Forgot your password?

We just sent you an email, containing instructions for how to reset your password.

Sign in

  • [Continued from That Sucking Sound]

    Put your hand up if you are interested in discussing economics. Or would you rather read about paddling a canoe down a meandering river in some pristine wilderness?

    OK, I thought as much. We're creative writers and artists here – dreamers, not business executives or policy wonks. We celebrate beauty and extract wisdom, not capital, from life. But as you paddle that canoe down your beautiful river, listen for the sound of a waterfall ahead.

    We are enmeshed in an economic system that many of us have come to feel is not designed for us, and which is set on diminishing our possibilities for livelihood in order to accumulate capital. Investors in public corporations and private funds want what we have: our meager bits of wealth, and when that dries up, indebtedness.

    Look, each of the six heirs of Walmart founder Sam Walton on average enjoys an annual income of $450 million a year. Their total assets equal those of the bottom 30% of American households. This is just fine, say free-market enthusiasts, because the Walton family are "job creators." Right. Walmart employs 2.2 million people worldwide. But it turns out that for every two jobs Walmart creates (starting salary, $21,000), 2.8 other jobs are lost to the US economy. (source:

    As huge as they are, Walmart's gross earnings are dwarfed by international financial trades. The financial crisis exposed investors and economies around the world to potential losses well exceeding total global GNP.

    By 2007, the international financial system was trading derivatives valued at one quadrillion dollars per year. This is 10 times the total worth, adjusted for inflation, of all products made by the world's manufacturing industries over the last century. – The Guardian

    Think for a moment how that could be possible. How could ten dollars be circulating in financial markets for every dollar of economic output from every nation on earth over the last 100 years?

    Nine of those dollars are funny money. They were ginned up by financial institutions that parlayed real-world value into derivative financial products and spun off bets on them, sold as commodities to well-heeled investors looking for higher returns than average, say, 7.5% return on an economy that was growing at 2.5% per year. They still expect that, and financial innovators are hard at work devising new gambling games to satisfy them.

    To satisfy investors' lust for profits, banks and brokerage houses combined real assets like mortgages and sliced them into unreal bond-like investments called collateralized debt obligations. When credit-reporting agencies gave them AAA ratings they did not deserve, lots of investors bought them. Other companies offered them insurance policies on those investments (called "credit default swaps"), which became very popular. Goldman Sachs cynically bought credit default swaps for bonds they had sold to investors, essentially betting against them.

    The larger problem was that anyone could buy insurance on any investment, whether they owned it or not. It's as if your insurance company encouraged 100 people to take out fire insurance on your house. If your house went up in flames, all those policies would have to be honored, not just yours, and that could be the end of the insurance company. This would have happened to AIG (which had sold over $1 trillion of credit default swaps) had the Feds not stepped in with hundreds of billions of dollars to bail it out.

    Some of us have funny money sitting in our retirement accounts or other places. The idea that it could evaporate is painful to contemplate, so we avoid thinking about it. But somewhere up ahead, around a few bends in the river are foaming rapids and perhaps a big waterfall that will swallow our little watercraft. If we hear the sound of rushing water ahead, it might be to late to start to portage. So let's start putting to shore.

    The good news is that once we land, there are trails we can take to get past the rapids and that we can travel together on them. The bad news is that we don't know where they are or lead to and we will have to trundle our canoes, perhaps for great distances. But at least we'll be on solid ground instead of in free fall.

    Don't be too depressed. I'll describe some ways we can take back the economy in my next installment. Bet you just can't wait.

    Continued in That Splashing Sound.

    [The original seed of this series is On Sustainable Power, May 31, 2012.
    To identify all the stories in the series, click the tag That Sound beneath the map.]

    @image: Wikimedia Commons
    @audio: The sound of a large waterfall, from Sound Jay
    • Share

    Connected stories:


Collections let you gather your favorite stories into shareable groups.

To collect stories, please become a Citizen.

    Copy and paste this embed code into your web page:

    px wide
    px tall
    Send this story to a friend:
    Would you like to send another?

      To retell stories, please .

        Sprouting stories lets you respond with a story of your own — like telling stories ’round a campfire.

        To sprout stories, please .

            Better browser, please.

            To view Cowbird, please use the latest version of Chrome, Safari, Firefox, Opera, or Internet Explorer.