Author: Alex Wall (Page 2 of 4)

Rethinking the Goals of Finance, Cont’d

Some Letters to the Editor

The article Rethinking the Goals of Finance: Lessons from the Amherst Arbitrage proved controversial. Below are a couple emailed responses Political Animal recieved on the topic:

Dangerous Derivatives?

I particularly enjoyed the case example of Amherst Holdings versus the banks. Indeed, the use of financial derivatives was a superbly brilliant strategy by Amherst to protect itself against financial loss and importantly provided a social good to the community whereby none of the homeowners lost their houses.

That said, this essay should have ended in the second paragraph with the authors’ assertion that “there is nothing inherently problematic with finance……financial practices are troubling because of their execution, not because finance is itself problematic.”  As with many things in life, including finance, poor execution can typically lead to unfortunate and unintended outcomes. For example, owning a car is considered a valuable and useful asset, but poor execution (reckless driving) may very well lead to catastrophic consequences.

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The Pledge of Allegiance: A Reading

By: Richard Oxenberg

I pledge allegiance to the flag of the United States of America, and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all.

What does it mean to say the Pledge of Allegiance? In this time of national tension, when the President of the United States has pronounced his inauguration day a “National Day of Patriotic Devotion,” and declared that “from this day forward it’s going to be only America first,” it might be helpful to remind ourselves just what we devote ourselves to whenever we say the Pledge.

To this end, I offer this brief reflection on the meaning of the Pledge of Allegiance.

I. I pledge allegiance to the flag of the United States of America

It is an oddity of the pledge of allegiance that, in it, our allegiance is pledged, not to any particular, actual, nation, but, first of all, “to the flag.”

What can it mean to pledge allegiance to a flag? What is a ‘flag’ such that one can pledge one’s allegiance to it? Of course, if we take the flag to be no more than a piece of decorated cloth this makes no sense. Rather, the flag is a symbol. Our allegiance is pledged to a symbol and what it symbolizes.

This symbol transcends the instantiated nation as it may exist at any moment in time. We do not pledge our allegiance to the United States of America as it exists now, or at any time. Rather our allegiance is pledged to its symbol and what it represents. To understand just what we are pledging our allegiance to, then, we have to ask what the symbol symbolizes.

II. And to the Republic for which it stands

The flag symbolizes – “stands for” – a Republic. The word ‘republic’ comes from the Latin, ‘res publica,’ meaning literally, ‘public entity.’ It refers to a society dedicated to the public good, the good of all its people, as opposed to the private interests of any of its people, and governed for and by its people toward that common end. Thus, in pledging our allegiance to the symbol of this Republic, and to the Republic symbolized by it, we are dedicating ourselves to a particular ideal: The ideal of a society itself dedicated to the common good.

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Women Rule – How They Took Down a King

By: Elizabeth Larkin Bouché

As inauguration day approaches and women ready themselves for the Women’s March on Washington, I am reminded of Europe’s most remarkable uprising of women against tyranny—The Women’s March on Versailles in 1789.

It was a major, dramatic event on a par with the storming of the Bastille. A food riot in Paris, led seven thousand women, transformed into an armed march to take flour from the king’s stores 12 miles away in Versailles. Revolutionaries seized the opportunity to join the women and forced the king to sign the recently composed “Declaration of the Rights of Man,” so ending his absolute rule.  The king and his entourage were dragged back to the capital as prisoners. It was a turning point in history, signaling a shift in power from the nobility to the common people.

The Women’s March on Versailles is a reminder of the power of popular protest movements. Following the election of Trump, and spurred by growing unease with our own Versailles-like oligarchs, similar protests are now cropping up at grassroots level in the United States. The Paris women were driven by famine; they and their children were hungry. Women today are mobilized by threats to hard-won advances made since the Enlightenment. The ordinary women who have organized the March on Washington are unleashing what is perhaps a primal and formidable maternal fury once again.

