Tuesday, December 30, 2014
Monday, December 29, 2014
I mentioned on here awhile ago that I was reading a weird ass little book called “Doggy Bag” by a weird ass man named Ronald Sukenick. Well I finished that awhile ago, but it has stayed on my mind. It is not a book for everyone. I would even be hesitant to recommend it to people who like weird ass books by weird ass little men, but I’m comfortable enough to say that I enjoyed it (or, more honestly, I occasionally really enjoyed it, but generally I appreciated it as a sort of post-modern exercise. When I say “book” I am saying that it was an artifact with a front cover and a back cover and some pages in between and on those pages was printed some text which had originally been written by a man named Ronald Sukenick. The thing wasn’t a novel and it wasn’t a collection of short stories and it wasn’t essays or poetry or travelogues. It was all just a whole bunch of writing. It was occasionally SUPER PRETENTIOUS and occasionally it was boring as all fuck, and occasionally it was needlessly confusing, and occasionally it was just a waste of time. However, when it wasn’t those things, it was great. It is the kind of “book” that starts with what seems like the travel thoughts of the author but then it becomes too weird to be real and then later somehow morphs into this allegorical detective story about “vampires” trying to cure the disease of “zombie-ism”, but really that is about capitalism and how consumerism breeds thoughtless ness (the pun-y wordplay in this section is really lame). Then there was a whole middle section that seemed to be a story that moved between different tellers randomly. One of the latter sections was this ... (I’m choosing my words carefully here) … well-crafted section that is complicated to explain. Essentially it is about this young couple that has a lot of sex and then starts getting into some kinkier stuff (strangers on airplanes, group stuff at fancy tropical resorts, you know the usual) only the writing itself is fragmented. Like, the sentences themselves are fragments. They are not complete. It functions sort of like a dirty, sexy fill-in-the-blank, except once you get the hang of it and you start to think, “Oh, cool, this is just sort of like a Penthouse Letters Mad Libs ...” then some very weird and not-at-all-cool stuff starts to happen. Only it still has all of these broken spots and gaps, so you (the reader) become complicit in this really weird way, with the things that are “happening”. It was a strange and intense read and I don’t think anything I’ve ever read has been that dirty (and occasionally revolting) while simultaneously describing so little. The words that actually appear on the page are not remarkable or dirty at all. They wouldn’t even push a movie into PG-13 territory. All that being said, I’m not sure if that is just a neat trick, or if there is a deeply meaningful lesson there about how our brains construct stories. This is the basic premise behind all of the really good horror movies, right? Show the monster as little as possible, let the audience fill the dark with whatever frightens them. I will say that the “book” has made me think about it quite a lot. I guess that is a good thing. If you ever come across it - maybe in your friendly neighborhood independent bookstore - you should pick it up and hold it in your hand and remember that it is the book I told you about. I am not comfortable recommending that you read it. Let’s be clear about that; you’d can’t come back to me and be all like, “Why did you make me make my brain go through that?!”...
I saw a Buddhist monk in full-on bare scalped, flowing Saffron glory, smoking a Marlboro upwind of the baggage check the first time I ever flew out of Burbank airport.
That was maybe seven or eight years ago — which I am totally not cool with — and in those seven or eight years I have been living in/around greater LA and I have still yet to come up with a better metaphor for this town than that monk/Marlboro man. Though I guess you could — sorry, this is going to be the fancy-as-fuck-grad-student part of me talking now (sometimes I drop off into gulfs of my own astounding pretentiousness, like, just watch all this trainwreck of grammar that has to happen now ... ) — say that the Marlboro Man himself is just the embodiment of the imagined and idealized American “cowboy” of “The West” and that he has always been a kind of monk, but that of the quintessentially American sort: stoic, strong, with calloused hands from all that pulling he is doing on his bootstraps, and with that unimpeachable moral fiber that good Americans are supposed to have as long as you don’t look too long or too closely. This is all nothing to say of the 10,000 mile stare. I think we ascribe that to monks of every stripe, but the dude I saw puffing away at the airport that day wasn’t staring off into all of eternity. He was just standing there, just like the rest of us, getting one last fix in before going through security, just like the rest of us. So what’s that tell us about our monks?
LA is a weird place and this one time I saw a monk smoking.
