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Making sense of the Great Crunching Credit Crisis of 2008

Greg Penfold reviews two new publications that could help one come to grips with the sometimes perplexing world of financial terminology, and which give a perspective on what has been happening lately in the financial world.

The South African Dictionary of Finance

The misuse of jargon is a two-edged sword: on the one hand, it is of inestimable utility to those members of professions, associations, lobbies, cliques and cabals that utilise the language peculiar to their craft to intimidate and alienate outsiders while investing their nebulous doublespeak with an aura of authority; on the other hand, it is a scandalous stumbling block to communication in good faith between insiders and outsiders as well as a stone wall excluding non-specialists anxious to acquire useful insights into domains that more often than not, subtly or not so subtly, structure the world in which we live.

Finance is one of those domains, and if the “Great Crunching Credit Crisis of 2008” has taught us anything, it is that if you take experts at their word, you do so at your peril.

To avoid having the wool pulled over one’s eyes, one needs to be conversant with financial terminology. In a bid to meet this need, “The South African Dictionary of Finance provides guidance on the terminology that is encountered in the world of finance in plain, understandable English” (Pan MacMillan).

On the whole, the book lives up to this promise, including a clear definition of “credit default swap” – the technical term for the dubious practices that brought down the house of cards last year – as well as many specifically South African concepts.

Although the dictionary has been criticised by business journalist Lynley Donnelly for “failing to keep terms accessible” and including “complex economic concepts, with their working formulas, equations and graphs – see entries like ‘normal or Gaussian distribution’’ “ (“Coming to Financial Terms”, Mail & Guardian, 21 May 2009), that only the most sophisticated financier might need”, the fact is that very complex ideas are never going to be completely accessible to the layman.

The wise thing to do would be to use such terminology under advisement.

“The South African Dictionary of Finance” by Rudy Wuite and edited by Prof. Mthuli Ncube of the Wits Business School is published by Rollerbird Press

Payback: Debt and the Shadow Side of Wealth

Was the spectacular wobbly thrown by the finance sphere in 2008 a result of the industry’s sinful condition? Yes, it was – for the root meaning of sin is debt, a word that casts a long shadow over not only the financial, but also the cultural and mental landscapes we inhabit, as Canadian author Margaret Atwood so brilliantly demonstrates.

“Payback is not a book about practical debt management or high finance, although it does touch upon these subjects. Rather, it is an investigation into the idea of debt as an ancient and central motif in religion, literature, and the structure of human societies.

“By investigating how debt has informed our thinking from preliterate times to the present day through the stories we tell each other, through our concepts of ‘balance’, ‘revenge’, and ‘sin’, and in the way we form our social relationships, Atwood shows that the idea of what we owe one another – in other words, ‘debt’ – is built into the human imagination and is one of its most dynamic metaphors”. (Anansi Press)

Atwood’s style is irreverent and acute, examining the subject from all sorts of unexpected, fascinating angles.

Here she is on the credit crunch: “the business world has recently been shaken as a result of the collapse of a debt pyramid involving something called ‘subprime mortgages’ – a pyramid scheme that most people don’t grasp very well, but that boils down to the fact that some large financial institutions peddled mortgages to people who could not possibly pay the monthly rates and then put this snake-oil debt into cardboard boxes with impressive labels on them and sold them to institutions and hedge funds that thought they were worth something. It’s like the teenage credit card ploy, but at a much greater level of magnitude”. (Compare this explanation with the entry for “credit default swap” in the South African Dictionary of Finance).

Better known as a poet, novelist and critic than a business writer, Atwood nevertheless received a silver medal for her book in the “Business Ethics” category of the 2008 Axiom Business Book Awards and was short-listed for the 2009 Canadian National Business Book Award.

The National Film Board of Canada has also optioned the film rights to Payback, with filmmaker Jennifer Baichwal quoted as saying, “The writing in Payback is so rich and acute that the ideas literally jumped off the page when I read it. It was brimming with cinematic possibilities.”

“Payback” by Margaret Atwood is published by Bloomsbury Publishing

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