I have a Fidelity investment account from days yonder when I worked for a major corporation. I have no idea why I kept it because I yanked all my 401K funds out to try to pay off my house. That might look like a smart move given the current economic environment, but it was luck combined with my relatively newfound gag reflex regarding debt. I just got an email from Fidelity with the subject line: Insight into the Rescue Package.
You never really get any insight from these kinds of mails unless you read between the lines. So that’s what I did.
The mail starts off:
As part of Fidelity’s ongoing effort to keep you up to date on events affecting our economic situation, our Market Analysis Team has provided analysis on the Government Rescue Plan.
On October 3, the U.S. House of Representatives approved a rescue package for the U.S. financial system, the Emergency Economic Stabilization Act of 2008. It includes measures added and approved by the U.S. Senate on October 1.
The main objectives of the Act are to:
Remove troubled assets from the financial system
Recapitalize the financial system by injecting a major infusion of capital
I guess the term “rescue package” or “Emergency Economic Stabilization” was more palatable than “government bailout” and that if felt better to say “troubled assets” than “bad debt” or “bad bets.” I have suspicions that they may need to work on their approach if they think that this kind of word smith’ing is going to help ease their clients’ fears.
Now, I’ll be the first to admit that I am no financial Merlin; certainly far from it. But indulge me for a moment because I think that my inexperience helps me in this case. As a result of my simple outlook, I have the luxury of being able to boil the overall financial maelstrom into a few rudimentary observations and gross oversimplifications. Here’s the insight I did get from the Fidelity form letter:
A market is like a game
The players want to play and the fans want the players to play - so that all can benefit from the game
A game works just fine as long as everyone plays by the established and agreed upon rules.
If you don’t have trust that everyone is playing fair you won’t have a game for very long
Fair play is the game and cheaters are to be penalized or punished depending on the seriousness of the indiscretion
A government is like a referee
Referees that operate with integrity are helpful to a game’s coherence
Referees that lack integrity are hurtful to a game’s coherence
If the Ref is susceptible to harming the nature of the game (either through lack of knowledge of the game or through a lack of integrity) your game will lose integrity and coherence.
If a game has no coherence, the players and fans suffer, and they’ll find another game elsewhere.
It seems to me that in our nation, we’ve voted in some bad ref’s and player cheating is out of control. We bear the responsibility and perhaps we’ll suffer the consequences.
There are some interesting highlights that have jumped out at me in my own research into the subject of what went down in this whole mess.
The short story seems to be the perennial tradition we humans share of succumbing to gold fever. That, coupled with a lack of transparency, kicked off a distant tsunami that still has a ways to go before its full effects are felt by those of us standing on the shore fishing.
I do want to expand the story a little bit, just to examine who poured the gas and where the spark came from.
After about 6 years of “growth,” we all remember the dot-com bubble imploding around 2001. To defend against a recession the Federal Reserve injected money into the financial system by printing more (of course we know they can just change some numbers in a computer and not have to get their fingers inky to inject money). The custodians of this new cash, and anyone who had large sums of it already, needed a new place to find for it to live - and they found one…the housing market.
The housing market was flying, in part, because of the growth in the tech industry. The government at the same time was doing everything it could to encourage families to get into homes. Lenders were looking the other way to get people who weren’t qualified into them.
Once the tech bubble deflated there was still plenty of momentum in the housing market the bubble helped create. I think it took a while for the housing boom to falter because we’re dealing with a real-life web of interdependent systems and materials and a slightly different psychological mindset. Where the tech boom was mostly just digital wealth, the real estate market had real and tangible assets. Everywhere everyone could see housing prices increasing. There were even countless TV shows based on it like Flip that House and Designed to Sell.
And, as we now know, it seems that these real assets were much more attractive as risk mitigator to the financial service industry. Assets are always better than the mere 1’s and 0’s in the dot com game. It seems it was thought that these assets “guaranteed” the capital investment – so it was “safe.” I guess it kind of makes sense…the housing prices just kept going up and up - and even if someone or many someones did default, on balance, it would be okay because you could probably sell the house for more.
When housing prices went kaput – the match was lit, and the rest you can get inundated with if you turn on the TV news.
This is a story - but not the whole story.
In publicly traded companies, other than trade secrets and personal employee records, I can’t really think of too many things that ought to be shielded from public view. Unfortunately, “shielding from public view” is exactly what the companies that are failing in the financial services industry asked for – and ultimately got, thanks in part to former Republican Texas Congressman/current McCain economic advisor Phil Gramm.