Despite how much I talk about it, I would like to put you at ease and tell you that I am not one of those people who thinks that LA is the center of the solar system. Honestly, I don’t think LA even matters very much at all to anyone who isn’t in LA. I don’t hate the place either though. It would be a pretty cool town if the population was half what it is right now. And this is being said by a transplant and, yes, I get both the irony and hypocrisy of that. Sometimes honesty is hypocritical. Sometimes the way we feel is stupid. Or unfair. Or just dumb. No one you have ever heard of has ever effectively made the case that any moral imperative to be not a hypocrite is biological. That’s just my fancy way of saying that the way you feel and the way you are supposed to feel, are generated by completely separate and unconnected systems. Anybody schooled in Psychoanalytical literary theory would say that that’s wrong and what about all that stuff Freud said about cannibalism and castration?!
Well look, Freud was a weird dude.
Try to argue against that.
Man. I am rambling a lot.
I haven’t even been drinking.
In preparation for the new year (2015), I am trying to get in the habit of writing more frequently. The golden rule is to write everyday, but setting that as a goal would be like one of those half-ton-rescued-by-the-entire-fire-department-cutting-a-hole-in-the-wall-people setting the goal of winning a marathon by the end of the year. Which is to say: unreasonable. However, I am trying to write more. I have even started occasionally writing in a little notebook again (which I have not done in awhile). I wrote that part at the top and this part below in that little notebook:
I’m sitting at a bar at Burbank Airport as I write this. I’m waiting to board a flight to JFK. Today some crazy man in Brooklyn gunned down two cops as they sat in their squad car near the “Tompkins House Public Development” in the Bedford-Stuyvesant neighborhood. Apparently online he said that today he was going to “put wings on pigs” which is actually a fairly complicated statement, from a semiotic point of view. It is actually kind of a cool statement down at the semiotic level. Here “put wings” means to kill, right? Which comes from this cartoon idea that when something dies its ghost soul leaves its body dressed as an angel, in a sort of neo-classical Roman toga and playing a harp. And clearly, “pigs” here just means cops. That is not a complicates association if it is one you already know. I just looked around on my phone for five minutes and couldn’t reliably figure out how it is derived, so like all of language, it makes perfect sense once you no longer have to think about it. Anyway, I like to try to write-off crazy, violence-obsessed, gun-loving, douchebags (of every sort and regardless of which side of the badge they stand on) as plainly and simply stupid, but as an English major I am saddened by this “put wings on pigs” thing because it is actually a pretty successful turn of phrase. I have always contended that a really good phrase is one that we feel like we already know. I feel like I already know this one (really good songs are this way too, I think that is what makes them stick in your brain: they stick in your brain because they lock into empty slots that have always just been waiting there. This is how proteins work too.). I really hope that it does not end up on t-shirts.
The last thing we need is more people being dicks to one another.
I am, by the way, in favor of using vocabulary like “being a dick” or “acting like a douche-bag” in intelligent conversation when it is used to point out that someone is objectively no longer participating in a larger dialogue, but rather just being pedantic, reactionary, stupid, or simply whoring for ratings.
In this way, FOX NEWS is usually just behaving like “a bunch of moist douchebags”. Similarly, the Reverend Al Sharpton is generally “just being a big’ol dick all the time”. I keep trying to explain to my professors that I feel it is perfectly acceptable to write my research papers this way. Quite often though they respond by being “douchey dicks” about my grade.
It is completely true that all this cop-on-not-a-cop violence needs to stop, just as it is as completely true that all this crazy-person-on-cop violence needs to stop. But how much do you want to make a bet that over the next couple of weeks we aren’t actually going to be talking about any of that? How much do you want to make a bet that we’re all just going to be “dicks” to each other?
My money is on dicks.
There is a girl across the bar from me with bottle blond hair that looks more like metal than sunlight. She’s wearing black tights and a red, blue, and black flannel, but she’s too young to actually remember that flannel was a socio-political statement once — in so far as anything for which one has to pay can really ever exactly be a socio-political statement other than “Yay Capitalism!” — and she just noticed me looking at her and now she is aggressively not looking at me. It makes me want to be all like, “No! But I am not one of those guys! I’m okay! I’m all about the #yesallwomen thing!” But, alas, that is the point, isn’t it? We judge other people based on their behavior but we only judge ourselves based on our intentions.
