Counting House Blues
07 February 2021 | or confessions of a bank outsider
The cruising life is not all sun, hammocks, lissom bikini-clad deck dollies and grapefruit daquiris. Like all lifestyles, it has its, shall we say, challenges. Amongst these is dealing with institutions and officialdom at a distance. These entities struggle with cruisers because we don't fit the expected pattern on which their algorithms, and hence their forms, demands and procedures, are based.
Prime among such establishments are banks. Much as we may bemoan the fact, it is virtually impossible to function in modern society without at least one bank account; a situation which is not going to improve. Quite the opposite in fact.
My relationship with banks is of the "Can't live with'em; can't live without'em" variety. I know diddley-squat about banking and finance. I don't know exactly what they do, how they do it or, perhaps most importantly, why they do it. This probably explains my irrational, visceral loathing of the entire unholy, fly-by-night, morally compromised edifice.
The arcane nature of the whole sector is reflected in the media coverage of matters financial. Most newspapers print several pages devoted to finance and economics, almost all of which are awash with unexplained financial jargon. Most newspapers wouldn't, in a thousand years, print a story containing terms such as entropy, integral calculus, RNA transcription, regression toward the mean, thermodynamic equilibrium or the difference between correlation and causation, yet these ideas are all fundamental to understanding ourselves, each other and the world around us.
The media avoid them on the professed grounds that they're not 'sexy' and that their readers would neither understand them nor be interested in them. More likely would be that the primary reason is that these lumpen sentiments apply as much, if not more, to the writers as to their readers.
Exceptions are grudgingly made in circumstances where the concept is immediately and seriously relevant. Covid has provided several instances of this, prime examples being the concepts of exponential growth and limiting factors. The world and his dog now profess an understanding of these, but just try asking them to sketch a graph showing exponential growth and to discuss its implications and limitations. It soon becomes apparent that for many people, 'exponential' just means 'big'.
The only other exceptions are relativity and quantum mechanics. The consensus among the media luvvies appears to be that these two, mysteriously, somehow manage to attain the exalted status of sexy.
I suspect that there are a number of factors in play here. For a start, the ideas are so seriously difficult, so esoteric, and so contrary to common sense and experience of everyday life that there is no shame or stigma attached to failing to understand them - even actual physicists have trouble getting their heads round them. This is certainly true in my case. Richard Feynman said "If you can't explain something in simple terms to an average freshman (a 15 year old in the US grade system), then you don't really understand it." That means I don't understand either of them.(1)
The second factor in my list of suspects is the comforting prejudices of the familiar. In the popular imagination, these two areas epitomise the long-held stereotype of the unkempt, otherworldly, slightly dotty scientist whose head is so full of rarefied theory that he comes to work with his trousers on inside out. Or completely missing.
Finally, despite the abstruse nature of the two theories, the equations are dead easy. None of that
y(x,t) = ∑ Bn cos ω t sin nπx
n = 1 L
Everyone knows e = mC2. Rather fewer know the basic equation of quantum mechanics, which is surprising as it is even simpler:
E = hf
Not even a pesky raising to the power of 2.
Piece of piss.
As long as you don't ask what units h is measured in.(2)
However, to get back to the point, those self-same media outlets, despite their low opinion of their readers' intellectual capacity and powers of concentration, will happily publish articles peppered with financial jargon. How many of the people laboriously wading their way through this guff actually understand gibberish like:
Collateralisation of uncovered forward rate agreements.
Redistribution of low-IRR short positions.
Diversifying arbitrage-free market segments.
Amortising sequential-pay derivatives(3)
And then, of course, there is the most popular word in the finance world: leverage. This can mean anything, everything, and nothing. It's every bloody where. So I had to look it up. In its most common financial guise it is defined as:
The ratio of a company's loan capital to the value of its ordinary share equity.
If you translate that into English, it comes out as indebtedness. So a leveraged buyout involves buying a company with borrowed money.
Well, I'm glad I got that sorted out. Now if I can just ask the finance bods to clear up a few points for me, I'll be happy with my new-found knowledge and everybody can go home.
Take it away, Maestros:
1 Why are rising prices a Bad Thing, unless they're house prices in which case they're a Good Thing?
2 Why is it a Bad Thing when governments print money, but a Good Thing when banks do it?
3 What's with this limited liability business? Is it morally justifiable for company owners to reap the benefits in the good times but to shirk their liabilities when the company goes under? Is this a Good Thing or a Bad Thing?
4 Why is our entire economic and monetary system essentially run as one big shiny casino where all the major players are effectively gambling with other people's money? Is this really a Good Thing?
Answers on a postcard please to St Winifred's Home for the Terminally Bewildered, Lower Witless, Berks. BE11 END
BIRVIDIK @ SAILBLOGS - AN APOLOGY
It has been brought to our attention that this blog has been operating under false pretences. To wit, it purports to offer an amusing and informative account of life as a cruising sailor, but in reality it merely serves as a conduit for the author's ill thought out, half baked, and unsubstantiated prejudices.
On our strong and frank advice, the author has made a full apology and has promised that in future his narratives will be factually accurate and will stick to the rational course as described, with no digressions, deviations, diversions, or diatribes. He further guarantees that the next entry will stick to the bloody point and describe the interaction of the cruising sailor and the banking sector in a clear, unbiased, and appropriately restrained manner.
However, given his previous, we're not holding our breath.
Emmanuel P. Strobes
Clerk of Chambers
Messrs Weasel, Polecat, Ferret & Stoat Ltd
(1) Mind you, Feynman also said "I think I can safely say that nobody understands quantum mechanics." And this from a man who won the Nobel Prize for physics. For his work on quantum mechanics, since you ask.
(2) I said don't ask, but since you have, it's Joule Seconds.
Or Joule seconds per radian, depending on what you're measuring.
(3) These actually are gibberish. I got them out of a random jargon generator. However, the fact that the majority of those who read them, even those who are also avid readers of financial news, think that they are genuine, makes my point.