Monday, September 15, 2008

Suck It Capitalism

Posted By on Mon, Sep 15, 2008 at 2:00 PM

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So by now you're all aware of Blue Monday (tell me now how does it feel?): Lehman Brothers, America's fourth-largest investment bank has filed for bankruptcy and Merril Lynch, the country's third largest, has been purchased at a quarter of its peak 2007 value by Bank of America. Though the market avoided a morning meltdown (errr, umm, it's falling as we speak, the pinstripe/suspender crowd is wringing its hands over the frailty of insurance behemoth AIG, which, if it collapsed, would augur a whole new level of fucked-uppedness. Not mention, a change to the Man U. jerseys. Oh yeah, and Washington Mutual, too.

How does this affect you?

Depends. Are you rich? Or do you consider extra cheese an indulgence? Frankly, unless you actually work at Lehman Bros., it's too soon to tell. And though we're hearing the usual bromides about the natural cycles of the market (now's the time to buy!), the scariest analogy yet is that of a bunch banks tied together by shared risk, wobbling at the edge of a cliff… one goes down, and even the strongest can't hang onto the ledge.

The thing is, the scorched-earth availability of global markets over the last 20 years has allowed banks to take insane risks because there was so much room to spread it (the risk) around — but the globalized market (though big and open) is, at some point, a closed system. So unless some new i-banks start popping up on Mars or possibly near the Sun, the cycles have to stop somewhere. If that happens, you'll need to know how to make some of these.


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