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Comment Dated Apr 14, 2009


GOLDEN FLEECE

A fair definition of slavery would be "a condition of being forced to work for the benefit of another rather than one's own." It's customarily taught that that the instution has been eradicated from the Western world, but really it's just been desegregated. As with selling women the idea that guys actually like sitting in traffic snarlups and being ordered around by halfwits to do things they detest, it broadens the catchment base. In any case, the old, undisguised way of sending in hired hands to round up the recalcitrant tends to be frowned upon these days--and becomes increasingly problematical as the intended booty start to acquire guns too.

A more sanitary way of achieving the same objective would be to establish a legally enforcible lien on twenty years' or so worth of the earnings of the productive sector of society--that is, people who can create real wealth by turning things lke rocks, trees, and wastelands into buildings, machinery, clothing, and farms, as opposed to casino operators who deal in hedge funds, derivatives, and the like. To do this, pick a necessity for living that everyone needs to obtain in some form or other--say, housing--and, in violation of everything that has been known about sound financial practice for centuries, push effectively unconstrained loans on unsophisticated buyers, even to the degree of mandating them by law. They'll never repay, but the consequent recklessness will allow sellers to inflate prices beyond the bounds of sanity, which more responsible but inexperienced first-timers must go with if they're to have any prospect of owning a roof. When the pyramid eventually falls in (i.e. after the apex and top tiers have collected), and the young hopefuls learn that the assets which your appointed professional appraiser, who was supposed to know the business, accepted as security isn't worth what they were told it was, have a contract that still obliges them to repay in real wealth the full amount of the inflated numbers reflecting money that had never existed in the first place. How about the non-recoverable portion representing the bad debts that should never have been made at all? That's taken care of via government bailouts that derive ultimately from the pockets of the same real-wealth producers who are saddled with the negative-equity loans. Neat, eh?

The modern banking system has its roots in the mercantile financing houses of Lombardy, in northern Italy, in the Middle Ages. The difference then was that the lenders putting up the capital for, say, a trading expedition to the East not only stood to reap a cut of the profits if all went well and the ship came back, but accepted the risk of bearing their share of the possible loss. This provided a strong incentive not to over-reach (the insurance business began as a system for distributing the risks and compensating those who were unlucky), and to inquire very carefully into the experience of the captain, the seaworthiness of the vessel, the overall soundness of the venture, and so forth. But the kind of rigged game that it has turned into since guarantees a breakdown of the traditional means of ensuring responsibility and accountability. The poor judgments that they deterred are now not merely rendered risk-free but actively rewarded!

Although, I suppose, when viewed from within, the system and its logic probably aren't judged to be so poor at all. The delusion is that institutions can be trusted to regulate themselves. When thieves are put in charge of the counting house, it's not great mystery figuring out where the money went. But it's looking more as if the company's owners who put them there are in cahoots for a share of the take. I'm not sure offhand who said it, but there's apparently a lot of truth in the assertion that the biggest criminals don't break laws, they make them.