“Yes.”
She gave me a look like it was my fault, but I judged it a mock look. She said, “So what would you advise us to do?”
“You could buy the co-op yourselves. Buy it, go private, do what you want. Someone wants to buy your building, you tell them to fuck off.”
“Well, okay. That’s nice to think there is some kind of an option. Some kind of anti-community privatizing asshole option. Any others?”
“Well,” I said, warming to my task. “You could start a hedge fund yourself, leverage the boys’ money, and then you’re playing with hundreds of billions. Which you invest in targeted ways.”
Charlotte stared at me as if trying to comprehend some kind of mystery. “And that’s what you do.”
“Yes.”
“I like that,” Amelia Black said.
Charlotte shook her head hard: Quit encouraging him! “Any other methods you can suggest?”
“Sure,” I said. “New instruments are always getting devised. Real estate is always popular, because it isn’t vaporware. Although in the intertidal maybe it is. That’s my big question right now. The floods Case-Shillered a tenth of all the real estate in the world to zero, but now my index shows it’s almost back to par. So that’s been encouraging, maybe even bubble-istic.”
Charlotte frowned. “So what do we do in this situation?”
“You short it.”
“Meaning what?”
“You bet the bubble is going to pop. Buy instruments so that when it does pop, you win. You win so big that the only worry you have is that civilization itself collapses and there’s no one left to pay you.”
“Civilization?”
“Financial civilization.”
“Not the same!” she said. “I would love to bring down financial civilization!”
“You would need to get in line,” I told her.
I liked the way she laughed. The quants were laughing too. Amelia was laughing to see the others laugh. She did in fact have a beautiful smile. As did Charlotte, now that I finally saw it.
“Tell me how,” Charlotte said, eyes alight with the notion of destroying civilization.
Which I had to admit was fun. “Think about ordinary people in their own lives. They need stability. They want what you could call illiquid assets, meaning home, job, health. Those aren’t liquid, and you don’t want them liquid. So you pay a steady stream of payments for those things to stay illiquid, meaning mortgage payments, health insurance, pension fund inputs, utility bills, all that sort of thing. Everyone pays every month, and finance counts on having those steady inputs of money. They borrow based on that certainty, they use that certainty as collateral, and then they use that borrowed money to bet on markets. They leverage out a hundred times their assets in hand, which mostly consist of the payment streams that people make to them. Those people’s debts are their assets, pure and simple. People have illiquidity, and finance has liquidity, and finance profits from the spread between those two states. And every spread is a chance to make more.”
Charlotte was regarding me with a laser eye. “You’re aware you’re talking to the chief executive officer of the Householders’ Union?”
“That’s what you do?” I asked, feeling suddenly ignorant. Householders’ was a kind of Fannie Mae for renters and other poor people; the name was aspirational, seemed to me. Some important data from it went into the IPPI, as part of the rating of consumer confidence.
Charlotte said, “That’s what I do. But go on. You were saying?”
“Well, the classic example of a confidence crash is 2008. That bubble had to do with mortgages held by people who had promised to pay who couldn’t really pay. When they defaulted, investors everywhere ran for the door. Everyone was trying to sell at once, but no one wanted to buy. The people who shorted that made a killing, but everyone else got killed. Financial firms even stopped making contracted payments, because they didn’t have the money in hand to pay everyone they owed, and there was a good chance the entity they were supposed to pay wouldn’t be there next week, so why waste money paying them just because payment was due? So at that point no one knew if any paper was worth anything, so everyone freaked and they went into free fall.”
“So what happened?”
“The government poured in enough money to allow some of them to buy the others, and it kept pouring in money until the banks felt more secure and could get back to business as usual. The taxpayers were forced to pay off the banks’ lost bets at one hundred cents on the dollar, a deal that was made because the top people at the Fed and the Treasury were right out of Goldman Sachs, and their instinct was to protect finance. They nationalized General Motors, a car company, and kept it running until it was back on its feet and paid off its debt to the people. But the banks and big investment firms they just gave a pass. And then on it went, the same as it had before, until the crash of 2061 in the First Pulse.”
“And what happened then?”
“They did it all over again.”
She threw up her hands. “But why? Why why why?”
“I don’t know. Because it worked? Because they got away with it? Anyway, since then it’s like they have the template for what to do. A script to follow. So they did it again after the Second Pulse. And now round four may be coming. Or whatever the number, because bubbles go all the way back to Dutch tulips, or Babylon.”
Charlotte looked at the two prodigal quants. “Is this right?”
They nodded. “It’s what happened,” the taller one said lugubriously.
Charlotte palmed her forehead. “But what does it mean? I mean, what could we do different?”
I raised a finger, enjoying my moment of one-eyedness among the blind. “You could pop the bubble on purpose, having arranged a different response to the crash that would follow.” I pointed the raised finger over my shoulder, at uptown. “If liquidity relies on a steady payment stream from ordinary people, which it does, then you could crash the system any time you wanted, by people stopping their payments. Mortgages, rents, utilities, student debt, health insurance. Stop paying, everyone at once. Call it Odious Debt Default Day, or a financial general strike, or get the pope to declare it the Jubilee, he can do that anytime he wants.”
“But wouldn’t people get in trouble?” Amelia inquired.
“There would be too many of them. You can’t put everyone in jail. So in that basic sense, people still have power. They have leverage because of all the leverage. I mean, you’re the head of the Householders’ Union, right?”
“Yes.”
“Well, think about it. What do unions do?”
Now Charlotte was smiling at me again, eyes alight, really an intelligent and warm smile. “They strike.”
“Exactly.”
“I like this!” Amelia exclaimed. “I like this plan.”
“It could work,” the taller quant said. He looked at his friend. “What do you think? Does it meet with your approval?”
“Fuck yes,” the smaller one said. “I want to kill them all.”
“Me too!” Amelia said.
Charlotte laughed at them. She picked up her cup and held it toward me, and I lifted mine and we clinked them together. Both cups were empty.
“Another glass of wine?” she suggested.
“It’s terrible.”
“I take that as a yes?”
“Yes.”
Early in 1904, three of Coney Island’s elephants broke out of their enclosure and ran away. Gee, I wonder why! One was found the next day on Staten Island, and therefore must have swum across the Lower Bay, a distance of at least three miles. Did we know elephants could swim? Did this elephant know elephants could swim?