Friday, May 07, 2010

Dancing On A (Financial) Volcano

The bank lobbyists have the champagne out – the Brown-Kaufman amendment, which would have capped the size and leverage of our largest banks – was defeated in the Senate last night, 33-61. Simon Johnson

Mr. Johnson describes the pro-TBTF (Too Big To Fail) "victory" in a Pyrrhic sense and suggests their opponents, like Wellington, have fallen back to Waterloo.

It's an apt metaphor. Yet, I think the situation may be more dire than that (as, I suspect, does he, after all, we commentators only have so much time to mine for metaphors).

Just prior to the French Revolution of 1830, Talleyrand attended a ball, at which, he was reported to remark, "We are dancing on a volcano."

Moving back in time a few millennia, the flourishing Minoan civilization, inhabitants of which, ironically, liked to leap over bulls, actually were dancing on a volcano, on the island of what is now called Santorini. I don't know if the bull leaping was a mental reflection of their life on the volcano-beast but that beast did erupt (sometime around 1600 BC) and gore their civilization.

There are two aspects to the current volcano- popular unrest, such as was evident in Greece this week (discomforting, related note: one in 5 American men between 25-44 is unemployed) , and the increasingly volatile financial markets themselves. TBTF lobbyists, like the Minoan bull-jumpers, are engaged in risky business, risking both populist anger, and an eruption of the financial volcano (might rising market implied volatility be seen in a tectonic light?).

Those of us watching the spectacle, in delight, admiration, trepidation or horror, (depending on perspective) from afar may soon find, like the Minoans, worse things- deeper, more profound things- to fear, than the bulls.

Some might wonder if it would have been better to dance on the volcano as it erupted instead of, like the Minoan survivors of the eruption and resultant tsunami, trying to pick up the pieces afterward.

We'll see, soon enough.

Or not. After all, this is just a metaphor, my attempt, in a sense, to dance on the volcano, which may, in the event, not even exist (but my gold investment- my bet on the volcano- is an attempt to stay well clear of "Santorini")

Happy Dancing!

Here endeth the mind-bending Minoan metaphor. Next week (hopefully) I'll get back to more con-Crete (couldn't resist) analysis.


Saladin said...

too punny! ;)

As an aside. Fun fact pour vous.

How long till world daily petroleum production is back at say 1974 levels? (about 20Mbpd, or so) Answer? Less than 10 years.

We'd better stop dicking around with finance and get to work building our next energy supply, because THIS time, (unlike every other transition period in the whole of human history) there is nothing that is available to readily transition to. WE have to MAKE it (and we haven't even started).

Think Dung->Wood->Coal->Whale Oil->Petroleum-> ????

Just let that sink in for a moment.

Dude said...


From whence comes that forecast? I am a believer in Hubbert's research, but I hadn't seen anything that dire.

As to what's next after the "Age of Oil", who knows, which is the way it always seems at the terminal stages of such periods. Necessity is the mother of invention, they say (and I hope "they" are proved right in this case).

I've been a big wood convert for years and have many acres of nice big hard wood trees to farm (and burn).

Love that wood stove heat.

Saladin said...

On good sources and we will leave it at that. Okay?

Dude said...


Saladin said...

Can you say "Gorbamachev"?