‘an age of uncertainty, complexity and paranoia’

Todays Quote of pure Win came from re-reading Charles Stross’s first published novel, the splendid occult-espionage-tech-support odyssey called “The Atrocity Archives“, today. Here’s the bit which stuck – taken from his afterword, ‘Inside the fear factory‘:

“We live in an age of uncertainty, complexity and paranoia.

Uncertainty because, in the last few centuries, there has simply been far too much knowledge out there for any one human being to get their brains around; we are all ignorant, if you dig far enough.

Complexity multiplies because our areas of ignorance and our blind spots intersect in unpredictable ways – the most benign projects have unforeseen side effects.

And paranoia is the emergent spawn of these side effects; the world is not as it seems, and indeed we may never be able to comprehend the-world-as-it-is, without the comforting filter lenses of our preconceptions and our mass media.

It is therefore both an attractive proposition (and a frightening one) to believe that someone, somewhere, knows the score.”

This sums up a good chunk of the core thinking behind my next long piece, “Voices of Authority”, so consider it an aperitif. (And a strong hint to read Charlie. He’s one of the best, smartest writers we’ve got these days in the SF/fantasy/horror field and deserves attention.) (And beer.)

Postmodernism in modern banking

Hmm… is this becoming a series of posts on ‘posts’?

(Not a bad idea… lends me to fond recollections of Julian Cope and I backstage at one of his gigs, both utterly stoned as could be and him looking me deep in the eye and describing my wives and I as “the most post-christian family I know”. Good times.)

No, this one is about modern banks and how their decline and fall started as a modernist movement, but soon fell into post-modernism as it got non-linear…

The original conceit comes from a New Yorker article (found by Letter From Here blog),

Melting into Air – Before the financial system went bust, it went postmodern.” by John Lanchester

Have a toke on this… it’s long, but satisfying.

There’s something almost nineteenth century about Buffett’s writing on finance—calm, sane, and literate. It’s not a tone you’ll readily find in anyone else’s company reports, letters to shareholders, public filings, or press releases. That’s because finance, like other forms of human behavior, underwent a change in the twentieth century, a shift equivalent to the emergence of modernism in the arts—a break with common sense, a turn toward self-referentiality and abstraction and notions that couldn’t be explained in workaday English. In poetry, this moment took place with the publication of “The Waste Land.” In classical music, it was, perhaps, the première of “The Rite of Spring.” Jazz, dance, architecture, painting—all had comparable moments. The moment in finance came in 1973, with the publication of a paper in the Journal of Political Economy titled “The Pricing of Options and Corporate Liabilities,” by Fischer Black and Myron Scholes.

The revolutionary aspect of Black and Scholes’s paper was an equation that enabled people to calculate the price of financial derivatives based on the value of the underlying asset. Derivatives themselves had been a long-standing feature of financial markets. At their simplest, a farmer would agree to a price for his next harvest a few months in advance—and the right to buy this harvest was a derivative, which could itself be sold. A similar arrangement could be made with equity shares, where what was traded was an option to buy or sell them at a given price on a given date. The trade in these derivatives was hampered, however, by the fact that—owing to the numerous variables of time and risk—no one knew how to price them. The Black-Scholes formula provided a way to do so. It was a defining moment in the mathematization of the market. The trade in derivatives took off, to the extent that the total market in derivative products around the world is counted in the hundreds of trillions of dollars. Nobody knows the exact figure, but the notional amount certainly exceeds the total value of all the world’s economic output, roughly sixty-six trillion dollars, by a huge factor—perhaps tenfold.

It seems wholly contrary to common sense that the market for products that derive from real things should be unimaginably vaster than the market for things themselves. With derivatives, we seem to enter a modernist world in which risk no longer means what it means in plain English, and in which there is a profound break between the language of finance and that of common sense. It is difficult for civilians to understand a derivatives contract, or any of a range of closely related instruments, such as credit-default swaps. These are all products that were designed initially to transfer or hedge risks—to purchase some insurance against the prospect of a price going down, when your main bet was that the price would go up. The farmer selling his next season’s crop might not have understood a modern financial derivative, but he would have recognized that use of it. The trouble is that derivatives are so powerful that—human nature being what it is—people could not resist using them as a form of leveraged bet.

