Eugene Linden
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THE OZONE CHRONICLES; HISTORY REPEATING AS TRAGEDY

Joe Farnam, the dogged, data-driven discoverer of the ozone hole, died in 2013, three years before publication of findings showing that the ozone layer, which protects life on earth from UV radiation, has finally started to recover. This nascent recovery comes 42 years after atmospheric chemists fir...

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COMMON SENSE AT LAST!


Friday January 16, 2009

We are in the beginnings of the collapse of a fiat currency. Actually, it's the collapse of a type of credit that has been treated as though it was currency, but it's rise and fall closely mimics the natural history of fiat currencies. Back in the 19th century banks would issue their own currency, backed by government bonds that would be held as security by the Treasury Department. Starting in the 1990s, financial institutions began doing something like this again, although this time around the currency has been the triple-A rated tranches of mortgage-backed securities (MBS) and collateralized debt obligations (CDO). And, while our forbears in the 19th century could assure themselves that a bank note was supported by the credibility of the U.S. government, this new currency was backed by the paid-for opinion of the rating agencies. Assured by Triple-A ratings that these instruments were money good and completely liquid, bankers thought they had discovered the philosopher's stone -- a risk-free, high-yielding asset -- and this new credit/money has found its way into every corner of the financial system from teacher's pensions to commercial paper to money market funds. Moreover, once the printers of this new fiat currency realized that there was an appetite for their product among yield-starved institutional investors, they did what every unrestrained ruler with a printing press has done since the dawn of money: they began minting more of it. In this case, credit/money was inflated through the re-securitization of already securitized assets. The Mugabes of hyperinflation in this case were the rocket scientists in structured finance, and the Zimbabwian extreme are so-called synthetic CDOs, arcane confections which invest in tranches of CDOs. These "innovations" leverage the underlying subprime assets to dizzying multiples so that tens of billions of dollars in subprime originations might ultimately support of a trillion dollars in CDO tranches. At the tail end of this whip, tiny variances from the assumptions about the performance of the underlying assets can vaporize the value of these supposedly rock solid assets. This new fiat currency exploded during the period of skyrocketing home price appreciation, but it should be noted that almost everything worked during that period. What securitizers and holders are discovering, however, is that a fiat currency rests on nothing more than the willingness of someone else to accept it. And, now that the market, most ominously the vast commercial paper market, has discovered that credit is not money, the contraction has begun. The question of the moment is whether anything can be done to slow it, much less stop it? Eugene linden [ Huffington Post ran this in Aug. 2007. I put it up now because Sheila Bair has just suggested the solution proposed in the last paragraph] If the Federal Reserve lowers rates, it risks a precipitous fall in the dollar and a big rise in long term rates, which would only worsen the situation for over-indebted consumers and homeowners. Similar risks accompany other Fed strategies by which they might inject liquidity (the only reason that the euro did not fall more after the ECB's massive liquidity injection was that central bankers around the world were all doing the same thing). Most likely, the best we can hope for is an orderly blood-letting with pain apportioned where it is deserved. The device that might help accomplish that might be a public-private corporation (largely funded by the big banks that promoted and profited from this mess) set-up to exchange currently illiquid CDO/MBS tranches for tradable notes in the enterprise. This will not solve the many other problems attending this credit contraction (including counter-party risk in the CDS market), but it will buy time, and time is everything when bills come due. We've done this before (Felix Rohayton's creation nicknamed Big MAC calmed markets during New York City's financial crisis in the 1970s), and it will help supply liquidity and price transparency in this vast market. A fix like this won't much reduce the pain for either investors or overstretched homeowners, but it could reduce the growing risk of panic, paralysis and systemic collapse. It will also minimize moral hazard by doling out financial punishment mostly to those who deserve it.

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Short Take

[Mild spoiler alert: the book is a fictionalized exploration of a girl who falls under the spell of a Manson-like cult. We all know how that story unfolded. In this Short Take I’ll be offering my reactions to the protagonist, Evie Boyd.]

 

The Girls offers as bleak a view of the amorality of American youth as I have ever encountered. In a review of my first book, I was called “Intolerably apocalyptic,” but I can’t hold a candle to Ms. Cline. The book is a novelistic attempt to try and understand how some of the privileged young women of the late 1960s could commit unspeakable acts while under the sway of a Manson-like psychopath. 

