the Wall Street crash is a failure of the imagination

Yesterday was the 79th anniversary of Black Monday, and today is Black Tuesday, two important days in the 1929 crash on Wall Street. Just, y'know, as an observation.

"Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even." said Richard M. Salsman* about the crisis, according to the Wikipedia page. So there's that.

This is one of those classical "prisoner's dilemma" situations we find ourselves in frequently in our society. What this situation makes clear is that if everyone maintains trust in the collective illusion of the market, the market will keep stable. What the stock market crash really is, is something that us literature majors can tell you all about (see? We can be useful - even in a depression! Hire me! Hire me!). It's basically a wavering in suspension of disbelief. Everyone has suddenly realised that their money really is Monopoly money and are panicking. Like Wile E. Coyote going over the cliff, suddenly looking down like an idiot. Stock market crashes, in effect, are simply a colossal, systemic, collective failure of the human imagination. And bright ideas are what's going to get us out of it.**

Society is a consensus reality we choose to participate in. A story that we tell ourselves. But some parts of that story have a really bad plot, bad grammar and poor writing. We need to rewrite those parts of the story without anyone getting hurt. This is the time, in other words, to remember that all money is pretend money. The only thing we get to decide is what kind of game we're playing. Are we playing capitalism or socialism? Monopoly or Junta, so to speak?

In short, if everybody would just hold on to their damned assets and be cool, we would all be fine in a pretty short time, while the "real" economy and the market got back in synch. If we could also reimagine what the world economy is supposed to look like while we're at it, that would be a fantastic added bonus.

* * *


But then, Richard M. Salsman's Wikipedia page indicates that he is an objectivist Austrian school eejit. Let me share with you, as a gift, the titles of some of his papers and books:

* "The False Profits of Antitrust", chapter in The Abolition of Antitrust

* “The Cause and Consequences of the Great Depression”:

- “Part 1: What Made the Roaring ’20s Roar”,
- “Part 2: Hoover’s Progressive Assault on Business”
- “Part 3: Roosevelt's Raw Deal”
- “Part 4: Freedom and Prosperity”, January, 2005, pp. 14–23.

* “Bankers as Scapegoats for Government-Created Banking Crises in U.S. History”

* “‘Corporate Environmentalism’ and Other Suicidal Tendencies”

* “Banking without the ‘Too-Big-to-Fail’ Doctrine”

* Breaking the Banks: Central Banking Problems and Free Banking Solutions
Remember, my friends, this is not the time for gloating or schadenfreude. This is a time for honest, serious, dedicated work.

No, I'm just kidding. This is the time for merciless mocking. And it's a good time to put these people out of a job. And also a good time for reading Keynes and Marx.

** Mandatory endorsement: And obviously, that's going to be easier with an imaginative, creative, flexible US president. Like, say, candidate Obama. An inflexible, uncreative, volatile, insecure president like McCain? Not so much.



Blogger Mikkel said...

But in monopoly everybody starts with the same amount of money.

October 29, 2008 1:00 pm  
Blogger mrtn said...

Sure, and everyone gets the same amount of money every time they pass GO. But the Monopoly market is otherwise completely deregulated, allowing the very concentration of wealth and power in the hands of those with favourable initial random conditions which the name of the game implies. In fact, the tax credits players get when they pass GO, nominally a redistributive scheme, only serve to cement the differences, raising everyone by an equal amount. In an ideal Monopoly, or "Polypoly" as I like to think of it, a cooperative sharing model would be pursued in which either everyone owned equal shares of each property, and nobody charged rent, or that there were rent control limits on the sums allowed to charge, thereby discouraging the overpricing atrocities we see in Rådhusplassen and so forth, and encouraging investment in decent, affordable housing for the working and middle class families. Foreclosures and bankrupcies would return to a minimum level and the competitive nature of the game would end in three rousing choruses of The Internationale.

October 29, 2008 1:11 pm  
Blogger Mikkel said...

"Affordable housing for the working and middle class families."

I see. So you would retain the framework of a class structure.

October 29, 2008 3:56 pm  
Blogger mrtn said...

I am a gradualist. The class structure cannot be done away with in one revolutionary stroke. I do not believe that the disparities that are like a chasm between the cannon, the shoe, the car and the top hat can easily be removed. Not without intolerable rioting and the burning of houses and hotels.

October 29, 2008 5:03 pm  

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