Tagged: financial crisis Toggle Comment Threads | Keyboard Shortcuts

  • Mark 2:25 pm on July 1, 2019 Permalink | Reply
    Tags: , financial crisis, ,   

    Did oil prices cause the financial crisis? 

    I’m a little wary of the causation here but it’s a provocative claim. Perhaps it does constitute an INUS condition, as J.L. Mackie put it, with the oil price spike igniting a precarious system which could have gone up in flames for other reasons. From Societies beyond Oil, by John Urry, pg 34-35:

    But this extravaganza came to a shuddering halt when oil prices increased in the early years of this century. Suburban houses could not be sold, especially where they were in far-flung oil-dependent locations. Financial products and institutions were found to be worthless. Easy money, easy credit and easy oil had gone together. And when oil prices hit the roof in these US suburbs, then easy money and credit came to an abrupt halt and the presumed upward shift in property prices was shown to be a false dream. The financial house of cards had been built upon cheap oil. When the oil got prohibitively expensive the house of cards collapsed to the ground. Timothy Mitchell observes how the ‘shortage of oil from 2005 to 2008 … caused a six-fold increase in its price. … The surge in oil prices triggered the global financial crisis of 2008–9.’

  • Mark 7:30 am on August 30, 2015 Permalink
    Tags: , , financial crisis,   

    the disruption of finance  

    From The Big Short by Michael Lewis, pg 172. This is a part of the story of the financial crisis which has received too little attention: ‘innovations’ in finance were driven by the ‘disruption’ the established figures in the industry were subject to as a result of new online competitors:

    One of the reasons Wall Street had cooked up this new industry called structured finance was that its old- fashioned business was every day less profitable. The profits in stockbroking, along with those in the more conventional sorts of bond broking, had been squashed by Internet competition. The minute the market stopped buying subprime mortgage bonds and CDOs backed by subprime mortgage bonds, the investment banks were in trouble.

  • Mark 9:28 am on July 26, 2013 Permalink | Reply
    Tags: financial crisis, ,   

    The Reflexive Imperative, Social Change and the Financial Crisis 

    As a precursor to the posts in which I’ll look in detail at each of the modes of reflexivity as discussed in the Reflexive Imperative, this post looks at one particular aspect of Archer’s arguments concerning autonomous reflexivity. Much as contextual continuity is argued to distribute communicative reflexivity among the population and contextual incongruity is associated with meta-reflexivity, Archer argues that context discontinuity is the generative mechanism underlying autonomous reflexivity.

    Contextual continuity obtains when the situations confronted by “one generation or cohort are much the same as they were for their predecessors” (Archer 2012: 20). Under such conditions “members know what to do because their repetition over time also means that appropriate courses of action have been defined intergenerationally – perhaps to the point of becoming tacit knowledge – and are readily transmitted through informal socialization” (Archer 2012: 6). This ensures a common experiential frame of reference and a low level of ideational diversity: conditions propitious to communicative reflexivity which are, in turn, reinforced by it given that ‘thought and ‘talk’ with ‘similars and familiars’ will tend to favour normative conventionalism. The reliance on others to complete and confirm deliberations reproduces the “norms of established custom and practice, because when they seek confirmation and completion of their initial thoughts and inclinations, convention is re-endorsed through external conversations” (Archer 2012: 21).

    Contextual discontinuity obtains when social change begins to undermine the commonalities which are the basis for communicative reflexivity. At a macro level, Archer argues that discontinuity is produced by the “simultaneous circulation of negative, structure-restoring feedback and positive, structure-elaborating feedback for structural, culture and agential properties” (Archer 2012: 6). On a biographical level, the key feature of contextual discontinuity is the absence of the ‘similars and familiars’ who would be able to complete and confirm one’s internal conversation. The increasing particularism which has come to constitute their experience makes their reflexive deliberations difficult to communicate and inculcates a tendency towards pursuing those deliberations to their end in a purely self-contained way as autonomous reflexivity.

    Contextual incongruity obtains when the intensification of social change means that “past guidelines become more and more incongruous with the novel situational variety encountered” (Archer 2012: 6). In a sense this can be seen as a radicalisation of discontinuity, such that the same process which precludes the emergence of durable commonalities of experience amongst the populace also increasingly makes the future intrinsically unpredictable. Under such conditions instrumental rationality, depending as it does “upon a calculability of pay-offs and sufficient knowledge about likely outcomes”, becomes increasingly untenable as a biographical strategy because “instrumental rationality cannot operate in an unpredictable environment where calculability goes out of the window” (Archer 2012: 35). So why does it still seem able to operate? Interesting answer below which I assume is a key thread running into the next book:

    If the intensification of morphogenesis spells a precipitous reduction in calculability, and if that, in turn, is inimical to instrumental rationality, should not a sharp and equivalent reduction in the practice of autonomous reflexivity also follow? This would seem to be the logic implication, but in practice the conditions that lead to this conclusion were, until the 2007 financial crisis, fairly effectively contained by the powerful interests involved. Specifically, the multinational corporations and finance capitalists tackled the root cause threatening their activities, namely incalculability. The former moved to an ‘assurance game’ in order to stabilise key aspects of their environment in which they operate. What this basically entailed was a series of mutual agreements that enabled those whose operations gained them a market advantage to continue to benefit from it for a number of years. This is why legal patents became crucially important. They served to ‘freeze’ uncertainty and, in guaranteed profitability ceteris paribus, thus freed up internal resources to make the next innovative development which, if successful, would then be protected in the same manner. Calculability had been restored, the old game could continue with no more than the old absence of guarantees that new lines of research and development might turn out to be dead ends. 

