>Here's a new article on finance theory, "convergence arbitrage," and the
>problems that Russia’s devaluation of the rouble and partial default on its
>rouble-denominated debt in '98 caused for Long Term Capital Management:
>
>http://www.lrb.co.uk/v22/n08/mack2208.htm
>
>In it, the author writes, "As [LTCM's] difficulties grew, the Federal
>Reserve Bank feared the consequences for already nervous capital markets of
>a sudden forced liquidation of the fund’s large commitments, and therefore
>co-ordinated LTCM’s $3.6 billion recapitalisation by a consortium of
>American and European banks."
The author, David Sylvester, writes:
>LTCM's fate has provoked some anti-intellectual nonsense.
>Mathematical finance is part of the infrastructure of the modern
>world. The techniques developed out of the research of Black,
>Scholes and Merton continue to work perfectly well in millions of
>transactions daily, and to abandon them would be unthinkable folly.
>Yet we must also remember that finance theory describes not a state
>of nature but a world of human activity, of beliefs and of
>institutions. Markets, despite their thing-like character, their
>global reach and their huge volumes, remain social constructs and
>the feedback loops that constitute them are intricate, knotted and
>far from completely understood.
In his new book, The Fragile Absolute, Slavoj Zizek writes (further excerpts to follow later today):
>Here we encounter the Laanian difference between reality and the
>Real: 'reality' is the social reality of the actual people involved
>in interaction, and in the productive process; while the Real is the
>inexorable 'abstract' spectral logic of Capital which determines
>what goes on in social reality. This gap is palpable in the way the
>modern economic situation of a country is considered to be good and
>stable by international financial experts, even when the great
>majority of its people have a lower standard of living than they did
>before reality doesn't matter, what matters is the situation of
>Capital.... And, again, is this not truer than ever today? Do not
>phenomena usually described as those of 'virtual capitalism' (the
>futures trade and similar abstract financial speculations) indicate
>the reign of 'real abstraction' at its purest, much more radical
>than it was in Marx's time? In short, the highest form of ideology
>lies not in getting caught up in ideological spectrality, forgetting
>about its foundations in real people and their relations, but
>precisely in overlooking this Real of spectrality, and pretending to
>address directly 'real people with their real worries'. Visitors to
>the London Stock Exchange are given a free leaflet which explains to
>them that the stock market is not about some mysterious
>fluctuations, but about real people and their products - this is
>ideology at its purest.