The language of money is a powerful tool, and it is also a tool of power. Incomprehension is a form of consent. If we allow ourselves not to understand this language, we are signing off on the way the world works today—in particular, we are signing off on the prospect of an ever-widening gap between the rich and everyone else, a world in which everything about your life is determined by the accident of who your parents are.
John Lanchaster wrote a novel called Capital, set in London before and after the 2008 financial crisis. As one would imagine, he learned a lot about finance in the writing of it. He has a very Billfold-y piece in this week’s New Yorker about decoding the alienating language of money: “It is potent and efficient, but also exclusive and excluding.”
He talks about how finance words come to mean the opposite of their typical definition — i.e., “credit” when what they mean is debt — and calls it “reversification.” His explanations of hedge funds helped me actually understand (kind of) what hedge funds actually are. Securitization, too!
So is “securitization.” A good instinctive guess would be that the word has something to do with security or reliability, with making things safer. Not so. Securitization is the process of turning something—and, in the world of finance, this could be pretty much anything—into a security, a financial instrument that can be traded as an asset. Mortgages are securitized, car loans are securitized, insurance payments are securitized, student debt is securitized…Another example of an exotic security is the Bowie Bond. In 1997, future royalties from David Bowie’s assets were sold to raise a lump sum of fifty-five million dollars. In effect, Bowie was saying, “I have a lot of money coming in over the next ten years from my back catalogue, but I’d rather have the cash now.” If Ziggy Stardust wants to stock up on shiny jumpsuits and needs his fifty-five million now, why not?