    However, the assurance game was not applicable to key areas, the most crucial being the finance market, but the latter had effectively tackled the incalculability of risk, from its own point of view, until the house of cards collapsed in 2007. Up to that date, the insurance game complemented the assurance game. Thus, the complex development of financial ‘derivatives’ and hedge funds represented forms of insurance by spreading risk over a variety of investments. If the development of ‘derivatives’ rendered risks calculable for the biggest players, investment supermarkets performed something of the same function for those with surplus capital. Assurance and insurance provided insulation against the quintessential unpredictability of morphogenesis and enabled the old game to continue – pro tem.

    They were complimented by other devices that manipulate consumption to ensure rising ‘demand’ and to underwrite increasing commodification. The proliferation of the credit card market, with a massive intensification of offers to transfer one’s balance (read: ‘debts’) to a new interest free card for a limited period, was a direct inducement to increase indebtedness, at an exorbitant interest rate, for those who frequently could not pay. An identical role was performed by sub-prime mortgages and unsecured loans. This complete reversal of cautious issuing and lending in the past, on the basis of established ‘credit-worthiness’ and earnings, artificially stimulated demand over an increasing range of products, from housing to holidays to cosmetic surgery, thus introducing greater stability in market demand and extending this to the tertiary sector.

    Market and state collaborated in buttressing finance capitalism […] as the expansion of public services in terms of benefits and employment  kept ‘demand’ buoyant in European countries, which increasingly produced nothing but consumed more and more. Whilst ever the game went on and the devices for concealing the manipulative aspects of marketization became more sophisticated, so too could many continue to work on the basis of instrumental rationality in planning their courses of action in the hope of becoming better off. With its collapse, and a few of the most audacious financial players going under, European states were more concerned to re-establish ‘business as usual’ than to introduce stringent regulation of the financial services, which had replaced the production of goods as the source of national wealth. In other words, there are few grounds for supposing that the associated mode of reflexivity – autonomous reflexivity – would undergo a sudden and sharp decline.

    (Archer 2012: 35-38)

  • Mark 2:34 pm on June 2, 2012 Permalink | Reply
    Tags: financial crisis, , ,   

    “We all know bankers are greedy bastards!” Ideological dimensions to the financial crisis 

    Think back to 2007. Did you believe the end of neoliberalism was nigh? I must admit I did. It seems rather naive in retrospect. Yet fast forward five years and consider the political terrain: we have witnessed a massive consolidation within the financial sector and an unprecedented attack on the welfare state across Europe. As if by magic, a crisis of the financial system has been reframed as a crisis of sovereign debt, with ‘austerity’ (in essence the structural adjustment programmes that the organs of international capitalism have long imposed elsewhere) being pursued with breathtaking alacrity, accompanied by the continual refrain that there is no alternative.

    So what happened? This question is one which will undoubtedly preoccupy large swathes of the acdemy for decades. However I do want to offer a quick observation about the ideological dimensions to a set of processes which are reshaping global society to an extent which I suspect is still not entirely understood. This concerns what the financial crisis established for the population as a whole. What did we learn from it? Oddly, I think the answer is very little. How were ‘bankers’, as the pantomime characters to whom financial capital is reduce, perceived prior to the crisis? As greedy bastards. How were ‘bankers’, as the pantomime characters to whom financial capital is reduce, perceived after the crisis? As greedy bastards. I’m generalising wildly here before anyone feels the need to point it out. Likewise, if you know of any longitudinal polling data about attitudes towards bankers, I’d love to see it. Without doubt, there are significant numbers of people who either approve of bankers or regard them as a necessary evil.

    My point is simply that the discursive construction of ‘the bankers’ (rather than more or less well-informed propositional claims about the actual characteristics of specific people working in a specific industry) really hasn’t changed as much as one might expect. Although of course the social significance of the negative characteristics imputed to bankers has increased: after all THEY broke THE ECONOMY because of THEIR GREED. But the general perception of the financial system has changed much less than would seem likely given that, well, it almost collapsed. In a sense, the financial crisis represented an affirmation of what we all already knew.

    The moral failings of the financial elite were widely recognised prior to the crisis and no one did anything because we couldn’t and/or because we benefitted from its continuation. But a lack of illusion about the nature of the people in charge, with the accompanying cynicism about their motives, facilitated a widespread disjuncture best represented by the weird position of the traditional Labour supporter during the Blair years: subjectively critical but objectively complicit in the reproduction of the social structures which were the object of their criticism. The apparent absence of ideological illusion about the nature of finance capitalism itself, as well as the political pragmatism and turn away from ‘idealism’ which naturally accompanies it, functioned as a form of ideological control. As Žižek puts it,  “a cynical non-identification with the ruling ideology’s explicit content is a positive condition of its functioning: the ideological apparatuses ‘run smoothly’ precisely when subjects experience their innermost desire as ‘oppositional’, as ‘transgressive’“. We all knew that bankers are greedy bastards before the financial crisis. Then after the crisis this shared recognition becomes an object of public debate. Bankers are ‘bashed’. Then everything ‘returns to normal’?

Compose new post
Next post/Next comment
Previous post/Previous comment
Show/Hide comments
Go to top
Go to login
Show/Hide help
shift + esc