The Master Narrative and The Real Narrative

Simply reposting something I put on Google+. I felt like I needed a more permanent reference to it for future use. It's all commentary on a series of CBC documentaries about the financial crisis. Here's the link to the first video. (HT: The Big Picture)

And here's what I wrote:

Ok, watched all of it. I like that if told more of a global tale than many of the US-centered things linked previously.

I'd say its biggest weakness is its treatment of regulators. They pretty much universally portray the Treasury, SEC, and Fed. as reactionary and as people trying to do what they thought was right at the time. Any criticism is usually overshadowed by an argument about how unprecedented the situation was, how difficult it must have been to work with all the parties involved in negotiations, and how political leadership slowed the process. When direct blame is assigned, it goes to people who've already lost: Dick Fuld, Angelo Mozilo, James Cayne, Joseph Cassano, etc.

Therein lies my criticism of this and other documentaries. Most present not a "Secret History of the Global Financial Collapse" but the Official History of the Global Financial Collapse. This is the narrative fronted by the powers that be - by Wall St., Washington, London, and many other metonymic financial and political centers.

We get a history where it was a few bad decisions by a few greedy and/or well-meaning individuals that sank the system and ruined the world. We have a narrative that relies on characters. If only James Cayne hadn't been such a pot head, he could have saved Bear Stearns. If only Richard Fuld hadn't been such an asshole, he could have worked with Paulson and the other banks to save Lehman. If only AIG had watched Cassano more closely, they could have stopped him from making such bad decisions.

It's all an attempt to remove blame from the truest source, the financial system. Don't believe for a moment that AIG-FP and Cassano acted outside their authority while racking up counter-party debt. They were making billions of dollars for their company and AIG loved it. It was the appetite for risk, and therefore for leveraged debt, which undid all these companies. And they accepted it willingly. Indeed, the Financial Products division was created int he 80s to do exactly what it was doing in 2008 - to speculate wildly and make a ton of money.

Our show portrayed Fuld as someone unwilling to negotiate and that's why he wasn't invited to the "secret" banker's meeting. Never mind that all the other banks benefited greatly from Lehman's demise. Never mind that all the other banks had equally poor balance sheets and were (still are) equally insolvent. Never mind that mere days later they were bailed out for billions of dollars in terms Lehman would have been glad to accept. Those are unimportant facts because Dick is a dick.

Let me also add that the show made it seem like the banks were subjected to regulations as a result of the bailouts - one specific regulation mentioned was limits on CEO pay. Were there ever any limits placed on CEO pay? No. Remember that fiasco about AIG bonuses mere months after the bailout? The CBC doesn't. No regulation ever took place. No limits were ever placed on executive compensation. These men signed the deal so willingly not because they were scared (as the show claims) but because they were given blank checks by the treasury and the taxpayer. (And some secret stuff, outside of TARP, that we didn't even know about at the time: http://www.unelected.org/audit-of-the-federal-reserve-reveals-16-trillion-in-secret-bailouts)

This show and the many documentaries like it are presenting a half truth. They show us the crisis. They show us a partial list of easily dislikeable characters to place the blame on all while portraying the true culprits as helpless victims (poor Hank Paulson has dry-heaves while writing Goldman a check from the American tax-payer for $30 billion, he was so stressed that he could only talk to Christine Lagarde for 15 seconds! Wow, it must have been so hard...).

This is the crisis they want you to remember. This is the crisis that will be in our history books.

Don't believe it for a second. I think the key to understanding the crisis is the old Latin phrase, Cui bono; For whose good? Who benefits?

Rockabye baby...

I had a very nice drive up through the Appalachian mountains last night. As I climbed the highest part of I-26, a bank of fog appeared and reduced my visibility to nearly nothing. After a few minutes of impenetrable whiteness, I realized that this was not fog but a cloud that I was driving through. Somewhere along the line I became aware of my descent and shifted to a lower gear, preventing myself from gaining too much speed in the low visibility of my cloud. Suddenly, I broke through the bottom of the cloud and ahead of me was a moon-lit valley hundreds of feet below. My low speed granted plenty of time to react and follow the road on its sharp right turn. Had I been traveling faster, you'd be finding pieces of my car in that valley for decades.

