor”, hard assets that could not disappear overnight, a fact of intrinsic worth, like gold or steel under-pinning cold-hard cash.
Unfortunately, as long as every day-trader at home with a supercomputer, with enough power to launch the Apollo space programme, and capable of crunching numbers into infinity with software geared towards maximising profits without responsibility, plays this “virtual stock market” game there will be the problem of abstraction, the way in which real goods turn into ephemaral items of little substance, and even property and gold bars into dust.
Day-trading should have been banned after the first Dot-Com boom and bust, and even though it was revealed that the crash had been the result of a form of tulip mania – a veritable South Sea Island bubble, (the notion that there are an infinite number of islands out there. Or that tulips are somehow better than lilies i.e. a simple value judgment, based upon aesthetics) which had turned out to be mere speculative fashion.
Speculation on property in the US and abroad, all completely legal spiralled out of control in the no-holds barred capitalist discourse of the fin ‘d ciecle until the derivatives based upon the “bricks and mortar” assets no longer reflected real value on the book. In other words, number crunching has its pitfalls – there is a limit to what the market will accept. Nobody wants to pay $billion for a run-down shack, simply because some bank-manager believes in the ephemarability of numbers, leverage and share capital.
Todays financial crisis represents more than a simple downturn, it is the end of what Fidel Castro referred to as Casino Capitalism. Betting big, taking the whole house down if you have to, well, that’s the mess we are dealing with right now.
Gosh, if we all had the kind of credit that has been handed out to kids today, where would we all be, not in this kind of trouble, a winner-takes all system in which every now and then the big rollers lose.
Then there is contrarian view, a less intellectual but gut felt response which motivates the Obama regime – what we are really seeing, instead of South Sea Island bubbles, is the cost in trillions of dollars of the war in Iraq. Somebody has had to pay for the military build-up over the past five years, whether this is in stocks and bonds, mortgages or home loans, the money has had to come from somewhere, China, Japan, Europe, Africa – and there is only so much slack the rest of us can take – there is no pity for the poor investor who has been stung by the banks, and the resulting trophic cascade of denial, as real debt out there is compounded by virtual debt until the system is, overloaded and out of control.
Thinking about the two scenarios pictured above, one invariably seeks out a different solutions, the first is a technological solution – a quick fix – reboot the economy stupid. The decremental errors can be resolved, and there is nothing wrong with the world system except for the greed and stupidity which resulted in day-trading, forward speculation, and the really long bet, the bet that the Federal reserve would actually bail out the banks and ask for nothing in return.
But the second is more dire, who pays for the cost of the increase in the money supply, who guarantees Federal debt – surely the tax-payer? No in our modern interconnected world, we all do, and as usual, the next generation will pay the highest price, as the great leveller – the real world – comes into play.
You see at the end of the day, computers and software can never understand time. Its the one human fallibility and our saving grace and so no matter how perfect your software, there is always going to be something wrong with automating trades – the result – the biggest one-day crash into the future, in stock-market history – along with the attempt to get back to dry land, the metaphor of crisis, oh yes, the Great Depression as a benchmark, as if we could all go back 100 years.
Surely now is the time for an inquiry into speculation, the futures market, the impact of technology on economic models and the tinkering that is becoming force of habit, as day-trading gets ignored. How far ahead are the speculators, are we creating boom and bust cycles in the future that we will have to re-route, entire virtual economies based upon nothing more substantial than log algorithms of the colour Orange?
Does any of this actually mean anything to the millions who are not online, and not included in the day-trade system? Does this actually have any baring on those in the South who have lived all their lives in poverty or the other side of America, living in ghettos? This crisis is a wake-up call, the time to reform the system before it brings everything down, including the virtual world of the information economy is now.