So. I am a creepy guy at the airport, I guess is the point of this post.
The grown man in the backward baseball cap who just sat down to my right ordered a Jameson and ginger ale and chicken parmigiana. I don’t know that it would ever occur to me to order those two things together, much less in an airport bar.
Also, now he is looking at that blond girl and he is being WAY creepier about it than I was.
Saturday, December 27, 2014
Thursday, December 25, 2014
Wednesday, December 24, 2014
Tuesday, December 23, 2014
Monday, December 22, 2014
Sunday, December 21, 2014
Saturday, December 20, 2014
Thursday, December 18, 2014
Wednesday, December 17, 2014
Saturday, December 13, 2014
Right now I am reading a strange little collection of what can only generously be described as “stories”. The collection is called Degenerative Prose and it takes its cues from the “Avant-Pop” movement which apparently was a thing back when it looked like the rise of the internet was going to make the world into a peace-loving intellectual commune of anarcho-hippie. Little did they know back then that the internet was really just going to be the most effective means of distributing cat videos and porn that mankind has ever devised.
At this moment I am reading something like an “essay” by a woman calling herself “Eurudice” and I just came to this passage which I really enjoy:
There is no greater art than the art of daily life. The talent for living well is the most substantial; so I try to fashion my life as I would create a text, driven by sheer desire and imagination, with no regard to rules, limits or fears, feasting on this bottomless world.
Last night I worked until midnight in a part of the college library where I don’t normally work. It was a strange and quiet and desultory experience. I kept my four Twitter followers up-to-date on it in real time. Below are my notes. And below those is a picture of what it looked like as I walked to work.
Notes from the Late Night Library
by james bezerra
Notes from the late night library, hour 1: finals stress smells like sweaty coffee. A girl bought a calculator from the vending machine.
Notes from the late night library, hour 2: a febrile, moist-eyed psych major borrowed our scotch tape. He has not been seen since.
Notes from the late night library, hour 3: So quiet here I can hear the ASL students signing. I think they're talking about me.
Notes from the late night library, hour 4: Fatalism sets in. An escalator stopped working, two students just stood there, marooned.
Notes from the late night library, hour 5: No one is saying there are mimes hiding in the stacks. That isn't a rumor. Don't look for them.
Notes from the late night library, hour 6: As I'm leaving, see a pizza guy delivering. People he passes look up, angry and envious.
Friday, December 12, 2014
Wednesday, December 10, 2014
Saturday, December 6, 2014
Friday, December 5, 2014
Tuesday, December 2, 2014
Sunday, November 30, 2014
Because I am desperately trying to avoid writing my linguistics paper (and because I had kind of a weird day), I have spent the last few hours reading about the future of literature. I’m not trying to seem fancy; all I did was type “the future of literature” into google and then read the first couple pages that came up. Anyway, having conducted this survey of “the literature” on the topic, I think that I can say with authority that no one has any idea what they are talking about.
That is not -- BTW -- to say that I do.
Life is not a zero sum game, people.
If this is a topic that interests you, then you should absolutely read Ewan Morrison’s two-part series for The Guardian. It’s some of the most interesting and thoughtful and fun and wonky writing I have read in awhile. He also -- very gently -- goes to town on the complicated and troubled legacy that Harry Potter leaves us with. I’m glad people are starting to tackle that. I’ll get to it one of these days.
Otherwise, I can’t say that I have learned that much from my readings tonight. The crazy homeless stark raving mad contrarian in me would normally be happy to stand in the digital town square and yell at listicle writers who have never heard of me about how wrong I think they are about stuff, but I’m just not in that kind of mood.
I have things like “the future of literature” on my mind because I’m doing revisions on a short story right now and I think it is one of the more interesting and complicated short stories I’ve written (this is the D. B. Cooper thing I have mentioned before) and as good as I think it could be, I am left with this resounding and empty feeling that can only be described as who-gives-a-fuck-ness.
Now keep in mind, I said already that I am having kind of a weird day. If who-gives-a-fuck-ness was a big concern of mine then I wouldn’t have been writing this blog for the last 150 years, because - you know - no one reads these things anymore anyway.