In 1999, with a final sweep, Gramm’s legislation (signed into law by Clinton) kicked the leg out from the Glass Steagall Act. The Glass Steagall Act, which regulated the financial services industry, was enacted in 1933 as the Great Depression was in full swing. One of its primary purposes was to, guess what…curb speculation and prevent bank holding companies from buying other financial institutions; basically to help prevent the situation we’re currently in now.
JP Morgan gets Bear Sterns and WaMu for a song, and institution after institution fails or gets absorbed. More and more control coalesces in fewer and fewer nodes.
I question Milton Friedman’s world view as it pertains to his influence on developing countries. He takes a one size fits all approach that I think does a great deal of harm. That said, he does have some interesting opinions as it relates to the United Stats. This video was made in the early 80’s but there might be something interesting to take away given the current climate:
I think the important thing to learn from this is that we’re not really good at learning - or at least we suffer from some form of selective collective memory loss. The thing is - grandma and grandpa knew all this stuff already - don’t trust banks and live within your means: save, save, save. The Chinese have a culture that adhere’s to this philosophy as well.
I have to admit that our economy has been able to withstand a herculean amount of punishment; far more than I thought it could. While that may mean things aren’t as bad as reported, I think it is more likely that we have been supported by a globalization suspension net. Unfortunately it sucks to stress test something while you’re dependent upon it - I wouldn’t do it while I was on a life support machine. I think our economy is definitely a reflection and consequence of our current cultural mindset. In the context of mythos, I am extremely curious about what cultural Karma might look like.
Mindsets can be hard to change. The good news is that they will if they have to. As the USA looks to find its role in a future where we may not be the world’s alpha protector dog, other countries will naturally assert their own strength. Loki, Kali, Nun and Naunet, and other chaos gods come to mind (side note: I find special interest that Nun and Naunet are the male and female Egyptian gods/aspects of chaos AND water). These mythic figures may be worth investigating to see how the human psyche orients towards their representation of change. For those who are not accustomed to reorienting their world view on a regular basis, the journey ahead may get a little rough; they in turn may make it rough on the rest of us. To me, education and awareness seem to be the best preparation in any case.
“Where is it written that the United States will last forever?” -Chalmers Johnson
“What power Rome slowly built, an unarmed traitor instantly overthrew.” -Claudian (CE 365 - ~408)
I love the concept of differentiating between America and AmericaTM. This is clearly demonstrated in Culture Jam: How to reverse America’s Suicidal Consumer Binge - and Why We Must by Kalle Lasn. It’s a very good read, amazingly patriotic, and here’s an excerpt:
“Act Four of the story of America is about breaking the media-consumer trance. It’s about taking the TM out of AmericaTM. It’s about putting corporations back in the box and revoking many of the constitutional rights we have granted them over the past two hundred years. It’s about calling these subordinate entities to heel.
“The goal of this workshop is to spark a dramatic personal mind-shift that will change the way you relate to corporations. Once you’ve experienced this shift, you’ll feel ashamed for having been so docile and subservient for so long. Your days will be charged with a new sense of autonomy and mission. You’ll derive immense pleasure from tussling with corporations, putting them in their place. You’ll train yourself to always take the position of power, to be mindful of the fact that you are a human being and the corporation is merely a legal construct your species thought up.
And further on…
“Two generations of chronic overconsumption, decadence and denial have weakened AmericaTM. American cool is now every bit as vulnernable as the Soviet Utopia was ten years ago. A revolution couldn’t happen there but it did. It can’t happen here, but it will. This is a momentous occasion and we shouldn’t doubt or fear, but celebrate. In the dawn of this new millennium, one dream is ending and another is being born.
“And I can’t think of anything much cooler than that.”
I’d also add that governments are also legal entities. A government is a contract between peoples on how they choose for themselves to be governed. In the United State’s case, that contract is the constitution. I ask all the citizens reading: are you choosing the way you are currently being governed? Are those in power operating within and fulfilling their contract with you according to the boundaries outlined by the Constitution?
I is surely obvious, but I prologued with Culture Jam because if you’re new to Polycogs, you might mistake the next section for something less than American. I assure you it is not. Instead I hope to demonstrate some bad behaviors that lead to a known failed state and some bad behaviors we are participating in that seem to be a repeat of a lesson taught. That’s the bad news. The good news is that we have the gift of choice on how to move forward.
If you’ve already absorbed conceptual frameworks listed above, then check out my favorite Yoda-Human (meant with the utmost respect): Professor Chalmers Johnson. He draws some astonishing parallels between Rome and the United States:
But what about this seeming repetition of history?
I have recently been investing a great deal of energy into researching Terrence McKenna’s work on what he has called Timewave Zero or Novelty Theory.