 Thus we meet Evie Boyd, a fourteen year-old growing up amid relative affluence in Petaluma California. She’s directionless, with no apparent passions, self-conscious about her looks, emotionally needy, alienated from her parents (who get divorced), but possessed of a tough inner core and a rebellious streak. She’s enthralled when she encounters Suzanne, a wild, charismatic 19 year-old who seems to be a composite of Patricia Krenwinkel and Leslie Van Houton, and Evie is honored when Suzanne pays her some attention. Events bring her to the cult’s squalid ranch, and for some weeks, Evie maintains a dual life, throwing herself into the life of the cult, while returning home enough not to galvanize her mother, who is pre-occupied with a rebound relationship with Frank, an entrepreneur who comes across as a hustler with a heart of gold.

Evie is so smitten by Suzanne that she doesn’t notice as the cult spirals down from talk of love and freedom to episodes of paranoia, back-biting and revenge. Along the way, Evie has her first sexual adventures, and enters sufficiently into the spirit of the cult that she brings them to the house of the family next door (which they descrate), even though she has known the family all her life and has no score to settle. Later, Evie talks her way into joining Suzanne as she and others set off to inflict mayhem on a Dennis Wilson-like figure, but Suzanne kicks her out of the car before they begin a horrific rampage.

Did Suzanne do this to protect Evie from what she knew was about to happen, or because she felt that Evie wasn’t a murderer and would become a liability? That’s left unanswered, but the bloodbath that Evie missed is so depraved – including the slashing apart of a toddler – that no human with a soul could find that earlier gesture redemptive … except for our Evie, who still feels the tug of Suzanne’s power, even after she learns every gory detail of Suzanne’s actions.

It’s several months between the time of the murders and when the cult is finally caught. During this time, Evie keeps her mouth shut about what happens and meekly allows herself to be shipped off to boarding school to resume her comfortable existence, though as a wreck, not a spirited teenager.

That’s when I decided Evie was a worthless human being. Sure, she was terrified that the cult would come after her, and there’s some honor on not squealing, but Evie had to know that the cult would likely kill again, and that made her an enabler of whatever they did subsequently.

The book interweaves the present and the past and so we learn how these events haunted Evie’s life. But there’s no redemptive moment, no act where she summons the courage to do the right thing, or rises above her own self-absorption. Even in the present, when the psychopath-in-the-making son of a friend and his underage, impressionable girlfriend crash at her digs, she can only summon a half-hearted (and failed) attempt to save the girl from following the path that so grievously sidetracked her own life.

All the men in the book are either pathetic or pigs of various shapes and forms – except for a premed student named Tom, who sees the cult for what it is, but who Evie rejects as a dork. Towards the end of the book, Evie ticks off a long list of subsequent experiences with awful men that could summon in her the hatred to commit horrendous crimes, seeming to imply that with the right mix of events, she too might have become a Suzanne, and, by implication, so could enormous numbers of other young women.

My first reaction was to call “Bullshit!” Were all young women potential Suzannes, we would have seen endless repeats of the Manson horrors in the nearly 50 years since the events. Instead, those murders still stand as a touchstone of horror because nothing since has eclipsed their mindless violence.

The Manson cult was at the far far end of the normal curve during truly abnormal times. In just the two years leading up to the murders, we had the huge escalation of a senseless war, the explosion of the anti-war movement and counter-culture, a breakdown of generational trust, my generation’s first experiences with powerful, mind-altering drugs, and a sexual revolution. In a country of more than 200 million people, that roiling stew of disruptive forces bubbled to the surface about 20 broken souls, deranged by drugs and in the thrall of a false prophet.

On reflection, however, maybe Ms. Clein was making a different point. All we have to think of are the teenage executioners of Pol Pot’s Cambodia or the child soldiers of Africa to recognize that the capacity for evil lies latent in the young. And, while in fiction we want our protagonists to find redemption or transcend their flaws perhaps Evie’s failure to rise to the occasion was making the point that a civilization that keeps our murderous impulses in check is not innate, but something external that has to be actively inculcated and supported. That’s something to keep in mind amid the current insanity of gun violence, and as more dark clouds gather on the horizon.



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