Answered Prayers

Black holes swallow everything. Cross the event horizon and you’re dust or worse. What better metaphor for the BP oil spill, the greatest environmental disaster in U.S. history? Here, all the ambition and avarice, all the masses of Enrons and junk bond dealers, the credit-default swapsters and collateralized default loansters, the Marc Richs, the Boeskys, the Long Term Capitalsters and Michael Milkensters, have finally been trumped. Here, nature rebels and turns the desire for riches into a plague that drowns birds or sends them into death spirals, that poisons fish, that destroys beaches, that turns the sea into a toxic swamp. The carnage is worsened by the smell of rotting flesh. The oil spill is the crossroads of ambition and lax standards (like the ones that were supposed to encourage the growth of the economy during Alan Greenspan’s tenure at the Federal Reserve). Nature unhinged is the poison. This is not some synthetic product of man’s imagination, but the bowels of the earth disgorging the very lifeblood of the modern economy. What would the Mideast be without oil? We needed more oil to free ourselves from the stranglehold of the sheiks, and God answered our prayers. St. Teresa of Avila’s famous dictum, “Answered prayers cause more tears than those that go unanswered,” perfectly illustrates the conundrum of the West, strangling on its own nourishment. 

The Debt to Pleasure

John Lanchester wrote the bestselling The Debt to Pleasure during the same period in the late '90s when Long Term Capital Management, the giant hedge fund, failed spectacularly. The fund’s collapse, while surprising at the time, proved to be providential.

English novelist Margaret Atwood addresses debt in her latest work, the book-length essay Payback: Debt and the Shadow Side of Wealth, published as the United States deficit approaches one trillion.

Debt is in the air. Derivatives like securitized mortgages and credit default swaps have increased obligations to the point where the hallowed halls of finance have been shaken to their foundations. Venerable institutions like Bear Stearns and Lehman Brothers have crumbled, while Bank of America, AIG, General Electric and Citibank wobble as if the ground underneath them were in the throes of a tectonic shift.

Debt is something we all take for granted. Most businesses can’t start up without debt. Without debt, it’s impossible to buy homes, whose prices usually exceed the assets the average family needs to live. Like economies of scale and the division of labor, debt is a centerpiece of any capitalist economy.

But at what point does debt, or pleasure, get out of hand? The title of Lanchester’s book was oddly prescient about the nature of the financial calamities that would strike a decade later.

All debt reckons with the future at the expense of the present. We use money that we don’t have to enjoy something that we will pay for tomorrow. If the value of the object goes up, then we are able to sell it or refinance the debt. If it goes down, we owe even more money. In the subprime mortgage crisis, the value of assets suddenly went down. Why? Because demand, which had been high, decreased until there was a glut of goods on the market.

Why did demand decrease? China holds the mortgage on America. When the payments, which filter down as higher costs to the consumer, get too high, there simply is no money left to pay back the future. Existing loans fail and there aren’t any new prospects to take their place. Demand for goods, like houses, plummets. Blame China? Better yet, blame pleasure.

Hindsight is always 20/20. After the crash of l929, who would have thought that practically the same thing could happen all over again? Sure there were differences. A year ago, there were no cries for margin, no black Tuesday. It was all much quieter. On the screens of computers in somnolent trading rooms the market simply stopped functioning. The financial system froze, as if inhabited by one of those viral worms that infect computers. Life came to a halt and then proceeded to fall apart. It wasn’t as good as science fiction, for it lacked the willing suspension of disbelief. People are still trying to write the story, even though no one wants to believe it.