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The hidden easter eggs of risk have come home to roost! - click opera
February 2010
 
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Tue, Sep. 16th, 2008 03:25 pm
The hidden easter eggs of risk have come home to roost!

The financial meltdown currently being described as "the most serious since the Great Depression" (and forecast to get worse) will have one unexpected consequence: promotion for artists who have dealt with "the heart of darkness of capitalism" in their work. They may be unable to sell it as a result, though: not only are the major banks "all tied together on the edge of a cliff", it seems the art world is tied up with them: "it is no longer clear that art and property interests are even opposed," wrote Irene Cheng in Frieze; "after all, the much-discussed booms in both markets have been propelled by the same hedge-fund bonuses. The recent turmoil in the financial markets has led to speculation that art gallerists, equity traders and property developers may all be inhabiting the same precarious bubble."



One artist who ought to be promoted by recent events is Mark Boulos, whose two-screen video installation All That Is Solid Melts Into Air pits a Nigerian liberation movement called MEND (Movement for the Emancipation of the Niger Delta) against futures traders at the Chicago Mercantile Exchange in a way that suggests they both serve irrational gods:



If the art and financial communities are as intimately roped together as oil makes Nigeria and Chicago, however, it seems they don't share the same way of thinking: what artists foresaw, with their ethical and aesthetic intelligence, the highest-paid minds in the City completely failed to. Jeff Randall's BBC Radio 4 documentary about the Credit Crunch, Welcome to the Jungle, aired last Thursday, started with a soundbite from a city trader: "How many experts are out there -- when you can see the banks collapsing -- these guys are supposed to be the brains of the city... not one of them saw this happening, not one!"

Now, the current financial crisis is dauntingly technical -- and far beyond my comprehension. But it also contains a moral dimension which we can all understand, and I think the quote above is a way to the nub of it. That complaint isn't just about the failure of supposedly-intelligent brains to predict the current situation, it's about the specialization of intelligence, the narrowing down of intelligence from a general critical sense, a view of the big picture (the kind of view artists might take), to a very narrow form of self-interested cunning that focuses on devising ever-newer, even-more-complicated forms of personal gain -- ways to cheat the system and cheat other people, even out of their houses and food -- and studiously ignores the bigger implications.

We're talking about the difference, then, between intelligence and low cunning. The "city brains" failed to predict the current situation because they were mostly employed to look at new ways to make risk pay, rather than to work out what might happen when you ingeniously hide risk, like Easter Eggs, all over the house. These "eggheads" were paid, in other words, to be cunning rather than intelligent. They sold risk on in complicated chains of derivatives so that they could free up an advance party of "risk soldiers" to make profits by selling debt to the poor, irregardless of whether this debt could ever be repaid. Only when it was too late did they realise that their cunningly hidden debt eggs were now secreted anywhere and everywhere in the financial system.

And now the Swiss cheese is full of holes, and the chickens are coming home to roost. Or something. Look, I'm just an artist! I think in -- and mix -- metaphors! I use metaphor-derivatives, and sell them down the metaphor-line! But it seems to me that risk keeps the mind sharp, and keeps us safe, the same way pain keeps us from putting our hands under hammers and saws. The person who dissociates the pain of risk from the profit of risk -- who allows you to take risks, that is, without suffering consequences -- is a bit like the person who invents the perfect aspirin, only to find that it encourages people to walk into doors and crash their cars for fun. The removal of pain and risk, in other words, makes us stupid, no matter how intelligent the man who invents a way to do it.

It's often suggested that one of the virtues of art is that it allows you to "crash the plane and walk away"; that, like gameplay, art is a place where you can take all the risks you like. But the interesting thing that emerges from this financial meltdown is that art's intelligence is all tied up with its ethical overview, its eye on the big picture, and its strong sense that there are things you oughtn't do. It's the money world which has been acting "artistically", taking risks because the consequences have been sold on down the line, crashing the plane because "it's okay, it doesn't hurt". This week, carrying their possessions out of defunct investment banks in cardboard boxes, they're finding out that it does hurt. And not just other people.