Why? Well Terrence offers a unique way of looking at reality and I think there’s definitely some goodness to be extracted there. He also beat me to the punch on my notion that we’re not necessarily in a Big Bang but instead we’re in a Big Suck, and that time actually works backwards as much as forwards (even though we usually only experience it moving in one forward-like direction). These two concepts track with the consistent turning of common sense on its head (the earth isn’t flat, the sun doesn’t revolve around the earth, and space isn’t separate from time nor is it “empty”). I’ll expand on these ideas at some point in the future, but for now examine some of Terrence’s thinking on why we seem to be experiencing historical events over again.
Unless you’ve gotten a good dose of the following memetic medicine: Chaos Theory, Fractals, Complexity, Emergence, Neuroscience, Evolution, General Relativity, Special Relativity, Terrence will probably come off looking quite non-sane. In fact, he’ll be really easy to dismiss otherwise. Don’t buy into the hype…enter with an open mind.
The most fascinating thing that I’d like to point out from McKenna’s work is the idea that time will allow fractal resonances via historical, present, and future events – meaning that similar events will appear to spiral closer and closer together on the timeline. History will continue to “repeat” and loop in smaller and smaller cycles. In chaos theory, this type of temporal patterning is called a strange attractor. McKenna suggests that the endpoint of this pattern will continue until the year 2012.
Terrance could be speaking literally or metaphorically (I suspect he would say both and neither). Either way, I think most people will agree, there is something going on with time and it does seem to reflect itself in an odd way. The similarity between Rome and the US are striking.
If you haven’t seen it yet, and are interested in the study of power, I would strongly encourage you to watch a documentary titled The Fog of War: Eleven Lessons from the Life of Robert S. McNamara. Filmmaker Errol Morris interviews McNamara about his experiences and reflections as one of the most powerful men in the United States government from 1961 to 1968. McNamara also served as head of the World Bank from 1968 to 1981. Whatever one thinks about his moral character, I think they would be hard pressed to argue against his brilliance.
In an extremely illuminating segment: “Lesson 1: Empathize with Your Enemy” McNamara contrasts the US’s ability to empathize with the Soviets during the Cuban Missile crisis and the failure to do so during the Vietnam War.
“We must try to put ourselves inside their skin and look at us through their eyes just to understand the thoughts that lie behind their decisions and their actions.”
And later…
“In the Cuban Missile Crisis, at the end, I think we did put ourselves in the skin of the Soviets. In the case of Vietnam, we didn’t know them well enough to empathize with them. There was total misunderstanding as a result. They believed…that we had simply replaced the French as a colonial power, and we were seeking to subject South and North Vietnam to our colonial interests - which was absolutely absurd! We saw Vietnam as an element of the Cold War, not what they saw it as; a civil war!”
Here’s the segment for your viewing pleasure (I invite you to take 8 minutes to watch it before moving on):
One of the reasons I found this documentary so enlightening was that you get an interesting insider’s view of what pivot points are available to someone in McNamara’s position – and by extension Rumsfeld, Gates, Cheney, Rice, Bush, etc. They have many - but they have their own challenges cast by the fog of war. In this way I think it is important to get inside the skin of the current US Administration, the Administration’s peers, and the intentions of the various players on the global scale - then insert what you know of chaos, complexity, and emergence.
Even with all of the unknowns that might complicate your understanding out there, you can still attempt to obtain the “correct” information to help you leverage critical strengths in your sphere of influence or chinks in the other’s armor; it’s all about seeing and using fulcrums, pressure points, and interference patterns. Recalling McNamara’s discussion on the Soviets and Vietnam as a case study, you can see these fulcrum points in action and inaction respectively. Tommy Thompson the former US Ambassador in Moscow held the Jenga-like support structure that allowed the US an out with the Soviets – thereby letting us watch The Road Warrior instead of living it. In fact, they were able to create a non-zero situation because of it. For any people who’ve had experience in sales, understanding this non-zero sum element is an easy reach.
Conversely understanding the wrong thing (as in the case of our interpretation of the Vietnamese mindset) can be just as pivotal when examining the countless cost to us in Vietnam in blood and treasure. The direct study of these kinds of special points and feedback mechanisms is called system dynamics (http://en.wikipedia.org/wiki/System_dynamics). System dynamics is another valuable tool in de-linearizing our normal way of thinking.
In a previously posted blog on conspiracy theories I suggested that to beat a conspiracy you had to quit playing the conspiracy game. I’d like to submit that there’s a lot that one can do to increase the signal-to-noise ratio that conspiracies naturally adversely distort by educating yourself with the appropriate information; empathy is one of these information amplifiers.
Who knows, there might be value in determining how much we’re defeating ourselves in the process of trying to defeat an enemy we don’t understand.
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