Homeless global warming greedheads, plus "End-of-the-World Trade"

We'll refer you to Sadly, No! for the full skinny on how homeless Americans are producing greenhouse gasses at a rate twice the world average for individuals, but the short version is that one of the resident halfwits at the National Review's group blog is making the dual case that (implicitly) American derelicts are pretty well off and (explicitly) that if even the least among us are such prodigious producers of carbon dioxide, trying to trim emissions to the point that global warming can be mitigated is an exercise in futility and, perhaps more to the point, unnecessary discomfort.


In other news, a short essay in the London Review of Books delivers a quick rundown on an obscure variety of hedge insurance, otherwise known as gambling, that the author describes as the "End-of-the-World trade".

Last November, I spent several days in the skyscrapers of Canary Wharf, in banks’ headquarters in the City and in the pale wood and glass of a hedge fund’s St James’s office trying to understand the credit crisis that had erupted over the previous four months. I became intrigued by an oddity that I came to think of as the end-of-the-world trade. The trade is the purchase of insurance against what would in effect be the failure of the modern capitalist system. It would take a cataclysm – around a third of the leading investment-grade corporations in Europe or half those in North America going bankrupt and defaulting on their debt – for the insurance to be paid out.

I asked one investment banker what might cause half of North America’s top corporations to default. No ordinary economic recession or natural disaster short of an asteroid strike could do it: no hurricane, for example, and not even ‘the big one’, a catastrophic earthquake devastating California. All he could think of was ‘a revolutionary Marxist government in Washington’. That’s not a likely scenario, yet the cost of insuring against it had shot up ten-fold. Normally one can buy $10 million of end-of-the-world insurance for between two and three thousand dollars a year. By early last November, the prices quoted were between twenty and thirty thousand, and even then it was difficult to buy in quantity – at least, said the banker, ‘not from anyone you trusted’.

Of course, the credit crisis has increased the risk of systemic economic failure. But the existence and rising price of the end-of-the-world trade indicate something beyond that. The crisis isn’t just about the bursting of the US housing bubble and dodgy sub-prime lending. Nor is it merely a reflection of the perennial cycle in which greed trumps fear to create a euphoric disregard of risk, only for fear to reassert itself as the risk becomes too great. What is revealed by the end-of-the-world trade is that the current crisis concerns the collapse of public fact.

"Public fact" is what everyone agrees to be true about the value of something. When everyone is wrong, a la Enron or Countrywide Finance, or mortgage loans in general, we get the sort of meltdown we're having now (which isn't even close to fully unfolding); public fact is in short supply, much like political integrity and other somewhat amorphous concepts. Lots of major financial players seem to be pretty sure that their counterparts are either lying about the worth of their products, or ignorant of it.

From the perspective of homeless people, a financial apocalypse, whether or not precipitated by that revolutionary Marxist government in Washington, doesn't seem like that big a deal. In fact, it sounds highly entertaining, even though the outcome would probably include a vast increase in our numbers and a consequent increase in competition for scarce resources. Brokers v. Bums.

Of course the reality is that insurance against the apocalypse is one of those things without value, since no one who has to sell insurance for a living has the resources to act as a bulwark against the collapse of capitalism. Still, it's a fun read and a reminder that some people will buy any damn thing someone else can think to market.