Are you afraid of what happens in the dark corners of Wall Street?
The Meaning of Money
Michael Lewis has become the great teller of modern morality tales around money: from the story of how high finance bubbled up, then popped, in Ireland and Iceland to the story of how a handful of eccentric thinkers saw a mortgage crisis brewing before it took down the world economy in 2007 and 2008.
In his latest book, Flash Boys: A Wall Street Revolt, Lewis sounds worried. After that last great crash, finance has gone digital. The action has moved off the downtown trading floors and into black-box servers stationed in New Jersey. Wall Street’s work has become so automatic, algorithmic and obscure that ordinary buyers and sellers have less understanding than ever of what’s happening with their savings.
In Flash Boys Michael Lewis focused on the practice of ‘high-frequency trading’ — a game of arbitrage conducted in the course of microseconds, well handled on Radiolab. But in a new afterword he says HFT is just a symptom of a larger problem. The market’s big players have once again abdicated their “clear responsibility to protect investors… and to create a fair marketplace,” meaning that the game may be more dangerous than ever.
So we’re asking the $64,000 question: can we build a more crash-proof, less leveraged, more equitable financial system? Our guest Jeremy Allaire would argue that the technology known as Bitcoin can do just that: bring back transparency and a simple standard of honest exchange. But we’re reminded that the American dream runs on credit — and we may just be too dependent on the boom-and-bust market we’ve made.
Life Under The Cheese-Grater
London — ever more a 21st-century financial capital — is undergoing the building boom. Our guest John Lanchester — novelist-journalist who’s become an obsessive wrestler of big-money topics — can see those buildings from his study window, and he’s (ever so slightly) flustered.
Lanchester says the meaning of those enormous buildings — nicknamed the Gherkin, the Spire, the Walkie-Talkie, the Cheese Grater — comes from their being built without a context, comically dwarfing the Tower Bridge and what’s left of that Dickensian skyline.
Hear our whole conversation with John Lanchester below, and — even more — buy his high-spirited book on How to Speak Money:
The Not-So-Mighty Dollar
On Medium you can read a piece asking what Bitcoin technology might actually accomplish by our newest producer, Pat Tomaino:
Here’s what I learned. Whether you see Bitcoin as a solution depends on who you are and how you define the problem. While the debate continues, here’s a rough scorecard on Bitcoin, what it can do, and for whom.
One thinks of a few Berkshire towns — like North Adams, out of Berkshare buying range — as monuments to the power of modern capital: how it all but literally floats in and floats out of a place. Like a kind of slow-motion weather event, money has whipped into Detroit, and Haverhill, Mass., and Gary, Ind. — building up their physical plant and infrastructure so long as that promoted profit — then whipped out and away, leaving something skeletal and defunct behind it.
This is, by the terms of the market, a morally neutral phenomenon. Monopoly capitalism of this kind is indeed like weather, in that one accomplishes nothing by complaining about it.
best-selling financial journalist and author of Liar's Poker, The Big Short, and most recently, Flash Boys: A Wall Street Revolt.
Boston-based serial entrepreneur, founder of Brightcove and Circle, a new digital money platform
political philosopher and historian of capitalism at Brown University, author of From Slavery To The Cooperative Commonwealth
Michael Lewis, Vanity Fair
When Michael Lewis published Flash Boys last spring, the world of high-frequency trading he wrote about was so obscure it was hard to predict what would happen after the whistle blew. A year later, some of the key players are catching on: big pension funds are peeved about flash trading, regulators are shooting letters to exchanges, and some of the smartest flash boys have abandoned the "dark pools" for greener pastures. In a new afterword, Lewis describes one big lesson he's taking away:
That some minority on Wall Street is getting rich by exploiting a screwed-up financial system is no longer news. That is the story of the last financial crisis, and probably the next one, too. What comes as news is that there is now a minority on Wall Street trying to fix the system...All they need is a little help from the silent majority.
John Lanchester, London Review of Books
We dialed South London this week to talk with John Lanchester—our other favorite financial explainer—about our culture of money, what it buys us, and what it doesn’t. He read Flash Boys, too, and came away with many of Lewis’s concerns. But, he also found a larger indictment of capitalism:
...I found it hard not to think about those missing oceanographers, the computer geniuses and engineers and physicists and entrepreneurs, all those brilliant minds, all that passion and energy disappearing into the black hole of money, lost to all the more productive and interesting things that we humans can do. It’s hard not to feel a sense of loss when you think of what these people would have done, if they hadn’t been sucked into the enterprise of making money out of money. If we ever get enough distance to look back with some sense of perspective on the delirium of modern finance, I think this is what will stand out clearly: that sense of human and intellectual waste.
William D. Cohan, Vanity Fair
This catch-up with the doomed and not-so-doomed Wall Street titans of 2008 reads like an inventory of everything we didn’t learn from the last crisis. After Congress called him a “villain,” former Lehman Brothers CEO Richard Fuld dodged criminal and civil charges and then resurfaced for a second act in China. Even that seems less outrageous than the fact that Lloyd Blankfein and James Dimon (still ensconced at Goldman Sachs and J.P. Morgan, respectively) survived to help spin the oral history of the crash.
Maria Bustillos, The New Yorker
After the 2008 crash and Eurozone aftershocks, institutional trust is a resource that's even scarcer than new jobs, housing starts, or sane fiscal policy. Bustillos took a relatively early look at Bitcoin—through the lens of the Cypriot bank-runs—and found people looking to put their trust in just about anything but the current financial order...even a start-up crypto currency:
The weakness in existing currencies stems from lack of faith in institutions—particularly central banks, which are often in league with commercial and investment banks. When a government bails out a failed bank or insurance company—in essence, by printing money—the net effect is that the currency as a whole is debased, in favor of a few and at the literal expense of everyone else, which amounts to a fair description of today’s global financial system. Hence the sudden appeal of bitcoins, which appear, for the moment, at least, to be immune to the machinations of inept or crooked bankers and politicians.
Aleks Krotoski & Alex Hern, The Guardian Tech Weekly podcast
The Guardian’s Tech Weekly podcast takes the measure of Bitcoin. It’s a little currency with big questions, and it may never be circulated widely enough to be bus fare or someone's weekly allowance. Even so, Bitcoin has hopes and dreams riding on it that speak to our frustration with the global money order and what we’re not getting from the big banks.
Felix Salmon, Reuters
And another critical view on Flash Boys, from the ascendant financial journalist and podcaster Felix Salmon. Felix sees the HFT criticisms as missing the point — trying to build a corruption narrative around a more arcane in-house market problem.