Onwards to Badiou’s Subtraction

…about meta-narrativizing (sorry for this nonlinear/bottom-up approach to the mail), I could only quip on post-modernism as highly ineffectual, escapist laden movement in its reactionary gesture to modernism. Take for instance, Lyotard, and his turn from libidinal economy to post-modernism through paganism, before he culminates his journey in The Differend. He sure reached a road block in Libidinal Economy itself, when faced with his unflinching commitment to ontology of events, since that raised dire issue for his epistemological affiliations. The resultant: Freud and Marxian marriage was filed for divorce. The way out that he imagined was to sort out matters to even out differences with the incommensurable issues of justice, and thats why he took up paganism. Even here, to begin with, he was in a quandary, since he took recourse to admissibility in irreducible differences plaguing the prevalent order of things (Sorry for this Foucauldian noise!!), and paved the escape route by adhering to the principles of never trying one’s hand/mind or whatever one could use at reductionism. So far, so good. But, was this turn towards micro-narrativizing proving a difficult ordeal? And my reading of the thinker in question undoubtedly says YES. If one reads The Postmodern Condition or The Differend carefully, one notices his liberal borrowings from Wittgenstein’s language games, or what he prefers to call “phase-regimens”. These are used to negate his earlier commitments to ontology of events by stressing more upon his epistemological ones, and therefore are invoked only with the idea of political motivators. The crux of the matter is: to drive his point home forcefully, he negates critical theory, unitary Being of the society (both pillars of modernism, or meta-narratives in themselves), and substitutes it by a post-modern society that is built by compositions of fragmented “phase-regimens” open to alteration in their attempts to successfully pass the test of legitimate narratives. This debt to Wittgenstein is what I call, a movement riddled with escapism, an exegesis that begins, but has a real eschatological problem. I do not know, if I’ve been able to show with this example clearly the fault-lines within micro-narratives?

[addendum]: if Wittgenstein is said to have some resemblances with postmodernism or more importantly poststructuralism, human imagination has transcended its sleep state..

On to Badiou:

badiou

His truth is to be unearthed in mathematics. His mathematics = ontology becomes quite notorious to deal with, none the less has the key component to understanding his concept of truth. In Badiouian mathematics (Can I really use this term???), what constitutes a transition from an inconsistent set to a consistent and a definable one is only the subjective intervention to do so. This obviously is a regressive fall-back. Why can a subjective intervention not slide into inconsistency? In a situation like this, Deleuze and Guattari would NEVER encourage an outside-the-situation intervention on behalf of a subjective agent that can profess and confess allegiance to force consistency onto this inconsistency, and in the process problematizing the given situation for a successful transformation of it. This is advocated through CONNECTIONS, between elements and sets built up by the elements. And thats why their weight on IMMANENCE. And hereafter, getting back to my first reply on the post: Badiou insists on invoking the void for any such consistency to take shape. Badiou gets away from IMMANENCE to construct his version of void, the existence of which is NOT networked to the given situation in any way. Thereafter, he calls upon the subject to prove her allegiance by naturalizing these events to effectuate consistency. And that is the reason why I remarked that Badiou is accused by Deleuze and Guattari to invoke the ‘transcendent’. In any ways, for Badiou, the truth has to be an archaeological stratum within the site of the event, and hence his mathematizing it cannot be under any shadow of doubt.

Apart from this vision of truth in Badiou, I see no other, despite agreeing upon your last phrase of truth getting caught up in the wire-mesh of cold logics and rationality. Truth is an age-old problem with philosophy, that tries in vain to seek answers for thee questions asked pretty badly, and I even dare say in more Manichean manner.

[addendum 2:]: we need to break free from Kantian infused anthropocentric philosophy. The German Idealism turn has been detrimental to doing philosophy, unless it can be freed of the symptoms. One, one talks about human subjectivity, it is difficult to ignore the extra onerous package of ideological practices. Either ways, certain “isms” turn into spoilers…..

How would an event emerge? Because, unless we have an event that has made its existence known, what point is there at all to talk about his version of Truth. We have to discern this something called an event, this ‘new’ situation in a manner that does not hark back to any encyclopedic determinant under the rubric of inclusivity. Badiou makes this very clear in his mathematical treatment of sets while dealing with his take on constructivism in philosophy. Now, with the emergence of such an element, or a situation or what have you, with the sole criterion of it belonging only to itself, is event’s appearance stamped in reality, otherwise not. Badiou is declarative and not demonstrative as far as announcing the advent of such an “appearance” is concerned. This announcement is linguistic in nature. This announcement of the appearance is subtractive, for it never belongs to, as I said above, any known determinants.

