finance | Open Source with Christopher Lydon

June 30, 2016

The Great British Break-Off

This week, we’re catching up on the split heard round the world. People laughed at Tory historian Niall Ferguson for warning that Brexit—Britain’s proposed exit from Europe—would be like his own divorce: a nasty and desolating affair that ...

This week, we’re catching up on the split heard round the world.

People laughed at Tory historian Niall Ferguson for warning that Brexit—Britain’s proposed exit from Europe—would be like his own divorce: a nasty and desolating affair that left him alone with his problems.

And yet! A week since it’s happened—52% out, 48% in—what we’re watched does resemble the bitterest of family fractures. The adults are checked out: prime minister David Cameron abruptly resigned, while Jeremy Corbyn, his Labour adversary, is himself embattled. And few of the victorious “Leave” leaders seem prepared to step in and help the process along.

Sparkling London, with its skyscrapers and trillions of dollars of daily business, was a spot of deep “Remain” yellow on the popular map. But it has been indicted by the towns and villages, even Labour strongholds, that no longer recognize themselves in the capital. Scotland and even Northern Ireland—decidedly for remaining—are threatening to go their own way. Everywhere, racial and xenophobic rhetoric—directed at Poles and Pakistanis—is, painfully, on the rise.

Our guests—many of them intelligent, cosmopolitan Brits—had nothing but distaste for the “Leave” campaign led by Nigel Farage, with his Hitlerian posters, and Boris Johnson (he of the misleading megabus). But they’d disagree on the nature of the case for remaining in a European Union: how to sell it, or whether the U.K. should do it at all.

We thought the best thing to do would be to convene our favorite Brits and Anglophiles to discuss just where this came from—and what’s next.

By the Way • March 26, 2015

Michael Lewis’s Age of Money

Michael Lewis is the great tale-spinner in the Second Gilded Age in America. He’s part muckraker, but part Mark Twain, too, for finding classic characters as good as the King and the Duke in Huckleberry Finn on Wall Street today: the good, the bad, the geeky, the banks and traders making billions mostly in the dark.

Like a great novelist, Lewis writes the moral ecology of the story. Five years ago in The Big Short, after the meltdown of the subprime mortgage racket, the center of the story was a thick air of anger and doom – because near-autistic social misfits saw the problem, when the go-along greedy guys didn’t. Only the mentally strange acted, and they weren’t called heroes for being right.

Now Lewis has taken on another disease in the money system: Trading is a war of robots, a black box that almost none of the players get to see inside – too fast, too algorithmic, too fragmented, too automated, too layered for human understanding. He says the market at the heart of capitalism is still rigged and that it’s become a means of systematizing unfairness.

Meanwhile the eccentrics and iconoclasts are still not rewarded for their clear sight:

It’s a problem that people who speak truth to power get quickly classified as oddball rather than important. Maybe it’s always been that way. It’s a big problem in culture of elites, in the structure of institutions. On Wal Stret, elites have lack of sense of responsibility — or their responsibility is not to the larger society. They have responsibility to shareholders, to the bottom-line, to short-term results, etc. But there isn’t a sense of noblesse oblige. That got drained out of us, I think. They don’t have any sense that they’re lucky to be there. They think they deserved whatever they got.

This Week's Show •

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.

And there’s a longer piece by Max Larkin about Berkshares, a small but resilient local currency used in Berkshire County, Mass.:

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.

Podcast • August 17, 2014

WWI: Adam Tooze Reviews “The Deluge”

In 1916, two years into the war, Americans reelected the president who’d kept us out of the battle. But by the summer of 1917, the same Woodrow Wilson had committed the US to fighting alongside Britain and France against Germany. For me the hair-raising fascination in our conversation here, on the eve of publication, is in the foreshadowings — of a century of horrific hot and cold sequels of the Great War, but also of the very-2014 tensions between democracy and capitalism, and of course the rise of a new giant in China.

Adam Tooze’s new history of World War One, The Deluge, makes a crackling, cautionary tale of the zig-zag course of the young economic giant in America, drawn toward the center of a new global order between 1914 and 1918. In 1916, two years into the war, Americans reelected the president who’d kept us out of the battle. But by the summer of 1917, the same Woodrow Wilson had committed the US to fighting alongside Britain and France against Germany.

For me the hair-raising fascination in our conversation here, on the eve of publication, is in the foreshadowings – of a century of horrific hot and cold sequels of the Great War, but also of the very-2014 tensions between democracy and capitalism, and of course the rise of a new giant in China.

Adam Tooze is an English-trained historian now teaching at Yale. Over a phone line to Paris, on the eve of American publication of The Deluge, Tooze is recounting the “truly extraordinary” role of Wall Street’s J. P. Morgan, serving as banker to Britain, France, Russia and then Italy, “effectively the financial agent for far-and-away the largest coalition of military powers the world had ever seen.” Morgan made a colossal bet on a war that Americans voted not to enter. Paris and London panicked at the election returns and the popular indecision about the war into 1917. What turned President Wilson, Tooze argues, was not J. P. Morgan but the Germans’ cynical (maybe mad) decision to pursue unrestricted submarine warfare (like the torpedo attack on Cunard’s Lusitania which had killed a thousand Americans and shocked the country in 1915). Among the endless counter-factual questions: what if the Kaiser had held back his U-boats and Wilson had held back the American fighting forces, as he wanted to? The Germans might well have won the European war, but we might never have known Fascism, state Communism, World War Two, the Holocaust, the Cold War or nuclear weapons.

Americans seem still to be ambivalent about Wilson’s ambivalence – between the “muscular Wilsonism” (that led us into World War One and the botched peace of Versailles) and Wilson’s dream of “peace without victory” and an American “liberal internationalism” that policed the empires without becoming one.

And then there are the China questions that Adam Tooze says he felt “hanging over me” as he wrote his centennial history of World War One. So many analogies between the US then and China today: rising industrial and financial powers, yet to be partnered into managing the world system. China is vastly older and bigger than the US ever was – a sixth of the world’s population and “an ancient empire coming back into itself,” as Tooze put it. This is the great drama taking place before our eyes, “an epic shift in world affairs we’re living through.” The trick, the historian says, is to realize that there is no succession of empires, no simple repetition in history. Stay tuned!