The Perspective of the World, 2008

The recent, dramatic drops in the Dow Jones Industrial Average command attention, but they are foam. The real currents of the current crisis are mostly hidden from public view. Some journalists are burning a lot of shoe leather to bring that story to light, but I imagine that much of it will remain obscured from history to all but the actors themselves.

And so Fernand Braudel in Civilization and Capitalism, 15th-18th Century, Volume I: The Structures of Everyday Life: The Limits of the Possible (trans. Siân Reynolds, New York: Harper & Row Publishers, 1981):

On the other hand, looking up instead of down from the vast plane of the market economy, one finds that active social hierarchies were constructed on top of it: they could manipulate exchange to their advantage and disturb the established order. In their desire to do so — which was not always consciously expressed — they created anomalies, ‘zones of turbulence’ and conducted their affairs in a very individual way. At this exalted level, a few wealthy merchants in eighteenth-century Amsterdam or sixteenth-century Genoa could throw whole sectors of the European or even world economy into confusion, from a distance. Certain groups of privileged actors were engaged in circuits and calculations that ordinary people knew nothing of. Foreign exchange for example, which was tied to distant trade movements and to the complicated arrangements for credit, was a sophisticated art, open only to a few initiates at most. To me, this second shadowy zone, hovering above the sunlit world of the market economy and constituting its upper limit so to speak, represents the favored domain of capitalism, as we shall see. Without this zone, capitalism is unthinkable: this is where it takes up residence and prospers. (p. 24)

The New York Times last Thursday (Nocera, Joe, et. al., “As Credit Crisis Spiraled, Alarm Led to Action,” 2 October 2008, p. A1):

This is what a credit crisis looks like. It’s not like a stock market crisis, where the scary plunge of stocks is obvious to all. The credit crisis has played out in places most people can’t see. It’s banks refusing to lend to other banks — even though that is one of the most essential functions of the banking system. It’s a loss of confidence in seemingly healthy institutions like Morgan Stanley and Goldman — both of which reported profits even as the pressure was mounting. It is panicked hedge funds pulling out cash. It is frightened investors protecting themselves by buying credit-default swaps — a financial insurance policy against potential bankruptcy — at prices 30 times what they normally would pay.

It was this 36-hour period two weeks ago — from the morning of Wednesday, Sept. 17, to the afternoon of Thursday, Sept. 18 — that spooked policy makers by opening fissures in the worldwide financial system.

Anomalies, zones of turbulence, fissures: call them what you will.

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