I think the who-gives-a-fuck-ness thing is on my mind because I have been thinking alot about a conversation I had recently with one of my professors, who I respect very much. He is a professor second and a writer first and that’s why I respect him. He mentioned casually that MFA programs seem now to be looking for extracurriculars in their candidates just as much as undergrad admission officers are. That is to say that the fancy writing programs of America care as much about whether you were the prom king or the treasurer of your frat as much as they do about your writing.
I am being simplistic and reductive here, of course. But not by much.
The professor I respect was not saying that this is a good thing, he was just saying.
Well that thought has been stuck in my craw for a little while now.
I’m not Salinger or anything, but I am a bit of a loner simply as a matter of practicality and the idea of having to join things and make small talk with people in order to get what I want just annoys me to no end. “There is something to be said for Fascism, after all” Ezra Pound said.
(I made that up about Pound, but that doesn’t mean he didn’t say it.)
So add to that festering thought the idea (gleaned from my research tonight) that no one has any earthly idea what they’re talking about ... well that just seems unreasonable. The idea that there are gatekeepers I can accept (agents, editors, publishers, MFA boards, etc.) but the idea that the gatekeepers themselves have no fucking clue what they’re doing? Well that just annoys me.
In many ways I guess the internet is just a bunch of people standing really far apart while screaming at eachother. So maybe that is what I am trying to say here: that there is a lack of reasonable authority in the answers I am finding.
That’s life though, right? No religion or value system really holds up to pragmatic scrutiny, ultimately.
I guess that I sat down here tonight and googled something as pretentious as “the future of literature” because it is something that I find interesting both professionally and personally and because it is 100% not a conversation that I am having with human beings in my actual life (and I am a grad student in a creative writing program). I sit through (and sometimes enjoy) a lot of lectures and discussions about writing and literature in the the western tradition and yet I have no earthly idea if I should e-publish this collection of poems I have sitting here. They’re not particularly good, but not a single article or essay I read tonight addressed the issue of “good” writing and “bad” writing. Neither has my entire college education, by the way.
I guess I’m kind of just disappointed in a lot of things right now.
I’m not asking the world to take notice, especially not right now. There are plenty of real problems in this world and this country right now, but this is my little corner of the internet where I get to talk about what I want.
Also, I wasn’t kidding about avoiding my linguistics paper.
Thursday, November 27, 2014
Monday, November 24, 2014
In the post below I tell you I’m reading a weird book by a guy named Ronald Sukenick and how he is good at writing stuff with his words. This is what he says about the strange multiplicity of things that we call ‘love’:
But I couldn’t admit any of this was love, maybe partly because, as I know now, it wasn’t what we call love. The overload we put on that word just indicates the poverty of our vocabulary.
I have always said there needs to be a plethora of words to replace the English word ‘love’. Some of them should be light and silly and taste like white wine on a summer afternoon, and others need to be thick and heavy and dark and peppery like a Tempranillo in the back of a cafe in the evening, and still others need to be so completely dangerous and radioactive that we keep them under safety glass.
This Sukenick dude really gets me, you know?
So I needed something read this morning when I got to campus about 7:30 and so I did as I do and I wandered into the fun part of the library and quite at random I plucked from a shelf the very small novel “Doggy Bag” by Ronald Sukenick (it is maybe six inches tall and four inches wide and less than a half an inch thick, so really I grabbed it because I liked that it would fit in my back pocket) and it is a strange and fascinating little book and about 25 pages in I found this passage about the life of grad students. I think it is fun because it describes my life, but also -- I would imagine -- the life of anyone hunting an advanced degree. Anyway, if you ever wonder why I’m so moody, this is why:
But let me say something first about the life of a graduate student. Suspended as it is between the student world of the undergraduates and the workaday quotidian, and above all, between the perfection of the written word and the abjection of the rotten world, it lacks what you might call ballast. Without friction with the ordinary contingencies and tolerating a high level of anxiety aggravated by too much work and too little pay, it tends to exaggerated swing of mood.
This Sukenick guy knows his shit. Please be prepared for me to spout off more of him.
Friday, November 21, 2014
Wednesday, November 19, 2014
You remember the sunscreen song! It came out in the late 1990. It is actually called “Everybody’s Free (to Wear Sunscreen)”.
Well I am not trying to write the new sunscreen song, but all day I have been making dumb notes to myself about the really terrible advice I would give out if I were in any position to be giving out advice (which I rarely am, on account of my consistently poor behavior).
