Nettime — Brian — Carry On (was: Paul Krugman etc)
Topic(s): the Meltdown | Comments Off on Nettime — Brian — Carry On (was: Paul Krugman etc)Sometimes, short comments on a mailing list like Nettime give more food for thought than any article found online. -rg
Post by Brian Holmes
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Nicholas Ruiz III wrote:
> The new idea I suggest revolves around shares and derivative contracts
> being issued to a Pubilc Trust, an active governmental trading
> institution that would post all gains as income for the public etc etc
In New York City in early 2008 we organized a Continental Drift session
at 16 Beaver where a critic of the financial markets, Henry C.K. Liu
whom you can read in the Asia Times, explained that the housing bubble
was going to be the last one. Why? Because in the logic of bubbles, each
one has to be bigger than the one before, and given that this one had
reached all the way down into the savings-and-borrowings of the lower
middle and working classes, it would be impossible to find more capital
than that, the whole cookie was in the oven and when it came out burnt a
new recipe would have to be found altogether. Henry C.K. Liu thought a
bunch of crazy artists were the perfect kind of people for the present
moment, cause they could think up something new while the old order was
tanking. Well, guess what? Due to the kinds of counter-cyclical policies
that every bureaucrat and monetary official gushes over at the beginning
of every TV interview (stimulus for Goldman Sachs & co) it now appears
that the result of the mega-bubble of 2007-08 will be… a zmega-bubble,
this time in “global assets,” i.e. investment-quality whatever, as long
as its FAR AWAY.
It’s called the carry trade, it used to go from Japan to Brazil and
Australia and now it goes from the US to points everywhere. It works
like this: to fight off the new Great Depression, interest rates in the
US are basically zero, once a little inflation is factored in anyway: so
you can borrow for free (zmegabanks only need apply). So what’s a good
zmegatrader to do? Borrow in America and invest, not in Joe Schmo’s
cement plant (which is in Thailand now anyway) but in any kind of asset
in a less troubled zone of the world economy where you can still get
five percent return or more. By doing this the added advantage is, all
these capital outflows drive down the value of the dollar, and as the
dollar goes down, the profit earned on your foreign asset increases with
the increased value of the foreign currency. People did this out of
deflation-prone Japan for ten or fifteen years, they got particularly
rich in Latin America because of the risk premium adding up to over ten
percent return on the free yen, and now it can be done on an even bigger
scale out of the USA with the free dollars. The massive bailouts, the
“quantitative easing” (i.e. liberal abuse of the printing press), all
that financial stimulus is getting poured into these easy opportunities
to make money on the interest-rate differential, plus whatever
speculative premium you can scrape up to boot. The limit comes either
when the US dollar gets so low that it can’t go down anymore (cause it’s
still by far the biggest economy of the world and the linchpin of the
whole system), or more ominously, when some kind of geopolitical crisis
occurs and there is a new “flight to safety” ie the greenback. Whatever
the cause, at some point sooner than later panic ensues and it’s game
over all over again. Nouriel Roubini has written an important article in
the FT about this, called “The Mother of All Carry Trades,” and
experience shows, you gotta read Nouriel Roubini:
http://tinyurl.com/carry-trade
So what does that mean for the average nettime-grade cultural critic?
That we should all go back to explaining the mystical Code of finance
capitalism and try to become Nicholas Ruiz the IV, V, or VI, ie that we
should all do like a good bourgeois according to Wallerstein, namely
invest and aspire to live off our rents and become an aristocrat? My
perspective is that instead of the boom-bust going on forever as it
seemed fated to in the 80s, it now looks as though the increasing scale
of each new crisis will bring about, A. major increases in the level of
social violence due to more and more people being trashed each time the
bubble bursts, and B. increasingly big returns on the
climate-contradiction, in the form of environmental disasters that will
contribute ever more to the major increases of A. What I find myself
increasingly drawn to in the moments when I have no energy for critical
analysis and social/environmental justice campaigns, is some kind of
science-fiction that could portray what things look like after a little
of that old ABABABA.
For example, let’s not tax our poor heads too hard by looking more than
just one year into the future: Imagine that the Democrats totally lose
the mid-term elections due to Obama’s obvious failure to do anything but
placate the financial elites – whatever, we can imagine he proposes a
Public Trust of bailout money invested in the carry trade to fix every
bridge, heal every sore, broken leg, broken heart and so on, but then at
the last minute, surprise surprise, because of a vote in the Senate it
turns out to be yet more Private Options for Goldman and J.P. Morgan and
the hedge funds – and so America swings back into some mounting rabid
Republican talk-radio fury, the carry-trade bubble bursts in our faces
and the Yellow Brick Road vanishes into the mud again, yet another ten
or fifteen percent of the middle classes are trashed, tuition at the
universities goes up 75%, the National Guard gets deployed around
hospitals to keep the uninsured at bay, a few cities get torched due to
the restiveness of the hungry and excluded, Sarah Palin starts
campaigning for Rogue of the Century, the Christian Fundamentalist
Family Bible finds a home under every Christmas Tree, fascist vigilantee
camo becomes THE patriotic outfit for the New Year, etc etc etc.
Whaddaya think? Time for an exit strategy? Maybe an earth divestment
fund? Quantum Lunar Escape anyone?
Actually I think I’ll carry on with the critical analysis and the
social/environmental justice, but maybe with a greater sense of urgency.
Could it be that more same turbo-capitalism is not what we need in the
21st century?
good luck, Brian