Well, subtraction is not to be thought of as ‘stripping away’ (your response points in that direction though). For, if that were the case, the obvious implication would be truth as congruent with representation. Even if Badiou scorns post-theories, he still retains aversion for representation. Instead, truth is catalytic to the situation of the event, for it continuously transforms the structure of the situation upon playing the role of an interventionist, a mediator. Its like truth punching a hole in the fabric of knowledge for a progressive transformation from within which this punching effectuates that is subtractive in Badiou.

p.s. The mail in the first sentence cannot be produced for obvious reasons……but talks of conformist psuedoMarxists is trying to put human imagination to sleep……

Fundamental Lemma 1 & 2

Object G = Object H
(Fundamental Lemma 2, FL2)

; G & H are objects in Grothendieck’s geometry.

Ngô Bảo Châu realised that the geometric objects needed for FL2 could be built out of the repertoire of mathematical physics, thus reversing Weil’s and Grothendieck’s original priorities: instead of using the results of counting about geometric objects to pin them down to motives by applying the equality in FL1 i.e.

Quantity G = Quantity H as not quantities themselves.

Why in the first place is an SPV (Special Purpose Vehicle) even required? A miracle that cannot be disproved…

Consider a $1 billion collection of risky loan, obligations of borrowers who have promised to repay their loans at some point in future. Let us imagine them sitting on the balance sheet of some bank XYZ, but they equally well could be securities available on the market that the Bank’s traders want to purchase and repackage for a profit. No one knows whether the borrowers will repay, so a price is put on this uncertainty by the market, where thousands of investors mull over the choice of betting on these risky loans and the certainty of risk-free government bonds. To make them indifferent to the uncertainty these loans carry, potential investors require a bribe in the form of 20% discount at face value. If none of the loans default, investors stand a chance to earn a 25% return. A good deal for investors, but a bad one for the Bank, which does not want to sell the loans for a 20% discount and thereby report a loss.

Now imagine that instead of selling the loans at their market price of $800 million, the Bank sells them to an SPV that pays a face value of $1 billion. Their 20% loss just disappeared. Ain’t this a miracle? But, how? The SPV has to raise $1 billion in order to buy the loans from the Bank. Lenders in SPV will only want to put $800 million against such risky collateral. The shortfall of $200 million will have to be made up somehow. The Bank enters here under a different garb. It puts in $200 million as an equity investment so that the SPV has enough money now to buy the $1 billion of loans.

However, there is a catch here. Lenders no longer expect to receive $1 billion, or a 25% return in compensation for putting up the $800 million. SPV’s payout structure guarantees that the $200 million difference between face value and market value will be absorbed by the Bank, implying treating $800 million investment as virtually risk-free. Even though the Bank has to plough $200 million back into the SPV as a kind of hostage against the loans going bad, from Bank’s perspective, this might be better than selling the loans at an outright $200 million loss. this deal reconciles two opposing views, the first one being the market suspicion that those Bank assets are somehow toxic, and secondly the Bank’s faith that its loans will eventually pay something close to their face value.

So, SPVs become a joint creation of equity owners and lenders, purely for the purpose of buying and owning assets, where the lenders advance cash to the SPV in return for bonds and IOUs, while equity holders are anointed managers to look after those assets. Assets, when parked safely within the SPV cannot be redeployed as collateral even in the midst of irresponsible buying spree.

Negative Interest Rates? huh!

Many months ago, Bank of Japan (BoJ) introduced a Quantitative and Qualitative Monetary Easing (QQME) with Negative Interest Rates. Whats the logic behind this other than maybe reducing reserves to induce banks into lending more? Tricky and audacious at the same time. The seven-pager document (hereCaution: pdf) isn’t a rigmarole, but the underlying logic sure is a Rube Goldberg machinic one, and that too in the face of impeccable liquidity management at the operational level at the Bank, where near zero-interest rates amidst growing fiscal deficits were carefully held. When Japan initiated its Quantitative Easing (QE) in the early 2000s, the rationale was to flood banks with enough liquidity to promote private lending leaving them with humongous stocks of reserves and scarcely a risk of liquidity shortage. this was achieved by buying excess amount of Government bonds than would be required to set the interest rate to zero. But, this stimulating package only accomplished a moderate success rate on the performance scale, to say the least. The banks are not reserve constrained in their lending, and thus the only rationale behind the stimulus as a result of negative interest rates would be investment and consumer durable were motivated enough to borrow at lower interest rates that the asset swap (bonds for reserves) generated.