Below are some of the notes I have scribbled to myself. These are oddly upbeat for this blog, given that I am normally busy here doing my best Jean Paul Sartre impression. However, it is possible that this is a list I am going to revisit from time to time, until - you know - it is good.
Advice I Would Give if I Gave Advice.
by james bezerra
Don’t worry so much.
Your life is going to happen whether you agree to it or not.
Take a year off.
Or at least fantasize about it.
But definitely spend a year unloading trucks, or skinning fish.
Occasionally do things that don’t look good on a resume.
Do things so big and so weird and so messy and so strange that they never even make it onto your resume.
While you’re at it, make mistakes.
Make 'em big.
Make them full speed ahead.
Because - at times - you’re going to be anyway.
Sometimes the world is a scary place and that’s okay.
Learn to make friends with the scary.
And along the way, learn about failure, because it is the best education you will ever get.
And learn how to fail with implacable grace.
Learn to love the people who prop you up when they have no reason to.
Learn to be skeptical of anyone who is trying to sell you anything.
Have that second glass of wine, because no one ever sat there dying, looking back at their life and saying to themselves, “I really wish I had had just a little bit less of a good time.”
Accept that you are just one of seven billion people stuck to a not terribly important wet rock spinning around a second-rate star in the boondocks of a weird looking galaxy tumbling endlessly through a universe that was probably some kind of mistake in the first place.
More than 100 billion people have lived on this planet so far and not a single one of them has gotten to live your life.
So be forgiving of yourself.
And be forgiving of the people around you. Everyone you’ll ever meet is living their own first draft in real time.
Don’t worry so much.
It’s entirely possible that no one has any of this figured out any better than you do.
Below is a piece that I revised for my creative non-fiction class. If you come here often, then you might remember that a really early version of this has appeared on this a long time ago. I never felt like I got it right, so I have been using my class to hone it. I’m still not sure if I am done honing it. I may have to continue honing it. Honing is a weird word if you type it enough …
All of the examples referenced in the piece below are taken from fact. Ish. Let’s just say that they are honed from the truth.
What a Bank Does,
Or: How I Learned to Stop Worrying and Love My Financial Institution
By James Bezerra
While there are endless variations and permutations of banks and the services they provide, all banks essentially do two things: they take in money and then give it out again. There is no mystery to it at all.
Person A deposits her paycheck into her bank account and when she wants some of that money back, she removes it to do with as she pleases, to buy sewing notions or drug paraphernalia, or whatever. To the average person there is no mystery at all. A bank is just a warehouse where money is kept safe from bandits, muggers, and water damage.
If Person A is particularly astute, she might one day ask, “How does the bank afford such a nice building if all it does is charge me five bucks a month for my account?” And then she might think to herself, “Well from other people’s interest, of course!” and then go about her day, though she is only partially correct.
What would likely never occur to Person A, is that banks are not service institutions. They do not exist to make modern life easier. They exist to make money.
When Person A deposits her paycheck, what follows is an intricate and complicated ballet of movements, none of which are ever seen by Person A.
The bank takes Person A’s money and puts it into a massive pool of money, along with money from Person B and Person C and Person D, etc., ad infinitum.
The bank keeps a small portion of ALL THAT MONEY available in case Person A needs to withdraw some to pay off a gambling debt or in case Person B wants to buy some dirty lingerie on her debit card. But aside from those sorts of things, most of ALL THAT MONEY would just be sitting there all the time gathering dust; except that banks are not warehouses for money.
So what a bank actually does is spend most of that money on other things (which have nothing to do with Person A or Person B or Person C, etc.) A loan is a good example of this. If the bank takes $100 of Person A’s money and gives it as a loan to Person X, then Person X is generally required to pay back that loan with interest. If the interest is $1 a year and Person X pays back the loan after one year, then Person X has paid back $101 to the bank. And remember, $100 of that technically belongs to Person A, but the bank has made $1 just for loaning out money that never belonged to it in the first place! And Person A never even knew about it!
But what happens if Person A wants all of her money back all at once even though the bank has loaned it all out?
Well that’s okay. The bank - much like any good casino - has kept enough money on hand (from Person B and Person C and Person D, etc.) to give Person A back all her money.
But what happens if ALL the people want ALL of the money back ALL at once?
Well that is called a “run on the bank” and it will cause a bank to “collapse”, because the bank does not actually have ALL THAT MONEY anymore.
