Sunday, September 27, 2009

Giant Pool of Money radio program

The NPR radio program This American Life aired an update to their "The Giant Pool of Money" program from a year ago (called appropriately, Return To The Giant Pool of Money. The producers did a nice job, I think, on the details of the collapse.

The podcast is available from iTunes, and should be available from the show's website here shortly.


Saturday, September 12, 2009

A couple of updates

I realize this blog has been very quiet over the past couple of years. Or rather, I have not posted very much. Despite the enormity of the financial crisis, I don't think there is anything new, or unexpected there. Yes the details of how the latest act began and played out are of some interest, and the jockeying over the possible restructuring is somewhat revealing. But overall, it was all to be expected: more and more extended speculation and risk-taking to seek historically shrinking rates of profit until the precarious structure collapsed, and set the stage for the next act.

One year after poo really hit the fan on Wall Street, it perhaps bears repeating Marx's description of financial crises: they are not the destruction of value, but a powerful (even violent) means of centralizing wealth (CW/Vol. 37, aka Capital Vol. III, p. 468). In this regard, the crisis represents a violent ratcheting up of the polarization of wealth and poverty.

There are a few threads in the recent news that highlight that stood out to me.

First, as Nasser Saber pointed out in his book Speculative Capital, an important element of speculation (Saber defines speculative capital as capital used in arbitrage), taking advantage of price differences in different markets. As speculative capital develops, the arbitrage opportunities shrink, requiring either larger sums to be committed to arbitrage to achieve the same return, or a kind of arms race to get ahead of the arbitrage crowd by shrinking the trading time through faster computers and smarter software. "Flash trading" is a way of exploiting price differences, or soon-to-be price differences by learning of upcoming (measured in milliseconds). [And today, only just today I am sad to say, I discovered Nasser Saber's blog on finance and speculative capital, and so I direct the reader to his blog for any more on speculative capital.] See e.g. NYSE's Fast-Trade Hub Rises Up in New Jersey in the July 30, 2009 Wall Street Journal. It also explains the significance of the theft of Goldman Sachs computer code used to power its trading juggernaut: see The Man Accused of Stealing Goldman's Code.

A second thread has to do with the destruction of value (as opposed to wealth), to wit the cash-for-clunkers program and the subsequent destruction of functioning automobiles to take them permanently off of the market (as automobiles, some value persists as scrap, see a YouTube video Cash for Clunkers: How to destroy an engine for instructions on how you can do this at home -- kids, ask your parents first! The video is sad in a way, and pornographic in the worst sense of the word). And the destruction of the tart cherry crop in Michigan (Bumper Cherry Crop Turns Sour: Tons of Unharvested Fruit Rots Under Government Program to Keep Prices Stable).