Voodoo Economics: the credit crunch explained

Like many people I suspect, I’ve been wondering about the credit crunch. About what it is – other than a little lego block of language – about how real it is, how real all these stratospheric amounts of money being talked about. Wondering, I think, about what, in context of the CC, ‘money’ is. Digits on a screen, years of work, part of a company…

I’ve read quite a few articles on the crisis, so I thought I’d put down a few of the best links. The title of this post comes from a comment on a Metafilter post, which has consistently produced some of the best discussion of the events I think. People trying to get to grips with it. Told you so’s, cynics, wits, fascinated students.

This particular post links to a great article on Wired about the role of maths geeks in the economic implosion, but before you get there I’d recommend some other links:

1. The Crisis of Credit Visualised is a good 10 minute intro to the basics.

It’s quite US focussed (and centred very much on housing) but is an excellent indication of how seemingly disaparate parts of the economy become interlinked.

2. To get a better sense of the delicate complexity involved in modern economic instruments, set aside an hour of your time for a brilliant episode of This American Life, aptly titled ‘Another Frightening Show About The Economy.’ You can stream it from their site for free.

3. Once you’ve listened to that, you begin to get some idea of the role of instruments such as Credit Default Swaps in this mess. And that means we’re now on to the role of computers, quants, algorithms and far out maths. This NY Times article frames the CC as quite possibly the first time that humanity on a large scale has been out-thought by computers.

4. Wired’s aforementioned piece is less scifi, and frankly, just plain excellent. It makes it clear that while algorithms played a role, two age old factors really drove it: the desire to trust in systems, and, of course, greed.

A music post: What if Beyonce was your Gran? What if she could predict economic turmoil?

beyonce-is-your-gran1

Yes, what if? Well, wonder no more – this very odd picture (which may or may not be photoshopped) was used by the Guardian to illustrate a story about how there’s apparently an inverse correlation between the stability of the stock markets and the regularity of beats in pop songs:

“Beyoncé’s worldwide hit, Single Ladies (Put a Ring On It), is not just catchy – it may spell doom for international finance.

According to findings by Phil Maymin, professor of finance and risk engineering at New York University, the more regular the beat on Billboard’s top singles, the more volatile the American markets. After studying decades of Billboard’s Hot 100 hits, Maymin found that songs with low “beat variance” had an inverse correlation with market turbulence. Which is to say, the more regular the song, the crazier the stock market.

And Single Ladies is very regular.”

Cue dramatic music. The meme of a link between turmoil and culture is old of course – why else would a researcher even be looking at this field – and is expressed in a well known speech by Harry Lime in The Third Man:

Don’t be so gloomy. After all it’s not that awful. Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love – they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.

The Wikipedia entry reveals the line wasn’t in Graham Greene’s speech, but was added by Orson Welles:

Greene wrote in a letter (Oct. 13, 1977) “What happened was that during the shooting of The Third Man it was found necessary for the timing to insert another sentence.” Welles apparently said the lines came from “an old Hungarian play”; the painter Whistler, in a lecture on art from 1885… said, “The Swiss in their mountains … What more worthy people! … yet, the perverse and scornful [goddess, Art] will none of it, and the sons of patriots are left with the clock that turns the mill, and the sudden cuckoo, with difficulty restrained in its box!”

Part 2: New Bon Iver

Fine, his album, For Emma, Forever Ago wasn’t the album of the year (wrong OMM! PFork got it right – Fleet Foxes), but his new track, Blood Bank is great. You can stream it from Pitchfork; looks like he’s taken the Iron & Wine route and added cheerier instruments while heaping on the dread and spookiness.

Part 3: A pop star from Blackpool

Being as it’s where much of my immediate family come from, Blackpool is close to my heart,  it’s good to hear one of this year’s most tipped pop acts, Little Boots, is a native of that strange, cold and fascinating place. There’s an interview with her in the Guardian, and you can listen to a few tracks on her MySpace. For those interested in the economic ramifications of her music, it’s electronic and quite regular.