My continuing trip was uneventful and I had the time to think about my small brush with danger. There wasn't much to prevent me from driving right off that cliff. There wasn't anyone to catch me cradle-and-all.

For some reason, this immediately brought the economy and our nation's future to mind. There's no one to catch us anymore and we're only just beginning to figure that out. Across our society the social safety-nets of the previous generation are unwinding. Social security, medicare, welfare, food stamps, unemployment protection, healthcare, defined pensions, quality education, and career stability are all threatened.

We know Social Security will stop taking in as much as it gives out sometime in 2016 and that that shortfall will deplete its balances sometime between 2030 and 2040. We will have to consider options like means testing and raising the retirement age or face insolvency. I believe that action will eventually be taken to save Social Security but it will reduce the benefit provided by an already meager support. In the long run, neither you nor I can count on Social Security alone as a support in our old age.

The same goes with Medicare and whatever our Healthcare package ends up being. Those systems' costs will grow over time - especially because our national healthcare legislation does little to address the underlying factors causing increased healthcare costs. Benefits will decrease and costs will rise in order to meet the need of providing adequate healthcare. Since it has$24 trillion in unfunded liabilities through 2084, I'm guessing we'll have to cut quite a bit from out coverage.

The Supplemental Nutrition Assistance Program now has a record number of families drawing support.

August's jobs added was unchanged but somehow the number of people drawing on unemployment support decreased. That's because tens of thousands of people reached the legal limit of that unemployment insurance, 99 weeks.

There's no stopping us now!

So far, I've only listed government programs. But throughout the workforce we're also seeing a move away from systems of lifelong support. Barely any companies offer a defined pension anymore, they're too expensive. Instead, 401k plans tied to stock indexes and money market funds have wiped out billions of dollars of American wrokers' savings. Baby Boomers are supposed to be retiring in record numbers over the next decade but many can't afford to.

Additionally, the old model of career-based employment has vanished. A person used to get a job with a firm and work there for life. Their path would take them up to a management position and they could depend on a stable income through most of their lives. Such stability breeds good economic decision making. Big purchases (house, car) and important long term savings (retirement, college for kids) and valuable self sustained safety-nets (emergency savings for medical or other emergencies) and long term goods like insurance all vanish when a person can't tell you how much money she's going to make this year or next.

How do you plan for the future when you may have a brand new career, with a brand new salary, and completely different benefits every 2-5 years? How can you remain valuable in a workforce when staying employed constantly demands new training and improving skills?

Bill's a copy editor but he doesn't know Ruby. Let's get him!

The economist recently ran a special report on jobs. Their take is mostly positive but let me quote a section from one of the articles:

Even in tough times there are jobs to be had, but applicants have to work far harder to get an employer’s attention, says Mr Bolles. The main thing is to give them hope and teach them the latest techniques for looking for work, of which he lists no fewer than 18. They need to market themselves better and consider a broader range of employers than they might have thought of. 

The growing need for workers to keep upgrading and adapting their skills is one of the themes of a new book, “The Shift: The Future of Work is Already Here”, by Lynda Gratton of the London Business School. She argues that the pace of change will be so rapid that people may have to acquire a new expertise every few years if they want to be part of the lucrative market for scarce talent. She calls this process “serial mastery” and notes that the current educational system in most countries, from kindergarten through university, does a poor job of equipping people for continuous learning.

Does this sound like the kind of life you want? It appears to be a working world where you constantly have to spend your free time marketing yourself on LinkedIn or going to a local community college to earn a certificate in the newest corporate fad. The Economist take a very positive tone but I see what looks like employment hell. We're moving to a system where employers have broken employee rights and now they can make exorbitant demands of their workers. I see a system in which people are going to be living in constant fear of being fired if they don't prove how they bring extra value to the company. On one hand this is what business is all about but I can see where helping the company succeed no longer benefits the employees at all.

Nine dollars an hour and I get to eat lunch? I accept.

I can see a system where lives revolve entirely around work because people depend so much on the scraps their companies will throw them. Without the institutions our grandparents built, people will be dependent on whoever pays them. Forget pursuit of happiness, we'll be pursuing a meal ticket.