The comparison between revolutionary France and current events is not so far-fetched. Civil unrest in Paris was fueled by paranoid plots in the press and fake news. It was also the result of basic needs becoming unaffordable, market deregulation, widespread distrust of government, huge national debt, and deeply divided political opinions. One key factor was the staggering inequality of the ancien régime, in which the clergy and nobles, or first and second estates, held vast wealth and paid no taxes, while the third estate, or 97 percent of the population, were heavily taxed for foreign wars. The parallels did not escape the notice of “Time” magazine. Its person of the year cover featured Trump seated on a tawdry carved chair decorated with a fleur-de-lis, the symbol of the French monarchy. Indeed, Trump draws the comparison himself when he chooses to be interviewed while seated in a gilded throne in his French Rococo-style dwellings.

Considering all this, and with large numbers of women taking to the streets, it is interesting to look at what drove French women to insurrection at a powder keg moment in history.

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Life is More Binary than Fiction: A Writer Reflects on Political Polarization

By: Shannon Kirk and Political Animal

Shannon Kirk is a novelist, a practicing attorney and law professor in Massachusetts, and also an avid follower of politics. She, like many of us, finds Trumpian politics incredibly distracting. In a world where the President-elect is constantly saying new and outrageous things on Twitter, how are news junkies supposed to get anything done?

In a great column on The Thrill Begins, Kirk addresses this problem, and outlines the system she’s using to try to stay focused. We highly recommend reading the whole thing.

One particularly interesting point is her observation that our current political climate encourages people to sort ourselves into two hostile camps based on our political identity. From a novelist’s perspective, this is maddening. Depth and contradiction make characters believable–because human life is complex. So why are we so attractive to binary extremism in our political life?


The following Is an excerpt from The article originally published in The Thrill Begins:

A good friend has a great response to try to chill me out every time I get spun up about the current political environment: “Is this going to impact the happiness of your cats?” Meaning, is this really going to lead to something that will change your life in a catastrophic way? I wish I could have this outlook on politics. I used to. I used to be able to tune most of it out and concentrate.

Now?

I confess. I have a problem. I’m addicted. I am distractified by Trump. But since I acknowledge this serious weakness, I’m hoping to fight my way back to my old ways and not let him win. I have devised a system, which I include at the end. No idea if this will work.

The distractification of Trump has impacted my writing in three ways: To lose time. To wallow in the quagmire of arguing about the fallacy of binary extremism. To resist bullying.

Distractified by Binary Extremism (frustrating my notion of character development)

Let’s first set the table and acknowledge the objective fact that we are living in La La Land right now. Nothing is normal, and, yes, nothing is logical. If your objective is to disagree and say that things are logical, then you are trolling this article; please move on.[1]

The reason it’s easy for me to get distractified by all this is actually nothing new; it’s something that’s always been a gripe of mine, even before Trump—just now more acute and in my face every single damn day, and in alarming ways. It is indeed a core issue I try to battle in my writing: the pushing of people into simplistic, binary camps. Example: Your character is a scientist, so she must be an atheist. I battle this notion, I reject it.

Here’s where we are, I liken it to the Fruit Loops vs. Cheerios Political System. Each Fruit Loop represents a position on an issue, and each Cheerio its “opposite.” If you are on Team Fruit Loop, you MUST accept and agree and support all Fruit Loops, likewise with Team Cheerio. Never may a Fruit Loop cross-pollinate the Cheerio world, and NEVER EVER may a Cheerio contaminate a Fruit-Loop-protected zone.

This is a binary system.

This is bullshit.

We would never allow such simple sorting for fictional characters, so why is it being pushed in reality?

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Merry Foolstide!

In honor of the season, Political Animal Magazine would like to remind you that the same Puritans who gave us Thanksgiving also outlawed Christmas, which they called Foolstide, in 1659.

Men dishonor Christ more in the 12 days of Christmas, than in all the 12 months besides.

