David Kirkpatrick

December 18, 2008

A theory on the financial crisis — a science fiction parable

Filed under: Arts, Business, et.al. — Tags: , , , , , — David Kirkpatrick @ 2:22 pm

I’ve been blogging on the current financial crisis since January 31, 2008, just a few weeks after I started this blog. In a way I’ve been a sideline observer as this process has heated up and become more public.

The Fed has been pretty busy behind the scenes for a while now (at least around two years) attempting to avoid what has become daily lead stories across broadcast and print media. Clearly these moves have been complete failures. I’m sure the Fed and SEC would argue things would be much worse without their interventions and policy tweaks.

I don’t know about that.

What is clear is we are in uncharted territory. And the government bodies in charge of fiscal policy don’t really have a clue what is going on. Credit default swaps, investment derivatives and other exotic high finance tools? Looks like no one really understands them. Not the parties using these tools, not the regulatory agencies charged with monitoring that use and certainly not the average investor whose money has been tied (maybe by a noose around the neck) to machinations of high finance.

Now don’t get me wrong — at some point high finance truly does become almost magical alchemy. It’s no longer balance sheets and stacks of physical money, it’s more arcane incantations, esoteric handshakes and ephemeral figures written on the sands of an imaginary beach.

Given all this, my theory is maybe it really is magic. Since a lot of the highest order finance these days is totally driven by computers and algorithms no single person understands, maybe a native artificial intelligence grew unbeknownst to anyone involved in the industry and is now rising against its masters. 2009 may become the Age of the Machine.

Hey, it’s as good an excuse as anything I’ve heard from Wall Street or DC for this mess. And makes about as much sense.

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  1. the root cause is that our current financial system is inherently inflationary. Money enters the system through loans, which must be paid back with interest. That interest, in turn, has to be pulled out from somewhere else. There is a constantly growing ‘deficit’ between the loaned out money, and the money + interest that has to be repaid. Eventually there is a clash and crash.

    the actual ’cause’ or ‘trigger’ for our current crisis may remain shrouded.

    and yes, money is magic 🙂 a dark art indeed.

    Comment by ggw_bach — December 18, 2008 @ 5:42 pm

  2. This post has been linked for the HOT5 Daily 12/20/2008, at The Unreligious Right

    Comment by UNRR — December 20, 2008 @ 9:59 am

  3. […] @ 12:50 pm The HOT5 is a new feature at the excellent blog, the Unreligious Right, and today this linked post of mine was selected as one of the “hot […]

    Pingback by The Unreligious Right HOT5 « David Kirkpatrick — December 20, 2008 @ 12:50 pm

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