(On Monday night Evan Davis led a discussion, The Credit Crunch Mess, What Next? which has some particularly interesting ethical points by Benjamin Barber about the morality of runaway consumerism and deregulation, followed by a perspective -- starting 41 minutes in -- from Oxford University economist Dr Linda Yueh on how this crisis represents "the end of the era of American economic dominance" and "a new world order in which economic power has shifted east" -- an analysis partly confirmed by David Shairp, a global strategist at JP Morgan, who says that China is already 85% to 90% the size of the US, on a purchasing-power-adjusted basis, and could overtake it by the turn of the decade.)

48CommentReply

kevisannasdad
kevisannasdad
kevisannasdad
Tue, Sep. 16th, 2008 02:45 pm (UTC)
Trompe l'oiel is making my wallet look smaller.

It seemed like the history of home loans in America was full of carefully analyzing people's personal financial history. When I was kid, people would say,Don't pay the electric bill late or you will never get a home loan. Then, it all changed and my employment as a semi-professional dung beetle breeder could get me a home loan, irregardless of my filing for bankruptcy.
Pleasant anectdotes aside, I wonder if the banks and quasi-banks and investors pretending to be banks just took on too many high risk home loans rather than the fact that they took on any high risk loans. In one scenario, a chain is only as strong as its weakest link. In the other, a leaky bucket can be filled up as long as the water is coming in faster than it is going out. In this case the water flow is how fast the banks could repackage high risk loans and resell them to other corporations as sub-prime loans.
Also, where can I buy some of these cheap, foreclosed homes? Some group is bound to make a ton of money picking up these things.


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kementari2
kementari2
The green fuse
Tue, Sep. 16th, 2008 05:02 pm (UTC)
Re: Trompe l'oiel is making my wallet look smaller.

Yes, it used to be very hard to buy a house one couldn't afford. Banks wouldn't take the risk.

The subprime mortgage issue started because banks started allowing too many loans that were too risky. But ultimately, they were just enablers to the people making unwise and unconservative purchases beyond their means. The average American has more debt than savings; it's no surprise that many of us will take every opportunity for irresponsible consumption made available to us.


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uberdionysus
uberdionysus
Troy Swain: Black Box Miasma
Tue, Sep. 16th, 2008 02:55 pm (UTC)

Damn you piss me off. There were plenty of people who predicted it. No one predicted that the major banks would fail but there were plenty who said that the economy was perilous and was headed for Extremely Bad Times. Check out Paul Krugman, Brad DeLong, and countless others - all economists, all worried about subprime lending and the housing bubble (and in general a deregulated economy seriously in peril). Hell, even the stodgy Economist and Barrons were worried about the fallout way before yesterday. That random banker and you simply didn't follow the financial news.

And although it's "dauntingly technical" it is definitely NOT "far beyond [your] comprehension." It would be nice if people would pay attention to this sort of stuff, and if the press would actually report on things like the housing bubble and subprime lending until after a crisis hits (subprime lending isn't just in housing, and is even larger in personal credit, and which has still exists as a bunch of future landmines for us to stumble upon - and soon).

It is all attached to the deregulation of Reagan, and his financial followers, Bush, Clinton and HeWhoShallNotBeNamed (and for you, Thatcher and her followers). And the mess is basically that the banks got too damn reckless, were totally unwatched, gave money to people they shouldn't have, lied about it, and denied the obvious bubble.

Last, I'm really disappointed in Irene Cheng. I like her, but there has never been a time (that I'm aware of) were "art and property interests are even opposed." Dada is one possible exception but a good case can be made against it, and I can't think of another time were "art and property interests are opposed" in any period of art history.

And this: "The recent turmoil in the financial markets has led to speculation that art gallerists, equity traders and property developers may all be inhabiting the same precarious bubble." If that isn't a "no shit" statement, I don't know what is.

BTW, hopefully this will presage a equality compression in the US. Crashes this deep typically do. And I hope your right with the rise of China - they're not a country I love at all, but it's never good to have one superpower. It's no good that our country can bring down the world.

Oh, and I'm listening to that radio show from BBC now, and this is far, far from over. Things can get MUCH WORSE, but we might also be at the bottom. No one knows that, but the financial situation is still filled with massively dangerous landmines.

Edited at 2008-09-16 02:58 pm (UTC)


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(Anonymous)
Tue, Sep. 16th, 2008 03:06 pm (UTC)

"Things can get MUCH WORSE, but we might also be at the bottom." No shit.


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lightelation
lightelation
lightelation
Tue, Sep. 16th, 2008 04:01 pm (UTC)

If there's anything we learned from the Depression, it's that during lean times, the rich like their spendings decadent. While perhaps some art has the potential to take a beating (Hirst), some art will not (historic ones like Pollock, and naughty ones like Araki). And the super rich will remain super rich, no matter what happens, and they will buy art and do lines off it.


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imomus
imomus
imomus
Tue, Sep. 16th, 2008 04:35 pm (UTC)

Wow! Where has your blog been all my life, Kira?


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(no subject) - (Anonymous) Expand
kineticfactory
kineticfactory
this is not your sawtooth wave
Tue, Sep. 16th, 2008 04:04 pm (UTC)

"the most serious since the Great Depression"

Shouldn't that be "...since the First World Depression", or "since WD1"?


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imomus
imomus
imomus
Tue, Sep. 16th, 2008 05:13 pm (UTC)

Tao Lin, by the way, has made good on his promise to send me his books. Opening his poetry collection Cognitive-Behavioral Therapy at random, I read something apposite to today's theme:

just as a hamster can be conditioned to press a lever for food
a human being can be conditioned by professional rewards
to ignore intellectual contradictions and the suffering of others

The tone is almost Brechtian.


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drywbach
:-Þ
Tue, Sep. 16th, 2008 06:36 pm (UTC)

Tao Lin stichomancy! It could save the world, but possibly not the whales.

You may start to enjoy the business and finance pages, if you found them dull before. I used to skip over them, but then I became interested. It's all human motivations behind the numbers.


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pay_option07
pay_option07
Tue, Sep. 16th, 2008 05:23 pm (UTC)
The Credit Crunch Mess, What Next?





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dogsolitude_v2
dogsolitude_v2
dogsolitude_v2
Tue, Sep. 16th, 2008 05:47 pm (UTC)

I've always put it down to a sort of committee-thinking on a grand scale. These guys eat, drink and sleep banking, and hang around with other bankers.

They're all living the same dream, and no one in that environment is really going to want to be the one to stand up in the wine bar after the latest 7-figure bonus handout and say something like: "hey, er, guys, isn't this all a bit risky? I mean, what happens if some of our poorest debtors and mortgage holders can't pay off their sub-prime mortgages in the event of an interest rate rise?"

What's more likely is that there's a sort of large-scale mass-self-deception going on, almost like a bizarre cult of Flat-Earth Creationists, who feed each other's delusionary behaviour.

Selling debt used to be called usury, and charging interest on it used to be illegal in England.

Mmmm... Easter Eggs... We should campaign for solid ones. Or giant Cadbury Creme Eggs, complete with spoon.


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uberdionysus
uberdionysus
Troy Swain: Black Box Miasma
Tue, Sep. 16th, 2008 07:16 pm (UTC)

That's exactly what happened. Same thing with the dot com bubble.

Oh, and Momus, this This American Life episode is the clearest description of what happened and how the subprime derivatives work and why people were buying them. And as usual for This American Life, it's really funny and fun to listen to.

I really feel like an idiot for not getting a NINA loan (a "no income, no assest" loan). I could have gotten a massive loan and defaulted and would have a few hundred thousands right now. Shit.


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(no subject) - (Anonymous) Expand
count_vronsky
count_vronsky
Tue, Sep. 16th, 2008 08:35 pm (UTC)

The one person who has been singled out as being the most prescient on the current crisis is Nouriel Roubini--aka Dr. Doom--of NYU (reprezent!) I saw him on Charlie Rose last night and he said things will get much worse.


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count_vronsky
count_vronsky
Tue, Sep. 16th, 2008 09:42 pm (UTC)

Great piece from Nassim Taleb -- THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS


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electricwitch
electricwitch
For anything, oh! she´ll bust her elastic
Tue, Sep. 16th, 2008 08:48 pm (UTC)

serious serious serious.


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microworlds
microworlds
Sparkachu Maelworth
Tue, Sep. 16th, 2008 11:00 pm (UTC)

boring boring boring.

yawn yawn yawn.

bernie buttlez bernie buttlez bernie buttlez.


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nofact
nofact
nofact
Tue, Sep. 16th, 2008 10:27 pm (UTC)

economy and astronomy are my favorite sciences.


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imomus
imomus
imomus
Wed, Sep. 17th, 2008 08:12 am (UTC)
On the China point...

"This is not a blip. It's extremely significant. We will see a shift in power away from the US, and towards the developing world - to countries such as Brazil and the Gulf states that have commodities to sell, and to China, where the savings ratio is high. We are going to see a new world order. America as a driver of the global economy is finished."

Max Keiser, former broker and presenter of The Truth About Markets on Resonance FM, in The Guardian


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(Anonymous)
Wed, Sep. 17th, 2008 12:16 pm (UTC)
Re: On the China point...

It's a shame that a newspaper with the intellect of the Guardian only reports these feelings via third parties or occasional columnists, after the damage is done. Meanwhile, it offers the same financial analysis as everyone else, cheers on the markets when escalating, like everyone else, and prefers the minutiae of party politics to relevant debate, like everyone else.


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(no subject) - (Anonymous)
uberdionysus
uberdionysus
Troy Swain: Black Box Miasma
Wed, Sep. 17th, 2008 06:08 pm (UTC)

I totally disagree and I think the numbers agree with me. That slogan fits the last 30 years, and esp. the last 10 years, where worker productivity has gone through the roof, corporate profits have increased exponentially, yet worker wages have remained stagnant for EVERYONE except for the upper 1%. (And I'm speaking specifically about the U.S.) According to classic economics, workers should share an equal upswing as the corporate profits, but that is NOT what has been happening.

I just don't see the benefit for the larger country. I personally benefited because I directly worked for an investment bank, but I don't think my country benefited in any obvious way, other than a small chunk of exceptionally wealthy people gobbling up even more wealth. I think you're parroting the standard trickle down theory that this recent debacle has disproved (as did the Enron/Worldcom/Andersson crisis, the collapse of LTCM, the S&L crisis, the junk bond crisis, etc.).

And that's not what I got out of that radio show at all. The problem of the securities/derivative market is that it was totally uncontrolled and grew into a giant Godzilla monster. Worse, it was all based on really bad bets without any liquidity to back them. It needed to be regulated because it was built on air. People were making bets and insurance claims without having any money down. The credit drop swaps were worth more than the actual bonds and stocks, yet the investment banks weren't (and still aren't) keeping any capital to back their claims.

Here's another great primer to the subprime housing derivatives, and how and why people stupidly bought them. It's from This American Life, so it's funny and clear and ignores most of the jargon:

http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1242


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(Anonymous)
Wed, Sep. 17th, 2008 01:56 pm (UTC)

A tip of the hat, Nick. Working as I do in and for the NY art world (even if from a distance) I have been wondering when all of this was going to start poking at the skin of our own little-reported bubble. Now here's a different view from ABC News, albeit couched in yet another contempo-art-equals-Damien-Hirst-hence-equals-totally-decadent grouse piece.

www (dot) huffingtonpost (dot) com/2008/09/16/damien-hirst-auction-fetc_n_126993.html


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(Anonymous)
Wed, Sep. 17th, 2008 02:42 pm (UTC)

I'm wondering whether an economic downturn might not in fact be good for hedge-fund artists like Hirst. In gloomy economic times you tend to see a "flight to quality", ie safe investments. Someone like Hirst now epitomises the whole YBA movement. Once his art is no longer relevant in contemporary art terms, he'll become an icon of art's past. Just as Warhol is the icon of pop art long after pop art's golden years. Just as Duchamp's urinal lives on, so will dead sharks. In the long term, investing in Hirst is a sure thing, in other words. I think it's all the middling (in commercial terms) artists who will get hit by the recession. The superstars like Hirst will actually prosper.


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(Anonymous)
Wed, Sep. 17th, 2008 05:50 pm (UTC)

Ive been reading alot of conspiracy books over the past year or two, and my dad has become more and more fringe (buying up guns, canned foods, bottled water) and we always joke about it. "It's a house of cards," he always tells me, "It's all built on a lie. The entire system is - in order to make money you have to sell a good at more than it's worth. The very fundamental action which modern society is based on is lying."

Seems like the excrement is hitting the fan more and more this year...

Adam Bruneau


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(Anonymous)
Wed, Sep. 17th, 2008 07:54 pm (UTC)

"Seems like the excrement is hitting the fan..." No, shit.


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