The only scarce asset

Money buys time. Everything else gets thrown in for free.

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And now, time.

A few weeks back, I referenced Sri Thiruvadanthai’s post from back in 2017 called “Socializing Risk is the Bedrock of Capitalism.”

I truly think about this post all the time. I would encourage everyone to read it, bookmark it, and reference it.

Sri’s post helps situate the perils of the individual’s risks — and by extension, society’s risks — against those which investors, corporations, and the market see as sensible. 

It is the kind of thing that once read cannot be unread. 

“Essentially, the rise of capitalism has gone hand-in-hand with increasing socialization of risk — and this is not a mere coincidence,” Sri writes. “Central banking, fiat money, social insurance programs, and countercyclical fiscal policy are all intimately related to the expanded socialization of risk.”

Once you understand the implications of what I’ll call the systemic deepening we’ve seen in the last few decades, no longer can you take seriously the idea that we’re just one crisis away from a banking collapse, that digital currencies are the only off-ramp from the Ponzi-like nature of a banking system that will eventually be found out. These fears go away because the mysteries of the system are no longer mysterious — the system is fully exposed. 

The idea advanced by Sri in this short piece is the throughline that kept me enrapt by Martijn Konings’ book, Capital and Time: For a New Critique of Neoliberal Reason.

I picked up this book on Veb’s recommendation and if you’re thinking it’s a bit random to be writing about an academic critique of neoliberalism, I’d agree.

But as my friend Conor Sen told me just before I took some time off to get married, it’s probably best to not have any short-term, news-adjacent takes right before an election. And discussing capital’s relationship to time needs no news peg. This is merely an exploration of the world we live in today. 

[Insert Faulkner quote about the past everyone loves]

Konings’ work animates many themes that began to take shape for me under the framework outlined in Sri’s work and that have been borne out in so many ways during this crisis. 

We see these themes emerge in how the Federal Reserve responded to this crisis, how investors have understood the implications of this response, and why it is that an unprecedented health and economic crisis entrenched and accelerated every prominent trend already happening instead of dramatically altering some previously accepted reality.

Every crisis creates more room for the system and less room for anything else. And if the response to the latest crisis showed us anything, it is that our systemic impulses have been sharpened since the financial crisis.

The neoliberalism Konings critiques throughout this book is less about the market-based preferences of the last few generations of thought leaders and more about how those in power have used this power simply to hold it and create the conditions for more uses of it. In other words, the neoliberal reason at critique here is not one of free markets but of captive markets, of the crises created by those in power solved only by those same actors and concepts.

“[F]ailure can just mean failure pure and simple, sheer disintegration,” Konings writes. “But in modern capitalism it often enough doesn’t: once a bank has positioned itself as a key part of the infrastructure of social life at large, its failure or merely the threat of it will activate forces that seek to secure it… To say that leverage allows financial institutions to expose society to the risk they take on means that they are in a position to shift risk away from themselves and onto others.” (18)

As Sri was saying. A pithier of articulating this same idea is that if you lose a million dollars it is your problem; if you lose a billion dollars it is the bank’s problem.

And what underwrites this dynamic, in Konings’ view, is time. How we understand it, how capital manipulates it, and how the institutions best able to present the appearance of a secure future are able to acquire, retain, and expand power. Modern capitalism has been enabled not by regulatory regimes or some conspiratorial cabal of global bankers but by a fairly recent human understanding of time. An understand that there is a past, there is a future, and that there is a role to play in shaping both.  

“The rise of modern capitalism was accompanied by the emergence of a secular experience of time,” Konings argues, “one in which humanity saw itself as making its own temporality, increasingly understanding present practices as having emerged out of a past and as shaping a contingent future.” (71)

Run this kind of loop through any part of your life in which you, the private citizen, feel less powerful than the organization with which you are associated — the church, the government, your family, your employer. Through these relationships we can see this power ultimately comes down to controlling the only asset that is equal among all people: time. The loyalty you have towards — or security you feel is provided by — any of these institutions is a function of how much certainty you perceive them to offer about the future. How much you believe offering your time to them will be rewarded by some kind of fulfillment, a sense that it was worth it. And that security about the future is informed by the number of answers these powers can provide in the present. And particularly so in a crisis.

“When emergence becomes emergency, boundless contingency inexplicably coincides with indisputable necessity… An intense concern with the future thus comes to be marked by a strangely reactionary quality,” Konings writes. (67-8) 

The longer the horizon on which we see the future, the more conservative our present choices tend to be and the more the past serves not as something that has happened but that must be followed, as prologue rather than happenstance. In present crisis contexts, this is how we get higher stock prices, larger large companies, and increasing inequality. The only answer to new questions, in other words, is a bigger helping up of our previous solutions.

