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When Pushkin Comes to Shovekin

September 19, 2012

There is a lot of physics envy in banks. Physicists are the giant brains who build the models that allow the cartel banks to leverage themselves 80 times (or 10,000 times if you include derivatives) and give intellectual cover to the usurious Ponzi scheme that is debt-based money. Have you heard of the “London Whale”? JP Morgan’s credit derivatives trader who caused $5 billion of losses, so far, on a book that was “hedged”. Without the physicists to build the model no one would have dared say that $10 trillion in notional exposure to corporate credit was “market neutral”.

There is a hilarious book called “Intellectual Impostures”, written by two French physicists called Alan Sokal and Jean Bricmont. Just for laughs, and to expose the pseudo-mathematical baroque stylings of postmodern intellectuals, Sokal submitted an article to a postmodern journal – in fact the postmodern journal for its anniversary issue – called “Transgressing the Boundaries: Toward a Transformative Hermeneutic of Quantum Gravity”. Sokal filled the paper with physics that was either trite but absurdly rhetorical or deliberately misstated physical truths, knowing that the readership would expect the former and be clueless on the latter. Here’s a sample sentence:

“…These multidimensional manifolds are no longer amenable to visualization in conventional three-dimensional Cartesian space: for example, the projective space RP3, which arises from the ordinary 3-sphere by identification of antipodes, would require a Euclidean embedding space of dimension at least 5…” [italics added]

After the publication of the book, all those intellectuals who had a fondness for mathematical buzzwords were obliged to be a lot more careful in their writings, as they couldn’t know who was reading them.

What banking needs is its own Sokal and Bricmont who can expose the pseudo-mathematical accuracy of complex models that permit the chosen few from running their parasitical get rich quick schemes. Of course, every day these models are responsible for a fund or a trader taking a bath. For example, the high frequency trading fund, Knight Capital Group lost about $500 million in a few hours when its trading programme, or algorithm, was left to run unsupervised. On that occasion the only harm done was to Knight shareholders, but similar technologies abound in the large banks and as 2008 demonstrated, and as we see today (QE3), when the cartel banks lose money, we the taxpayers are on the hook.

It is entirely predictable that the biggest promoters of ultra-capitalism insist that their moronic schemes be backstopped by public money. It’s not an unfortunate corollary of the system, it’s how it’s designed to operate – profits are privatized and losses are socialized. Only when people are fully aware of this fact and start to organize themselves accordingly will we have any hope of creating a society and an economy where psychopaths have as little leverage over our lives as possible.

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From → Chapter 1

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