We’ve lived so long under the spell of hierarchy—from god-kings to feudal lords to party bosses—that only recently have we awakened to see not only that “regular” citizens have the capacity for self-governance, but that without their engagement our huge global crises cannot be addressed. The changes needed for human society simply to survive, let alone thrive, are so profound that the only way we will move toward them is if we ourselves, regular citizens, feel meaningful ownership of solutions through direct engagement. Our problems are too big, interrelated, and pervasive to yield to directives from on high.
—Frances Moore Lappé, excerpt from Time for Progressives to Grow Up

Sunday, April 20, 2014

Film of the Week: Quants — The Alchemists of Wall Street

Click here to access 47:48m video posted by Don Quijones from Raging Bull-Shit (Spain).
With the banks ruling the world, and the machines as good as ruling the banks, just how close are we to another major financial crash?

In this brilliant VPRO documentary, some of the world’s leading “quants” — that is, people who specialize in the application of mathematical and statistical methods to financial and risk management problems – voice their fears about the financial industry’s almost complete dependence on mathematical models, many of them deeply flawed.
What I got from the film is that the new financial products that capitalists gamble with are based on assumptions about the future which have their roots in the most basic of all capitalist assumptions--economic growth. Capitalism requires growth to exist, hence people who work for capitalists such as mathematicians create models and mathematics with growth built into them. Inevitably these assumptions are wrong because reality based on people is constantly changing. Investments, or the bets, based on these assumptions are huge, the payoffs huge, but also the consequences for economic destruction are huge most of which are born by ordinary people. 

The bust part of these cycles are happening at an increasing rate. Capitalists, who incidentally are a ruling class, use their control of the state and central banks to provide stimulus in the form of low interest rates to create more money (debts to nations) and another cycle of big payoffs is created for them. (For an interesting commentary on the role of the Fed, read this piece by James Kunstler.)

I would also argue that because their assumptions, on which their logarithms are based, are motivated by the basic capitalist requirement of growth, they are disastrously wrong given the fact that growth can no longer be sustained given the finite limits of the planet. So, we must choose between two options: change the system or experience a nightmarish dystopia and probably extinction.

View the fascinating video and see what you think.