Annals of Wealth: Nick Paumgarten Deconstructs the Economic Crisis

Nick Paumgarten's piece in this week's New Yorker ("The Death of Kings," May 18, 2009) is long, detailed, and gripping, in the same way Greek tragedy often is. I'm guessing it was researched and written between November and February, a period when the global financial system was on the verge of collapse and the "green shoots" of the past few weeks were a distant hope. But whether you're a beginning-of-an-end type or, like me, an end-of-the beginning gloomster, it's an article everyone should read. Here's an excerpt:

This thing we're in doesn't yet have a name. It's variously called, in placeholder shorthand, the global financial meltdown, the financial crisis, the credit crisis, the recession, the great recession, the disaster, the panic, or the bust. It long ago metastasized beyond the subprime mess, which was merely a catalyst -- the first whiff, the last straw. A text-friendly acronym, ITE, for "in this economy," has started to get around, in sales pitches and head count meetings, but it doesn't do the work.

This thing is enormous and all-pervading, evolving and ongoing, history-altering yet in many respects banal. It is a persistent state, like the weather, or a chronic illness. In some circles -- financial professionals in Manhattan, regulators in Washington, central bankers in Europe, or the owners of cash-strapped businesses, to say nothing of the millions of people who have been laid off or whose houses have been foreclosed on -- this thing is, in its various incarnations, pretty much the only subject of conversation. The loss of a job, a home, a college fund, or one's dignity is both a symptom of the collective disaster and a contributor to its deepening. People assess their own exposure first and then, gradually, the implications for their friends, their town, the social fabric, and, in the darker hours, the fate of the American experiment.

In a way, the financial crisis is like a plague or war, except that the pestilence and carnage are metaphorical. Some have compared it to Hurricane Katrina, but Katrina occurred suddenly, and then all was aftermath. In this case, it's as though the levees failed anew every day. We stay on the porch, carrying on with our card game, in water up to our necks. War...fails as an analogy, too; there is no enemy to shoot at, and the destruction is so gruesome that it is hard to mistake wartime for normalcy. An economic meltdown can camouflage itself in the commonplace. It is more like radiation. It's everywhere, but you can't see or smell it....

Click here for an abstract of the article; the complete article is available only to magazine subscribers. Or you can buy a copy at your local newstand. (What a novel idea.)

-- Mitch Nauffts

Comments

[Hitch Hiker]

Agree. One of the best articles on the subject I've read and essential reading for Americans who truly want to understand cause and effect in lieu of stone throwing.

[Alice Garrard]

I probably fall into the "beginning-of-an-end type" camp, but Paumgarten's article
and Mitch's comments made me think of the charities for which a glimpse of "green shoots" may have come too late -- those that invested heavily with Bernard Madoff. That led me to the Web site of the Elie Wiesel Foundation for Humanity and this open letter:

"To Our Friends:

"We are deeply saddened and distressed that we, along with many others, have been the victims of what may be one of the largest investment frauds in history. We are writing to inform you that the Elie Wiesel Foundation for Humanity had $15.2 million under management with Bernard Madoff Investment Securities. This represented substantially all of the foundation's assets.

"The values we stand for are more needed than ever. We want to assure you that the foundation remains committed to carrying on the lifelong work of our founder….We shall not be deterred from our mission to combat indifference, intolerance, and injustice around the world."

The foundation took the high road in calling Madoff's treachery a fraud. And "in this difficult time" (ITDT trumps ITE), it chose to express, not anger or self-pity, but "profound gratitude" to its supporters.

Elie Wiesel is a survivor, maybe one of the most famous. Despite the gloomy, even ironic turn of events, the optimist in me has to hope the organization he founded will be, as well.