Hugh Latimer

Our current “War on Christmas” pales in comparison.

Happy Holidays!

Rethinking the Goals of Finance: Lessons from the Amherst Arbitrage

By: John Brodie Gay & Jeremy Kingston Cynamon

I. BACKGROUND

Financial devices, like all technologies, develop – sometimes intentionally, sometimes by historical accident – to benefit particular interests and reinforce certain values at the expense of others. Therefore, the form in which we encounter these various technologies today is not a necessary characteristic of those technologies, but the result of their respective histories. If those histories had unfolded differently, then those technologies might benefit sharply different values and interests. Given this contingency, we can plausibly pursue different ways of repurposing financial devices (as well as technology more generally) and thereby altering the interests and the values they protect. With a bit of imagination, we can realize alternative potentials in these devices.

The sort of argument just previewed has been largely ignored by the left. In general, progressives tend to treat the financial sector as a scapegoat for the ills of society.  In our view this is a mistake.  There is nothing inherently problematic about finance. Insofar as our contemporary financial practices are troubling, they are troubling because of their execution, not because finance is itself problematic. To the contrary, finance – if directed purposely – can be a great asset to the political programs of any stripe.

Our goal in this short essay is merely to demonstrate the aforementioned contingency and transformative potentials in our financial devices. We argue by way of example, using a peculiar story about the use of credit default swaps after the 2008 mortgage crisis to illustrate our larger themes.

II. FINANCIAL DERIVATIVES

We begin with a rather strange fact: our financial system allows individuals and firms to place side bets on any homeowner’s ability to pay his/her mortgage. Known as financial derivatives, the total amount gambled in these bets can greatly exceed the outstanding amount on the underlying mortgage. Bizarre as it may seem, this is the financier’s utopia: a “complete market” that allows participants to bet on any chance event. Natural catastrophe, the result of an election, even a terrorist attack could be the source of profits for the shrewd gambler.

In theory, these financial derivatives can be tools for prudently distributing risk across parties. In practice, however, the use of financial derivatives often results in dangerous concentrations of risk. As it happens, a significant proliferation of these sorts of financial derivatives coincided with the real estate bubble and the subsequent 2008 mortgage crisis.[1] Though much has been written about that crisis, the story presented in the following section will likely be unfamiliar to most readers – even to those who keep up with this sort of thing. This is probably not a coincidence. The story illustrates the potential inherent in our financial technologies and devices to disrupt the common practices of finance and harness its power for varying purposes.

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What is “Fascist”? Umberto Eco on Ur-Fascism

Howl of the Day: Nov 30, 2016

There is in our future a TV or Internet populism, in which the emotional response of a selected group of citizens can be presented and accepted as the Voice of the People.

In 1995, the late Umberto Eco wrote an essay on what he called “Ur-Fascism”. What he meant by this term is the fuzzy constellation of ideas and feelings out of which fascism grows. “[B]ehind a regime and its ideology there is always a way of thinking and feeling, a group of cultural habits, of obscure instincts and unfathomable drives.” In the case of fascism, this is Ur-Fascism.

Eco’s essay is as relevant today as when he wrote it. Indeed, with the election of Trump, and the debate over to what degree it is fair to call him or his positions “fascist,” it is extremely timely. (A topic we have covered a number of times before.)

The key insight of the essay is that fascism, and the underlying mode of thinking that gives rise to it, are impossible to clearly define, because they embrace many contradictory elements. “Fascism was a fuzzy totalitarianism, a collage of different philosophical and political ideas, a beehive of contradictions.”

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Chuck Klosterman and Relative Morality

Thoughts on “But What If We’re Wrong?: Thinking About The Present As If It Were The Past”

By: Matt Ryklin

When I was fifteen I had ridiculous opinions. Of course, at the time I didn’t think they were ridiculous, I thought they were well deliberated, intelligent, and insightful.