 According to the official communique, QQME with a negative interest rate would achieve the price stability target of 2% at the earliest; Adopt a three-tier-system to map-out outstanding balance of each financial institution’s current account at the bank; Introduce Money Market Operations (MMO) (Caution: pdf) to swell the monetary base by ¥80 trillion annually, and thus go in for more Quantitative Easing; and Adopt a Qualitative Easing goal by exchanging a broad range of public and private assets for reserves. In line with Point 3 on Page 3 of the document linked to above, it is maintained that the BoJ will lower the short-end of the yield curve by slashing its exposit rate on current accounts into negative territory and will exert further downward pressure on interest rates across the entire yield curve, in combination with large-scale purchases of Japanese Government Bonds. This is where Negative Interest Rate (NIR) find itself defined: Imposing tax on banks for holding reserves above certain limits with the BoJ. The logic cuts across smoothly here, for banks will not show readiness to borrow from each other at higher rates, and implying subsequent pushing of longer-maturity rates down. The dressing up logic, however is to address global volatility in markets with a double-edged sword of imposing public tax on private sector to promote exhilarating inflation. With a moderate success the first time QE was taken up, what guarantees bad implications for earnings of financial institutions slipping into the negative territory? In response, BoJ claimed, “overcoming deflation as soon as possible and exiting from the low-interest rate environment lasting for two decades is essential for improving the business conditions for the financial industry.”
Helter-Skelter midstream!!! But, there are more layers to peel to get centric. Okay, what is the three-tier-system about?
Tier-1: pays a +ve 0.1% on Basic Balance covering existing reserves traced on the system from previous QQME.
Tier-2: The Macro-“Add-on” Balance receiving a zero interest, and helping maintain required reserves held by financial institutions subject to Reserve Requirement system.
Tier-3: Policy-Rate Balance with a -ve 0.1%, with provisions of new reserves entering the system, with a tax of 0.1% on the bargain. This is where Tier-3 gets muddled. The logic is to swell reserves notwithstanding the fact that bank lending reserve constrained.
According to Bank of International Settlements’ Unconventional Monetary Policies: an appraisal (here; warning: .pdf file), such unconventional monetary policies are distinguished by central banks actively using its balance sheet to affect directly market prices and conditions beyond a short-term, typically overnight interest rate, and referring to such policies as “balance sheet policies” rather than “interest-rate policies”. Hereby, they obliterate insights understood in the Keynesian period by taking recourse to a decoupling principle via which the central banks remunerates bank reserves relative to the policy rate. Quoting in full,

..key feature of balance sheet policies is that they can be entirely decoupled rom the level of interest rates. Technically, all that is needed is for the central bank to have sufficient instruments at its disposal to neutralise the impact that these policies have on interest rates on any induced expansion of bank reserves. Generally, central banks are in such a position or can gain the necessary means. this “Decoupling Principle” also implies exiting from the current very low, or zero interest rate policies can be done independently of balance sheet policies. 

The principle is congruent with Modern Monetary Theory, or MMT in short, where Central Bank can sell Government debt in order to adjust the quantity of reserves to bring about desired short-term interest rate; or remunerate execs reserve holdings at the policy rate setting the opportunity cost of holding reserves for banks to zero. This then delinks the interest-rate level set by the central bank severing any relation between swelled-up reserves and interest rates. The BIS paper sums this up,

In particular, changes in reserves associated with unconventional monetary policies do not in and of themselves loosen significantly the constraint on bank lending…The preceding discussion casts doubt on two oft-heard propositions concerning the implications of specialness of bank reserves. first, an expansion of bank reserves endows banks with additional resources to extend loans, adding power to balance sheet policy. Second, there is something uniquely inflationary about bank reserves financing. 

This falls in line with MMT’s basis premise that banks reserves are not required to make loans and there is no monetary multiplier mechanism at work. BIS paper then starts hammering the nail in the coffin by invoking the ghosts of past Japanese experiments with QE,

A striking illustration of the tenuous link between excess reserves and bank lending is the experience during the Bank of Japan’s Quantitative Easing policy from 2001-06. Despite significant expansion in excess reserve balances, and the associated increase in base money, during the zero-interest rate policy, lending in the Japanese banking system did not increase robustly.

Japanese banks are not expanding credit as a result of unwillingness to make loans or a lack of reserves. Instead, the reason for slow credit is that businesses have sufficient capital stock to satisfy the demands of a very weak consumption sector and hence do not feel the need to borrow.
Negative interest rates will not alter that, since perhaps holding on to cash as a liquidity measure to transcend time as uncertainty is the future DOES.