Friday, September 26, 2008

The Imagination Trap

Oops, forgot to blog this last week, as my brain has deserted me to sing in a 5-brain boy band somewhere out in the Middle East. The best quote in the news recently came at the very bottom of a relatively minor article. Hear me out on this one, cos it's all to do with The Matrix, really.

Why was it good? Because it cuts through the crap and continuing delusion present in our economy, and in our perception of the economy - what we're spun, what we want to believe like in some boringest X-Files episode where Mulder and Scully have to investigate a spooky ISA.

That it's from the French Finance Minister, Christine Lagarde, probably says something. Talking about the French economy being in relatively decent shape, she points her laser eyes straight at the problem, and gives it a megawatt dosage of cold truth:

"I think we have let this world of fantasy and virtuality overcome reality... There have to be more principles, more discipline and a bit more reality," the minister says.

Rock on. And you see where the Matrix comes in yet? Here in the UK, we jump on the bandwagon and go blaming house price crashes, credit squeezes and giant supernatural entities. These are all just effects. House prices went up because cash was made available and everyone started buying houses.

Why did everyone buy houses? Because everything else has lost value. We saw the .com bubble get pricked at the turn of the millennium and went "oh, better get back to something physical". A re-direction of financial energy from the simulated to the "real", only the value of that reality was still "simulated", because it was driven by Returns, not by Actual Worth.

And why did everyone dive into the .com bubble, like a big swimming pool made of bitty custard? Because it was easy to inflate the value of it. It was new, exciting, and resources were unlimited - in economic terms, it offered unlimited growth. (Paradoxically, this also meant infinite supply too. Which means zero value. Aha.) And that omnidirectional growth was important when we pretty much have what we need. Even if what we have is badly-grown supermarket food and crap ad-riddled television.

So this is where we are. We make our cash from making cash, and we've sold off everything else. Business is the business, feedback is the feedback, and as Baudrillard points out, the more we lack/destroy something, the more we try to re-create (and profit from) those re-creations. Facebook re-creates community. "Web 2.0" re-creates creativity and production. Housing bubbles re-create a sense of worth.

If we're to get out of this trap, then pumping more imaginary numbers into the system won't fix anything in the long term, because we're still dealing with life on the imaginary level, and unlike South Park, imaginary things do not leap out and become real when terrorists say so. Christine Lagarde is right. We need to escape the Matrix. We need to start re-asking: "What is real value?"


RedYetiDave said...

oooh I can't leave that. Making even a tenuous causitive link between the .com bust and the housing bubble is making a link I don't think is there. The housing bubble came with the easy availability of increasingly large multiple of income loans. It was going to happen with or without the .com.

I think most people outside the .com bust hardly even knew what it was let alone that it happened. And that "most people" went on to get increasingly large mortgages with no regard for it whatsoever.

As for you basic point - leverage gone mad - agreed. But it will probably happen again. Arguably it started as soon as economises moved off the gold standard and first created their own "virtual" money.

Scribe said...

I think you're right from one point of view - most people getting mortgages weren't directly involved in the .com Good Times hoax. But what ties the 2 bubbles together, I think, is not the people at the bottom, but the people putting the money in to the system - the lenders looking for greatest returns on whatever the Next Big Thing is.

Someone else would need to say whether there's overlap here, and whether the people investing in technology (banks? venture capitalists?) were the same people giving out "cheap" loans (banks). The next level is whether the same people were buying shares in these companies, pushing up not value, but the value of value - or perceived value, perhaps.

It could be, as you say, that there's no direct link. We certainly seem to be seeing a second - although more concentrated - .com bubble running alongside the housing one. It'll be interesting to see if that deflates slower because of less credit, rather than because it's actually quite difficult to make cash off free websites...

But yeah, basic point is that "extended" value (i.e. value in the system that people need to exist in order to fill a gap, rather than value that exists as a virtue, of its own accord) requires belief, faith, delusion that stuff is actually worth twice what it is. Actually, that reminds me of something I thought the other day. Watch this space!

Scribe said...

Possibly relevant:

Guardian: What effect will the financial crisis have on the tech sector? and related commentary.

Not sure OSS will take off as a result though, for the same reason that Vista hasn't taken off - people seem fairly happy with the tech they already have.

Note the contrast between what Alan says in the second link:

"Finding a company with a really good idea and business plan - preferably not reliant only on advertising - looks, by contrast, like an excellent way to make money."

and the hope for "innovative ideas" in a lot of web2.0 tech which seem to rely on novelty, and finding - almost accidentally - something which people don't realise they want, but love when they see it.