However, every single bank that has ever existed throughout all of human history - going back to the de Medicis who basically invented modern banking in Florence and then funded the Renaissance - has functioned on the fundamental principle that there will never be a time when ALL the people want ALL the money back ALL at once. Every single bank in existence today (including the one where you keep your money) has made this assumption, even though the assumption has been proved wrong virtually constantly for over 500 years.
Fundamentally, however, Person A and Person B and Person C all understand that banks loan money. It is even likely that Person A has a home loan, Person B has a student loan, Person C has a car loan, etc. The implied contract that exists between banks and the people who use them is that the banks will behave in a thoughtful and responsible enough way that everyone involved is able to benefit from the relationship. Even though this implied contract has been violated over and over again for more than 500 years.
These are all oversimplifications. Sort of.
No where on earth is there a bank that would make a $100 loan with an annual interest rate of 1%, because banks are not in the business of making only one dollar a year. Banks (and by extension, all investment firms, hedge funds, lending and financial institutions, etc.) are primarily in the business of making VERY LARGE sums of money.
Well now you want to know: How does a bank (or any other financial institution) do that?
Oh there are lots of ways! And new ones are being invented all the time!
Very large banks (like the one you probably use) like to deal with other very large organizations, like other large banks, countries, or oil companies. If a large oil company wants to build a series of oil rigs in the Gulf of Mexico – for instance – it will go to a very large bank and take out a very large loan for hundreds of million dollars. The bank is happy to do this because it will make a lot of money on the interest from a loan like that. Also, a big oil company is often willing to cut the bank in on an extra share of the oil profits. The oil company is willing to be so generous because lots of times the same people run both the oil companies and the banks. How convenient is that?!
Other times a very large bank will work with a foreign country (usually a poor one that has oil or diamonds) and will make loans to the otherwise poor government in return for largely untraceable repayment in the form of raw goods like oil or diamonds. This is good for the bank because it generally gets to dictate the terms of the repayment (since the bank has the money and the country does not). So instead of a 1% annual interest, sometimes banks can charge a 100% effective interest rate! Because a lot of times the bank gets to decide how much the oil or diamonds are worth as a form or repayment, regardless of market price. How good for them! But why would any country want to pay a 100% effective interest rate on a loan when it could just sell its own oil and diamonds?
Well, sometimes the country can’t. Sometimes other organizations – like “the United Nations” – won’t let the country sell its goods on the open market. That is called an “embargo”. But why would the United Nations “embargo” a country’s oil or diamonds? Well usually because those countries are run by “dictatorships” that commit “human rights abuses” like “operating death squads”, engaging in “mass genocides” or “ethnic cleansings” or “systematic campaigns of rape and terror” or doing things like “kidnapping children” and forcing them to mine diamonds.
But wouldn’t a big bank get in big trouble for doing something like that?
But only if anyone paid any attention or cared, which most people don’t.
Just to be safe, banks do not loan the money directly to these counties. The loans are broken down into numerous smaller amounts and moved through a purposefully complicates series of “front companies” and “shell corporations” and most of those are located in small countries that don’t have very many banking laws. Sometimes the bank will even pay a lot of money (in the form of cash or diamonds or oil or untraceable bearer-bonds) to members of those governments to ensure that they don’t make any new banking laws in their little countries. Have you ever heard of Antigua and Barbuda? You haven’t?! That’s probably because you’re not a bank CEO.
When one of those “embargoed dictatorships” pays the bank back – say with three hundred thousand barrels of oil every week – the bank uses even more “front companies” and “shell corporations” to get that oil out to the market to sell at a much higher “price” than it credits back against the “embargoed dictatorship’s” loans. In this way, a very large bank - like Barclays or HSBC or Credit Suisse, all of which do banking for ISIS - is able to use ALL THAT MONEY that Person A and Person B and Person C, etc. deposited to make massive “profit”. And the bank doesn’t even have to share any of that “profit” with Person A or Person B or Person C, etc. How great is THAT for the bank?!
Those are only a few examples of how smart banks are at making money.
Banks are so smart that they have even figured out that they can make money off the money that they have already loaned out! When a bank makes very large loans and investments, it depletes the money that it has to make new loans and investments (and to pay back Person A and Person B and Person C, etc.). Since the bank has loaned out all that money, all it has now is a bunch of IOUs worth billions and trillions of dollars. So it may not have any money, but it has lots of potential money.
