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Charles on… anything that comes along

Monday 29 September 2008

Filed under: — Charles @ 2:55 pm

Silt in the machine: the real metaphor for the Wall Street ‘bailout’

Over the weekend I watched the car-crash interview of Sarah Palin being interviewed by Katie Couric, particularly on the “bailout” of Wall Street. (The video is later. Read me first. No skipping.)

First, I wonder, why is it that people are calling this a bailout? I’d feel confident that’s not what Hank Paulson called it. Bailouts are what sinking ships need. This isn’t so much a sinking ship as machinery gumming up.

That’s what so far nobody seems to have found - a good metaphor for the reason why this money was needed. (Since they’ve now gone ahead and agreed the form, though the Today program had an American pundit saying that popular opinion - expressed through letters and calls to senators and congressfolk - is running at 40-1, 60-1 against it.

OK, so I thought about it for five minutes to try to find the metaphor for what’s going on. Here’s what you should say if you’re a presidential or vice-presidential candidate. Though obviously if you do, you’ll be nicking it from me, with all that implies.

Think of Wall Street and those companies are running a giant machine. It needs oil; but they put oil in, turn the handle, and out comes money which they can lend you so you can buy a house. There are lots of places you can put the oil in.

One day some folk came up with a formula for the oil which had a Special Ingredient. It generated more money for the same amount of oil. Fantastic! Everyone started taking advantage to lend more money out.

Then they discovered - around April 2007 - that there was a bit of a drawback to the oil. It turns to silt. Which meant that you turn the handle, and far less comes out. Pretty soon the whole machine is silted up. What Hank Paulson is proposing is to drain the machine of silt, and spend $700bn on real, proper, known-to-work oil so that the machine can get back to normal. It won’t be able to generate money at the speed that it did in those glory years - but that was false, because that was running on the silted oil. The $700bn is required to drain the sump.

But why, you say, should we reward these Wall Street people for failure? Well, hang on here - what we’re fixing is the machine. We’re not saying that you reward the operators who happily poured the new formula oil in without first checking what its long-term effects would be. They’ve got some serious explaining to do.

OK? Got that? That’s how you would explain it, I hope, to an American prime-time TV audience. And that’s by me, just thinking while driving to the station - took about two minutes. Yes, you can argue some of the particulars, but silt in the machine is the clearest way to understand that you’re not “bailing out” the bosses, you’re bailing out (if you must) the machine that ultimately funds the businesses you work for and buy from and lend from.

Now let’s see how one of the vice-presidential candidates managed:

(Two points: first, when you’ve said enough, stop talking. Second, before the interview: this is doing the classic American TV trope - “let’s have a discussion about something that you’re going to see instead of just showing you the whole thing, thus cutting up information into tiny twitching pieces, because you’re stupid, aren’t you, American TV viewer?” - as described by Kieren.)

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