Many years ago, as an engineeriung student I came across a mathematical concept called Imaginary or Complex Numbers that had me fascinated for a long time.In this system, numbers were classified as real and imaginary and a well developed set of rules were constructed to define the relationships between the two sets.Although the imaginary numbers themselves had no independent existence,with the rules deployed many problems in engineering,physics and mechanics could be solved yielding real results.
Those ideas came to my mind when Mr.Bernanke and Mr.Paulson went about saving the big financial houses while ignoring the clamor of the masses reeling under the mortgage and gasoline crises that have gripped the country.
Up until the mid 70’s this nation’s economy was primarily one in which the making and selling of good and services constituted the majority of economic activity.Those transactions had to be transparent because the primary participants in the activity were the buyer and the seller.
That simple economy underwent a radical change in the 80’s as the financial middle men like Citigroup,J.P.Morgan and Chase entered the fray and began the looting of corporations that had done business with the equity that had been built up over many generations.The financial giants wanted to get their hands on this equity.They were able to entice the corporate bigwigs to loot their own companies by saddling them with debt and selling the corporations to bidders who had no money to begin with.Thus was born the subprime swindle of corporations destroying the auto and other manufacturing industries in the country.The role of the financial middle men can be compared to that of a parasite that eats the meat and leaves the dregs to the body of the organism.We now see that exact role being played out in our own economy.
Because the financial industry has no real stake in the economy other than to feast on the fruits of works of many generations, no solution to our problems is possible so long as the financial industry remains the beneficiary.The bailing out of the GSE’s like Fannie Mae or Freddymac will only whet the appetites of the financial leeches and they will be back for more.
What was once a subordinate role for the financial industry has now become the dominant one over that of the real economy.We need to change that .Like Complex Numbers, when the imaginary numbers dominate, the result will also be imaginary not yielding real world solutions.
Now I know why my profesors taught me Complex Algebra.