What the bank does then, is roll up all of those IOUs into an “investment opportunity” that other people and companies can buy. This process is called “commoditizing debt”, and the “investment opportunity” is called a “derivative” (named so because it is derived from something else). How exciting!
When a bank (or other financial institution) creates a “derivative” it is sure to mix a lot of unrelated types of IOUs into it (like risky home loans that it wants to get off of its books), that way it is almost impossible for a person or company to know, or even understand, what it is buying. But why would any person or company want to buy a mysterious “derivative”? Usually because the bank or other financial institution has a good track record of making lots of money! And because most of the people who run the “hedge funds” and “investment banks” (which buy most of the “derivatives”) are good friends with the people who run the banks. How convenient!
See, now the banks have managed to take money from Person A and Person B and Person C, etc. and loan it out in ways that will earn the bank lots of extra profit (which it does not have to share with Person A and Person B and Person C, etc.) and at the same time, it has managed to sell off all of its IOUs for real money. It has ended up making extra profit at least two different ways from the original money deposited by Person A and Person B and Person C, etc.! How smart is that?!
But what happens if all of those risky home loans start to go bad because people can’t pay them? And why would a bank make a risky home loan in the first place?
Well once upon a time the United States had some old time-y laws called “Glass-Steagall” (named after Senator Carter Glass and Rep. Henry Steagall). Those laws required banks to hold onto the loans and therefore to hold onto the “exposure” that would be created if a loan went bad. So way back then in the past, a bank only made a loan if it looked like someone could pay it back. Eventually though, all the people who used to run the banks went to work for the government as bank regulators. How convenient! And then the banks lobbied the Congress to repeal those old Glass-Steagall laws, which it did.
Then banks told their loan officers (who get paid bonuses on the number of loans they originate rather than the number of loans that get paid back) that they could make as many loans as they wanted! Almost as soon as the new, risky or “exotic” loans got created and sold to people (mostly people who couldn’t have gotten one before) the banks rolled them into “derivatives” and sold them off to other people who didn’t really understand what they were buying. Everybody was making lots more money!
Except for the people who took out loans they didn’t really understand to buy houses they clearly couldn’t really afford. They weren’t making any more money than before.
Sadly, when all those people started to “default” on their mortgages – millions at a time – all of those IOUs that were rolled up inside of all those “derivatives” went bad, meaning they lost their value (or rather, their potential value). Suddenly big companies and hedge funds and investment banks which thought they had trillions of dollars of potential money, didn’t anymore; they just had “loss” and no real money left.
Once that happened, none of the other banks wanted to loan them any money anymore.
Plus, since so many of the companies were interconnected and laterally invested in each other, no one could be sure anymore who actually had any real money left. So everyone stopped loaning money to everyone else. Then whole banks and investment firms began to “collapse”. And since they were so interconnected with other banks and other investment firms, those other banks and other investment firms began to “collapse”. And for a little while, it looked like the whole world economy was going to “collapse” because no one actually had enough actual money to cover all of the “loss”.
But remember all those people who used to run the banks but then went to work for the government as bank regulators? Well they convinced the United States to give the banks lots of money (called a “bail out”) so that all of the “collapsing” would stop. The government agreed to do that so that “modern human civilization” would not “collapse” and people wouldn’t end up living like characters in a Mad Max movie.
Well those banks took ALL THAT MONEY and they did all the things that banks do to turn money into more money and some of them even paid it back to the government so super fast that it made a lot of people wonder if they even needed a “bail out” in the first place, especially since now the banks were showing phenomenal earnings. How great for them!
From diamond rings to debit cards to gasoline, it sure seems like the banks have it all figured out. Person A can swipe her card for a cup of coffee (the swipe itself makes the bank about two cents) and drive to work in the car the bank helped her get (at a 4.04% interest rate on a 60-month new car loan) to work the job where she makes the money to pay her student loans (at a 4.66% interest rate) before she heads home to the house the bank let’s her live in (at a 3.877% APR on a 30 year fixed mortgage) where she watches the evening news (about Islamic extremists selling Iraqi oil across the Syrian border to Turkish brokers) and feel completely unconnected to any of it (because if she felt otherwise, then the banks might have a problem).