This is the “strangely reactionary quality” our increasing concern with the future creates in the present. A desire, say, to change the number of states in the union or Supreme Court justices or representatives or Senators declines the more venerably we view what has come before. The more the future is informed by the past, the less eager we are to change whatever perceived trajectory we travel.

And the force used by the neoliberal system to create the kind of certainty craved by self-aware consumers, voters, and investors is time. Financial leverage appears as an accounting phenomenon, but the obligations it creates are in fact metaphysical. On the centrality of banks within our political, economic, and social system today, Konings writes, “[The bank] does not in any way rise above the logic of risk but bends that logic around itself. It enjoys no special foresight but positions itself in such a way that its promises come to function as a standard, allowing for the formation of calculative logic that can serve as an economic infrastructure.” (78)

Banks, like the neoliberal system in which they operate, assume the answers only they can provide. And it is not because we prefer these answers that banks maintain such a central role in modern life. At least not entirely. It is because banks are able to provide detailed roadmaps for a future they shape that this worldview becomes broadly adopted.

Bigger and rarer

Sri writes: “Over the past thirty years, the nature of the government involvement has changed from establishing a floor to smoothing fluctuations. We have gone from crisis-fighting to promoting tranquility — that is, from selling a put to reducing vol. The original mandate of central banking was to act as a lender of last resort in financial crises. In the post-war era, it expanded to business cycle management. In the inflation targeting era, it has morphed into promising low volatility.”

Low volatility being another way to say a clearer view of the future. The upshot of this new regime, in Sri’s view, is that while vol has declined, skew has increased. Said another way, if negative events have become more rare, these events are more extreme and disruptive when they do occur. The last few decades provide ample evidence for this. 

Low vol creates more certainty about the future and grows confidence in the present system. Higher skew creates more significant crises during which the system acts to provide answers, thus further entrenching its power. And on it goes. 

And if talk from corporate executives and pundits during this crisis has taught us anything, it is that present instability creates a perceived inability to forecast the future. But if the realized outcome of this crisis is an aging millennial generation buying homes and more people working remotely as digital collaboration becomes socially normalized, then the crisis will not have changed anything but instead delivered us a previously contingent future.

“When emergence becomes emergency, boundless contingency inexplicably coincides with indisputable necessity.”

The Konings outline goes further to say that far from being an ill to be remedied in some future regulatory regime, our neoliberal system has instead been explicitly designed to realize an increased skewness amid lower perceived volatility in the economic life of non-financial actors. Which is to say that financial markets organized around the modern banking system seek the volatility Sri outlines because these markets alone can answer the questions asked by what appear to be imbalances (for instance, high indebtedness) but are in reality leveraged bets on the system, not against the system. 

“The tension between speculation and austerity can be seen as the affective structure of the plastic logic of value, ‘the ghost in the financial machine,’ the forcefield that holds together contingent assemblages of speculative relations,” Konings writes in his introduction. (12)

“If a kind of double movement is at work in capitalist life,” Konings writes, “this involves not a periodic oscillation between foundational values and speculative impulses but, instead, the constant need to respond productively to speculative provocations, to reconstruct reality around a new connection that cannot be undone and has irrevocably altered how things work...the austerity drive is the movement whereby capital secures its speculative investments and valorizes its fictions.” (12-13)

And so it is that the modern financial market system makes real our understanding of time and its consequences and fulfills our sense that something must be done. 

“Moderns experience the present as a point at which the transition from past to future is shaped rather than merely being one point in an externally determined pattern,” Konings writes. “Koselleck notes how in modern life ‘crisis’ — a concept that ‘imposed choices between stark alternatives’ — has become a ‘catchword,’ reflecting a tendency for the pressure to make decisions under conditions of uncertainty to become generalized and percolate into the structure of every consciousness.

“Not making decisions is not an option: there is no safe position that does not require making investments and engaging contingency — life needs to defeat entropy to stave off decline and postpone death.” (72)

The decision the market makes is that the market makes the decision. 

The work of Sri and Konings comes together for me in helping to articulate a sense of inevitability about the primacy of the market that is hard to explain without it sounding like a conspiracy. 

Sri’s outline tells us why the market system endures: the gains funnel up, the losses funnel down, and each failure empowers the winners to funnel future gains up and futures losses down. This, after all, being the outcome that “market forces” deemed most just.

Konings’ work offers the theoretical foundation for how market systems come to be in the first place. Their use of leverage forces the future to be shaped in their image. Not because leverage is an economically destabilizing force, but because the use of leverage in the economic sense makes real a future that forces decisions about the present only the market — the levered actor itself — is positioned to make. 

“The logic of the balance sheet can be seen as expressing and formalizing a particular relation to time,” Konings writes, “it is a device that operationalizes the distinction between past and future and so makes available a way to represent and manipulate the temporal structure of claims and obligations.” (73)

We don’t just live in the world.