Sunday, January 16, 2011

Infinitely, Suitably Scaled


You can all imagine how relieved I was when I saw that the Federal Reserve got its AIG loan repaid this week. Clearly for all those institutional financiers and oligarch wealthy victims of speculative investments – like credit default swaps – this represents the long awaited closure on part one of the unspeakable angst they must have felt knowing that their recklessness was less guaranteed as long at the Fed was short on cash. I’m sure I speak for us all when I breathe a collective sigh of relief that the “system” has been recharged to once again be ready to step into the all important role of making sure that reckless speculation undermining the fabric of our economy can be reanimated. And, I’m thrilled to see that the Fed repayment was applauded by the market with its heart-felt vote of confidence which was expressed as the destruction of 12% of the value of the taxpayer’s stock! Looks like the people who should win came out on top and the public has the opportunity to be grateful that very smart people are looking out for their best interests!

Oh, and I forgot to mention one of those teensy-weensy details that will make you all puzzle a bit (until you just get tired of puzzling) – Maiden Lane II and III loans from the Fed – the “investment” vehicles that were created to hold toxic assets – have NOT been repaid but, never fear, they are to be paid from the “assets” contained therein. So, just to be clear, “The Federal Reserve Bank of New York today announced the termination of its assistance to American International Group, Inc. (AIG) and the full repayment of its loans to AIG as a result of the closing of the recapitalization that was announced on September 30, 2010. As of today, AIG will no longer have any outstanding obligations to the New York Fed,” means that the legal entity – AIG – isn’t on the hook but the behavior leading to the collapse of the financial system done by AIG – not to be mistaken as AIG – is still as virulent as ever. But, it’s nicely named.

Why would the Federal Reserve, the U.S. Treasury, and AIG executives willfully mislead the public with Friday’s announcement? Carefully couched in legally defensible technicalities – it is, after all, AIG that they exculpated – the announcement is a critical requirement of a system that MUST grow at all costs. For a government that lied about everything from the wars on communism to drugs to terrorism, this week’s announcement must be child’s play. Faced with the political necessity to further extend our debt limit beyond the staggering $14 trillion, we the People must be misled to endorse the illusion that someone knows what they’re doing.

But at the core of this system resides a more fundamental challenge. Passive debt – decried by sages and saints alike as usury – requires detachment. And this detachment must be sociopathic – and, yes, I mean behavior that lacks a sense of moral responsibility or social conscience. To hold the assumption that any human endeavor – be it farming, mining, manufacturing or trading – will always grow at a rate that sustains uncorrelated interest imposed by debt can only be animated with antisocial impulses. If one were to actually understand both the commercial endeavor and its actors, one would encounter an attachment to humanity which must be avoided. If one were to actually enter into a deep understanding of the commercial or property pursuit under consideration, one may elect not to enable it. If one were to understand the dynamics of an endeavor and see that the underlying cash-flows or market dynamics are episodic, one would need to require returns that mirrored cash-flow reality rather than perpetually compounding returns. In the name of capital efficiency, we’ve agreed to participate in a system which cannot think, innovate, or act in any manner other than its own preservation. And, in our current model, we insure complicity by making sure that our very currency is the foundation for all the madness built thereon.

So we’re at the point in the system where the only beneficiary (and as a result, the only interest that is relevant in assessing the health or injury of the economy) can be the Fed and the Treasury and their benefactors. The idea that there is any semblance of a public interest is unthinkable in a world where the People finance the madness of the Establishment. In short, it is as unrealistic to animate energy seeking logic or justice from schemes of sociopaths as it is to expect different behavior from the actors themselves. And as long as we the People are complicit in our acquiescence to the madness, we have no standing to seek redress or accountability.

Or, we could take a different path. I fondly recall a lecture hosted by my father where a really smart astrophysicist was lecturing about the expansion of the universe and was trying to wrap the audiences’ mind around the notion of the finitude of the universe. “Space,” he said, “while thought to be infinite and infinitely expanding, has limits.” After an hour of physics and cosmology that would curl the toes of Mayan and Incan astronomers, he ended with a question and answer session. A short way into the Q&A, my wife, Colleen, mused, “Well, space may be finite but, since it’s expanding INTO something, ROOM must be infinite because it has to have a place to go.” Her logic was unassailable. There are, in all likelihood, things that are without boundary. However, when it involves the more terrestrial affairs of value exchange, it’s high time we start grounding ourselves in the discipline of a commitment to Suitably Scaled Finitude. By this I mean that we must become active members of value exchanges, wealth and its stewardship. We need to know the scale, velocity and contour of value in its recognition and exchange and engage in finance within that knowledge. The “knowledge economy” is oxymoronic until we first commit to the exchange of Knowledge and then deploy the fullness of the same in economic exchange.

In this process, we need to see growth with more dimensionality than is currently contemplated. Growth may be linear and compounding. It may also be a phase within a necessary cycle of birth, growth, maturity, and re-birth. Great benefit may accrue from an understanding that natural cycles of abundant production include composting, decay and replenishment. Using the wisdom emerging from our colleagues studying biomimicry, we may find that the temporary, cyclic use and repurposing of materials or processes is actually more value accretive than our current linear waste production compulsions. In short, our financial systems based on passive detachment must be replaced with wisdom and kinetics that are suitable at scale. If we are to learn from the 50 year experiment in sociopathic, debt-based perpetual motion growth-at-all-costs that leads our leaders to lie, we must resolve to be more fully aware. We must begin exercising the discipline of living at a suitable scale in our own lives so that we can learn accountability in the broader human experience. Engage!

1 comment:

  1. No longer puzzled at the incessant lack of moral behavior but I do remain utterly mystified as to why/how so many capable-thinking Americans continue to accept the condescending rhetoric from the beltway. We are nothing more than a 3rd world country in disguise if we fail to utilize the Constitution of our nation and our talent of independent thought.

    I recall a natty dressed banker bragging about his hand-made suit and the fact that the 3 buttons on the cuff were actually functional and not sewed in-place like off-the-rack suits. I asked what function outside of bragging rights did they serve and heard a chuckle followed by "someday you'll learn that the exercise of power is rarely meant to be pragmatic."

    One more infinite certainty David.......meaningful thought is as infinite as Collen's expanding room. Rally on!



Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave