On The Theology of Capitalism

A banking system is an act of faith: the system survives only for as long as people believe. In each other. With a face mottled by broken capillaries from working there, a Bank & Trust is an every day act of faith.

The BOND MARKET. The world is in unbelievable bad shape. And I do not hear many church people praying for a financial system on the brink of disaster.

In Russia, people who believed in the theology of communism saw their system collapse twenty years ago. The life of the ruble over ten years was a daily roller coaster ride, especially for people on pensions. In August 1998, when the U S Congress was voting to impeach Bill Clinton, the government of Russia defaulted on forty billion dollars of government bonds.

Credit is the air that business breathe. Bonds. That you should have what I have. When you wanted everyone to have what I had. And your job involved sharing bonds.

On February 11, 2009, I wrote a piece about the financial system crisis, more and more the DEFINING INSTRUMENT OF THE culture. Then and now this was a financial system crisis, not a sub prime mortgage crisis. It was not just the derivative market. It was the entire system. It was everybody. Here.

I understood that foreign governments were required to keep capital reserves for international trade, in US dollars. And it is my understanding that the United States went to war in Iraq and Afghanistan, without ever raising taxes. The wars, even before the United States escalated things in Afghanistan, were projected to have a total economic impacted cost $3 trillion, according to Nobel laureate Joseph Stiglitz and co-author Linda J. Bilmes in “The Three Trillion War” — or maybe $4 trillion. And every country in the world had no voice in the pursuit of these wars which was shared by all those who relied on the U S Dollar.

This now is a financial system crisis, not a sub prime mortgage crisis. It was not just the derivative market. It was the entire system. It was everybody. It was war and cheap money. Willem H. Buiter wrote on January 25, 2009, the impact of the bailout has been virtually nil in the market, which has continued to punish the banks in the stock market, and among the public, which has failed to find a clear message.

There was a lot of illusion in life today.  The illusion was about who we thought we were. Money helps create the illusions of grandeur in this life.  We fool ourselves.  With theologies based upon systems. Systems like capitalism and nationalism. Or systems based upon communism.

While living through the crisis in the financial system in 2008, I had lunch with a priest with part of a job description overseeing an endowment fund that would determine the future education of a lot of young people in college. After a touching on a lot of the fiscal concerns in the world, as to how much they might affect his job in fund-raising, at the end of lunch he asked me how much my identity was based upon money.

Money was a DEFINING INSTRUMENT OF THE culture. It was a language that we all communicated in.  It was how we exchanged things, beyond words.  It was a way of understanding.  Money reflected values of a community.  And values were always debated.  

The perils are all around us in America, especially today in Europe, as the banking system is again on the brink, with the value of all currency, of the things that help sustain illusion. Unetaneh Tokef is a prayer that the Jews recite during the High Holy Days about the perils of the year to come: 

How many shall pass away and how many shall be born,
Who shall live and who shall die…
Who shall be at peace and who shall be pursued,
Who shall be exalted and who shall be brought low…

Those stocks in banks in Europe have been worthless for the past three years. “If drugs continue to be injected which mask symptoms rather than address the disease (medicine in the form of debt destruction), the likelihood of a seismic readjustment increases in kind,” writes Todd Harrison, about the dollar. “As governments take on more risk” as they price assets on behalf of the market and transfer debt from private to public, “the common denominator, or release valve, becomes the currency.”

And it has been. As the euro dies. Maybe because the Chinese did not want to adjust the value of their currency. In the game of liar’s poker, in the markets.

“In the UK, no bank is solvent. And if there is, I do not know,” said Jim Rogers in January 2009. The crisis in the banking system has been accompanied by the collapse of the pound sterling. “Interest rates are on the floor and is expected to fall further, the housing market remains in crisis, the current account deficit is through the roof, economic prospects are very bad, it was have triggered the red in the public accounts and banking turmoil of recent days have come to weaken the currency.”

“I want them poor and they deserve to be poor. You can’t have capitalism without punishment.”
–Nassim Nicholas Taleb (1960–), NYY economics professor, former derivatives trader, at the World Economic Forum, January 2009, concerning the bailout. 

“There is an angry mob out there. Its shape is dimly perceived, but the terrifying shadows cast by its flaming torches are clear enough. This is the bond market in full cry. Its most aggressive participants even call themselves the “bond vigilantes.”” – Stephen Foley, British journalist 

“The US Federal government has taken on massive additional contingent liabilities through its bail out/underwriting of the US financial system (and possibly other bits of the US economic system that are too politically connected to fail). Together will the foreseeable increase in actual Federal government liabilities because of vastly increased future Federal deficits, this implies the need for a future private to public sector resource transfer that is most unlikely to be politically feasible without recourse to inflation. The only alternative is default on the Federal debt. There is little doubt, in my view, that the Federal authorities will choose the inflation and currency depreciation route over the default route,” Willem H. Buiter of the European Institute, then Professor of European Political Economy, London School of Economics and Political Science, wrote at the time.

“Although the US dollar and US Treasury Bills and Bonds are still viewed as a safe haven by many, there will, before long (my best guess is between 2 and 5 years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard.”  -Willem H. Buiter from his the naked capitalism blog, from three years ago.

We had lived through times when banks quit playing for the community.  When Citibank arrived.  And put that local banker out of business. The last twenty-five years have seen leveraged buyouts, mergers and acquisitions, as regulators ceased regulating. Because a lot of people got drunk on wealth.

Capitalism was on trial. Capitalism was in the news each day, with this world-wide Occupy Wall Street movement. After Communism had been tried and found guilty a generation ago. What now the system here? These were the days. When all those bankrupt banks were going to end up owning even more homes of financially bankrupt people. And there was anger at governments which bailed out bankrupt banks, on the back of taxpayers. If not for taxpayers, it would be the banks which were foreclosed.

There were saved banks….but banks still not fixed.  As a result of big banks in too many businesses, backed by worthless sovereign debt, this republic is threatened, as was the world. The scale of the problem – Bloomberg has reported the total bailout and loan guarantees, the stimulus, total $9.7 trillion now – would have been enough to pay 90% of all US home mortgages. And so the anger, over the choices, over the income of CEOs of banks and on Wall Street. The public concern over economic decay, not unlike the concern over cultural decay, as a political issue, with government over-reach, with the help of a military in international missions, at an economic and political price. On issues of power and might. On these weapons of mass destruction that so few people understood –called currency and bonds.

A calamity, when there was movement in the stories. Or not. When people were stuck. A calamity was a lot like fire. A raging fire, as people cannot buy homes and cars from a banking system where half of the banks are on the brink.  And the rest of us cannot sell. And there was the anger and disappointment. At the system.

Europe has as little as days or weeks to act to avoid a default by a euro-region country, Willem Buiter who is now the Chief Economist with CitiGroup, Inc, said today. In a banking system always an act of faith, on a continent where more and more, there is no there THERE, the system survives only for as long as people believe. Capitalism, as capital is lost, in an old society which cannot replicate itself. With falling birth rates, and independent contractors.

As the invisible becomes visible, over time. In the old stories where the fear and anger was not understood when invisible. It might be a good time to stop and pray — ironically on the last Sunday where the English-speaking Roman Catholic world can use the native language at Mass in rooted words which I have come to understand, before the language of English prayer is devalued — to pray like those in flight. In the way Passover was once commemorated, as the world once again looks at the old prayers, which have come down in the Jewish tradition, passing on, in relationship, in the DEFINING INSTRUMENT OF THE culture, the power in bonds which were believed in:

How many shall pass away and how many shall be born,
Who shall live and who shall die…
Who shall be at peace and who shall be pursued,
Who shall be exalted and who shall be brought low…

Copyright © 2011.



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