Nowadays Senator Everett Dirksen, a Senator from Illinois of some time ago, is probably remembered for, as much as anything, saying something like, "You talk about a billion here and a billion there, and pretty soon you're talking about real money."
Here I'm looking at things in another way. Pennies, nickels, dimes, quarters, 50-cents pieces, dollar bills, and even a whole suitcase filled with sawbucks are all really what amounts to real money. True, a single one of any of those coins will no longer buy you much (though I can remember when they did, and even a mere penny could at least get you a piece of some kind of candy). But greenbacks will still get you things.
On the other hand today, following Dirksen's departure, we have "credit default swaps."
They're supposed to be real money, too, but, compared to nickels and dimes, they're so far up in the financial asteroid belt that it's hard to see how they can be real money. The trouble starts with not knowing what they are.
The other day, the illustrious Congressman from Vermont, Bernie Sanders, the only Independent in the Senate, was on the Thom Hartman Show on Air America and also on Nova M Radio. He was one of several in Congress who had the fortitude -- and the regard for their constituents -- to go against the mix of hysteria and cynicism that engulfed so many of their colleagues, and he voted against the Wall Street Bailout. Sanders mentioned other economic dangers that also still threaten us but are even more sinister, because of their sheer imperviousness to ordinary understanding. Though he didn't put it this way, they're the financial equivalents of the quasars and the supernova bursts in distant constellations that could sweep through here so fast and without any warning that they would wipe us, the planet, and the entire Solar System out in a flash without anyone being the wiser.
The quasars of the eocnomic world are various kinds of derivatives, and as an example he cited one type, credit default swaps, and how important and menacing they are, yet, he added, not one person in a thousand can even tell you what they are.
So I thought I would try to be an exception, by asking the ever-informative Internet, but I quickly saw that I was going to fail, because, though, as so often, Wikipedia leaped to the eye first, it began by saying this:A credit default swap (CDS) is a credit derivative contract between two counterparties, whereby the "buyer" pays periodic payments to the "seller" in exchange for the right to a payoff if there is a default or "credit event" in respect of a third party or "reference entity".
And that was accompanied by a long and equally incomprehensible article that near its end featured a bunch of equations that looked suspiciously not like the ordinary tried and true recitals of nickels, dimes, and quarters, but instead like (gulp!) calculus.
We are informed that the total worth of all the goods and services produced by the six billion or so humans on the planet adds up to 62 trillion dollars a year. But credit default swaps, which involve concepts like speculation, hedge funds, and debt buying, are about amounts in the hundreds
of trillions of dollars!
It's easy to conclude that economic matters jumped the track and eventually led to nonsense like credit default swaps as soon as the money changers at the end of the Middle Ages found it easier, safer, and more profitable to abandon barter and real money, by instead having figures and various instructions written and imprinted on paper to represent money instead. And with that the temptation was too great to avoid taking things to stratospheric levels, far beyond the ability to comprehend them not only on the part of ordinary mortals, or extraordinary peoole, but also even by those who cooked up these things in the first place, and so matters get out of hand.
I noticed, for instance, that after bringing them up, Sejator Sanders made no attempt to enlighten us on what "credit default swaps" are -- or mercifully had no time to -- and so there things stand ...and always threaten to fall.