And then, once the results of all these leveraged bets became clear (an awful lot of basically useless financial instruments and toxic debts) it all went a bit… postmodern.

The result is a new kind of crash. The broad rules of market bubbles and implosions are well known. They were systematized by the economist Hyman Minsky (a student of Schumpeter’s), in the nineteen-sixties, and their best-known popular formulation is in Charles P. Kindleberger’s classic work “Manias, Panics, and Crashes: A History of Financial Crises” (1978). Tulip bulbs in the sixteen-thirties, railways in the eighteen-forties, and Internet stocks in the nineteen-nineties are all examples of the boom-bust cycle of a mania leading to a crash. As Morris points out, however, a credit bubble is a different thing: “We are accustomed to thinking of bubbles and crashes in terms of specific markets—like junk bonds, commercial real estate, and tech stocks. Overpriced assets are like poison mushrooms. You eat them, you get sick, you learn to avoid them. A credit bubble is different. Credit is the air that financial markets breathe, and when the air is poisoned, there’s no place to hide.”

The crisis began with defaulting subprime mortgages, and spread throughout the international financial system. Thanks to the new world of derivatives and credit-default swaps, nobody really knows who is at risk from the wonderfully named “toxic debt” at the heart of the trouble. As a result, banks are reluctant to lend to each other, and, since the entire financial system depends on interbank liquidity, the entire financial system is at risk. It is for this reason that Warren Buffett was doubly right to compare the new financial products to “weapons of mass destruction”—first, because they are lethal, and, second, because no one knows how to track them down.

If the invention of derivatives was the financial world’s modernist dawn, the current crisis is unsettlingly like the birth of postmodernism. For anyone who studied literature in college in the past few decades, there is a weird familiarity about the current crisis: value, in the realm of finance capital, evokes the elusive nature of meaning in deconstructionism. According to Jacques Derrida, the doyen of the school, meaning can never be precisely located; instead, it is always “deferred,” moved elsewhere, located in other meanings, which refer and defer to other meanings—a snake permanently and necessarily eating its own tail. This process is fluid and constant, but at moments the perpetual process of deferral stalls and collapses in on itself. Derrida called this moment an “aporia,” from a Greek term meaning “impasse.” There is something both amusing and appalling about seeing his theories acted out in the world markets to such cataclysmic effect. Anyone invited to attend a meeting of the G-8 financial ministers would be well advised not to draw their attention to this.

Give the whole piece a read, it’s quite illuminating. And while you’re there perhaps you can answer one of the great mysteries of our time – why are the cartoons in the New Yorker so uniformly shite?

Post-capitalism, and how to get it

Kim Stanley Robinson, one of SFs greatest ever world-builders and a passionate Green futurist, has a plan… and he calls it, becoming a post-capitalist society. Here’s a taste:

Am I saying that capitalism is going to have to change or else we will have an environmental catastrophe? Yes, I am. It should not be shocking to suggest that capitalism has to change. Capitalism evolved out of feudalism. Although the basis of power has changed from land to money and the system has become more mobile, the distribution of power and wealth has not changed that much. It’s still a hierarchical power structure, it was not designed with ecological sustainability in mind, and it won’t achieve that as it is currently constituted.

The main reason I believe capitalism is not up to the challenge is that it improperly and systemically undervalues the future. I’ll give two illustrations of this. First, our commodities and our carbon burning are almost universally underpriced, so we charge less for them than they cost. When this is done deliberately to kill off an economic competitor, it’s called predatory dumping; you could say that the victims of our predation are the generations to come, which are at a decided disadvantage in any competition with the present.

