08 July 2015

Magic and money markets

The world of finance is a mystery to most of us, so I was dazzled by Daniel Miller's explanation - finance as comparable to religion, viewed as a haunting of the secular world by shadowy spirits performing strange magical feats. It's like peering through the crack of the door at incomprehensible but compelling rituals.

His keynote, as he looks back over his writings on material culture in "Stuff" (2009), is that just as people make things, things make people. For instance, the way a sari must be worn in order to function is what determines how an Indian woman moves through her world. This sort of analysis slides round the door and sees the proceedings from a different angle.

"Many of us live in a world where more and more distant from any cosmology identified with established religion. But our secular world is just as haunted today by shadowy spirits that seem to perform strange magical feats that conjure vast powers out of the dross. People such as the Japanese traders in derivatives markets, studied by Mayazaki, are surely at least as incomprehensible to the uninitiated as any theological discussion of Talmud or the Sutras. Key processes in contemporary finance start not with doing something, but with an act of securitization. This is the process that turns a potential future profit stream into something that can be traded. In turn, a derivative may be formed by trading the risk involved in speculating on what that profit stream will be. This sounds obscure enough, but what is deeply unsettling is to contemplate what is thereby produced.

"In the trading known as arbitrage, experts will use models derived from theoretical physics to note tiny discrepancies between how a market should operate according to these models and how it is actually operating. But trading on the 'as though they existed' is sufficient to make these values exist. A million units can therebybe traded as a billlion units. Well more, actually. The rabbits coming out of these hats reproduce at a rate that would even astonish rabbits. The notional amounts of derivatives contracts by the year 2000 were already more than a hundred trillion dollars, a figure most of us can no longer convert into a meaningful image. During a credit crunch it can even more magically be transformed back into a mere puff of smoke.

"Now for the present purposes you don't have to understand modern finance (though perhaps we really should). The point is merely that the relationship between materiality and immateriality is no more straightforward in secular than in religious domains. Clearly this vast sum exists in some sense, but in what sense? Has derivative trading materialized something that didn't exist, or is it largely a juggling of immaterial concepts? One of the neat things about the Japanese arbitrage traders studied by Mayazaki is that they don't get paid by some share of the money they make in this trading. They accept a standard wage, because they see themselves as doing a good deed in the world. By spotting these discrepancies in the way markets operate, they are in a way punishing its imperfections, and in some small way helping to perfect the market itself. To make it as pure as its models. Is this then the secular opposite of religion? Hardly. Actually, religions were pretty good at making money on occasion also." (pp74-75)

The sequel (2012) is called Consumption and its Consequences. And he's written a few more things, besides.

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