Everyone looks back with some disgust and amazement at how they behaved when they were younger, but the opinions I’m talking about weren’t only related to music, or fashion, or how to get girls. When I was fifteen, I was of the opinion that we shouldn’t legalize gay marriage. Now, I couldn’t imagine holding this opinion, and I even look disdainfully upon those who do. How could you not legalize gay marriage? It has no effect on anyone except for the positive effect it has on people in love who want to be together. I can’t possibly imagine not being for the legalization of gay marriage. And yet nine years ago, I didn’t think it was necessary.

This is where my head went when I first heard of Chuck Klosterman’s newest book, But What If We’re Wrong?: Thinking About The Present As If It Were The Past. He seeks to explore how future society will look back upon the time in which we currently live. To do so, he first explores how we look at the past and how our present morals and values shape our perception and distort reality. Then, he examines how predictions about future society are almost always wrong, because we naturally employ present-day values in order to create these predictions. Klosterman then uses this analysis as reason to question nearly everything we think about ourselves in the present, asserting that our present is draped in an unavoidable relativism that makes it difficult to reckon with right and wrong, and makes it almost impossible to attempt to understand how future societies will think about their past – our present.

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Chimes of Freedom: The Politics of Bob Dylan’s Art

By: Stefan Schindler

The demand to abandon illusions about our condition is a demand to abandon the conditions which require illusion.Karl Marx

Bob Dylan’s winning the 2016 Nobel Prize for Literature – the most coveted literary prize in the world – presents us with an opportune moment for looking back on his long and astonishing career as a constantly evolving musical icon.  It is the first time that the Nobel Prize committee has awarded the literature prize to a musician.  In defending this almost revolutionary break with tradition, the committee’s chairman, quoting Dylan’s most famous line from the ‘60s, announced, “The times, they are a changin’.”  Dylan’s originality as a surrealist lyricist was elevated by his engagement with profound social and political themes.  So in honor of his award for “literature,” let us examine what Mike Marqusee calls “the politics of Bob Dylan’s art.”

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The US Left: A Short Introduction

by Victor Wallis
October 2016

Is there a US Left? More specifically, is there a popular movement for socialism in the United States? And what chance does such a movement have for affecting national policy any time soon?

There have been several promising signs. The first was a national survey conducted in May 2012 which found that, among people under 30, there were slightly more who had a positive view of socialism than had a positive view of capitalism [1]. This is quite remarkable considering the endlessly negative evocations of socialism by politicians and the mass media. The second hopeful sign was the election to the Seattle City Council, in December 2013, of Kshama Sawant, representing a group called Socialist Alternative; she received an absolute majority against an incumbent Democrat [2]. Perhaps even more striking, she overcame a massively financed campaign against her to win reelection in 2015. Third, of course, is the popularity of the presidential campaign of “democratic socialist” Senator Bernie Sanders. Although Sanders’ conception of socialism corresponds to 1930s policies of President Franklin D. Roosevelt (a Democrat), his acceptance of the socialist label removes a stigma that had long been attached to it as a result of the ideological repression that has plagued the US Left through much of its history [3].

Underlying this new openness to socialism is a broader public awareness, especially since the economic collapse of 2008, that capitalism is incapable of satisfying the basic needs of the majority. This awareness is indirect but unambiguous. It is manifested in overwhelmingly hostile attitudes toward politicians and, more importantly, toward big corporations. These attitudes became sharply visible during the Occupy movement of 2011. More recent expressions have included nationwide demonstrations and strikes by low-wage workers against fast-food companies and against the mega-store Wal-Mart.

Still, there is an enormous gap between these developments and the emergence of a solid and coherent national political force with a capacity to grow. To understand this gap – and why it has been so persistent – we must return to a question that has been posed about the United States for more than a century: Why is the US so difficult for the Left? Deep structural factors are at work, and we need to take these into account before returning to the question of what can now be done.

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