Second, the promise of capitalism was always that of class mobility—the idea that a working-class family could bootstrap their children into the middle class. With the right policies, over time, the whole world could do the same. There’s a problem with this, though. For everyone on Earth to live at Western levels of consumption, we would need two or three Earths. Looking at it this way, capitalism has become a kind of multigenerational Ponzi scheme, in which future generations are left holding the empty bag.

You could say we are that moment now. Half of the world’s people live on less than $2 a day, and yet the depletion of resources and environmental degradation mean they can never hope to rise to the level of affluent Westerners, who consume about 30 times as much in resources as they do. So this is now a false promise. The poorest three billion on Earth are being cheated if we pretend that the promise is still possible. The global population therefore exists in a kind of pyramid structure, with a horizontal line marking an adequate standard of living that is set about halfway down the pyramid.

The goal of world civilization should be the creation of something more like an oval on its side, resting on the line of adequacy. This may seem to be veering the discussion away from questions of climate to questions of social justice, but it is not; the two are intimately related. It turns out that the top and bottom ends of our global social pyramid are the two sectors that are by far the most carbon intensive and environmentally destructive, the poorest by way of deforestation and topsoil loss, the richest by way of hyperconsumption. The oval resting sideways on the line of adequacy is the best social shape for the climate.

This doubling of benefits when justice and sustainability are both considered is not unique. Another example: world population growth, which stands at about 75 million people a year, needs to slow down. What stabilizes population growth best? The full exercise of women’s rights. There is a direct correlation between population stabilization in nations and the degree to which women enjoy full human rights. So here is another area in which justice becomes a kind of climate change technology. Whenever we discuss climate change, these social and economic paradigm shifts must be part of the discussion.

Given this analysis, what are my suggestions?

  • Believe in science.
  • Believe in government, remembering always that it is of the people, by the people, and for the people, and crucial in the current situation.
  • Support a really strong follow-up to the Kyoto Protocol.
  • Institute carbon cap-and-trade systems.
  • Impose a carbon tax designed to charge for the real costs of burning carbon.
  • Follow the full “Green New Deal” program now coming together in discussions by the Obama administration.
  • Structure global economic policy to reward rapid transitions from carbon-burning to carbon-neutral technologies.
  • Support the full slate of human rights everywhere, even in countries that claim such justice is not part of their tradition.
  • Support global universal education as part of human-rights advocacy.
  • Dispense with all magical, talismanic phrases such as “free markets” and promote a larger systems analysis that is more empirical, without fundamentalist biases.
  • Encourage all business schools to include foundational classes in ecology, environmental economics, biology, and history.
  • Start programs at these same schools in postcapitalist studies.

Quote of the day – and a request for submissions

…neither come from me!

The quote is today’s example of the joy to be found from the webcomic A Softer Word. Go see.

The request for submissions is for the upcoming Beltane issue of Rending the Veil, my Number One occult webzine – and not just ‘cos they print my stuff.

Rending the Veil is seeking content for its Beltane issue, due to go live on or near April 15. This will be our first issue since Yule, due to various technical issues associated with the move (and other factors). If you’ve ever considered submitting content, please make an effort to do so for this issue. We want a robust, intelligent, and interesting issue and I have faith that anyone reading this post is capable of writing precisely that caliber of material.

We seek non-fiction articles on any occult subject — intermediate to advanced is preferred but we do have room for some beginner-oriented content. We also seek fiction (either chapters in a series or short stories) with occult or paranormal (or otherworldly) flavor; book, TV, movie, cd, etc reviews on anything that’d be of interest to an alternative audience; poetry; graphic art and photography; and pretty much anything else that will fit into a visual format.

Please feel free to paste this post anywhere you think people might be interested. Contact info – admin@rendingtheveil.com or sheta@rendingtheveil.com

We are also seeking volunteers for publicizing the magazine via interaction on like-content blogs or web forums.

Thank you!