VOLUME III, SEMESTER 2, CHAPTER 18, SECTION 2
2008, the Time the Hair Dragged the Hide Out of Place
At the end of the last section a line was left: the truly deadly thing is not that the hair grows much, it is that the hair grows too fast, too thick, too heavy, heavy enough to drag the very hide beneath it out of place. This section goes to look at that time. That year was 2008, and it is not far off, your parents remember it. Afterward people used a great heap of very complicated sayings to explain it, yet Guo She’s eight characters are more direct than all of them.
One. See clear first, what that hide is
Before speaking of that year, first find the hide beneath it. That hide is not in the bank, not on the exchange floor, not in any meeting room hung with crystal lamps. That hide is an ordinary person, on an ordinary early morning, rising, going out the door, going to work, coming off work, going home, and on the last day of the month, taking out part of his wage to repay his home loan.
See this scene clear: one person, one job, one income, one sum owed monthly. The root of the whole matter is this one thing, and only this one thing: whether he can repay, or cannot. Last semester we spoke of it: a thirty-year home loan is the future mortgaged in advance. Today turn this position over and look: whether he, this one, can repay or cannot, is the life or death of the whole hide.
Two. The hair, layer growing above layer
Next, look at how those hairs grew up layer by layer. The first layer, he borrowed money from the bank and signed a loan, and from then the bank has in hand a piece of paper, and this paper sends the bank a little interest each month, and this coat of hair grows straight on his job. The second layer, the bank packs a thousand such loans into a bundle, cuts it into shares, and sells them to others, and the buyers do not know him, have never seen his street, the buyers know only that money flows out of this bundle each month.
The third layer, someone packs these bundles into larger bundles, cuts them again, sells them again. The fourth layer, someone stops buying bundles, and what he does is the options, the futures, the wagering contracts on these bundles, one saying this bundle will go wrong, one saying it will not, the two betting. The fifth layer, the sixth, contracts on contracts, wagers on wagers. Count them, and walking to here, how many layers is it from the person repaying his home loan each month.
Three. To the finest thread at the very top
Walk to the very top, and the matter turns strange. That finest thread at the top has a price of its own, can be bought alone, sold alone, made money on alone, and it looks like a thing standing on its own. Yet its price, how is it set?
Not by asking whether that person will lose his job this year, not by asking whether the factory on his street still opens, but reckoned out by a set of formulas, pushed out by the rise and fall of the layer above, pushed up by a crowd buying and selling it back and forth among themselves. To this layer, its price and the matter of whether that person can repay his home loan have all but broken apart. And this whole coat of hair has grown thicker than the hide beneath it, thicker by tens of times, by a hundred. Draw the picture in the heart: a thin, thin hide, and on top of it a coat of hair layer upon layer, growing thicker, growing ever further off the ground.
Four. A gash opened in the hide
Then that thing happened. No calamity fell from the sky, it was the lowest layer that had a most ordinary thing happen: a batch of people could no longer repay their home loans. The factories were slack, the hours were cut, the jobs were gone, the monthly installments could not be handed in. This is only a small gash, and set against the whole hide it is very small. Yet what happened next has to be seen clear.
The topmost layer collapsed first, because it is furthest from the hide, and its price hangs wholly on confidence, and confidence once stirred, it drops first. Then the layer below, then the layer below that, wagers on wagers to zero, wagers to zero, bundles of bundles to zero, bundles to zero, loans turning into bad debt that cannot be recovered. Layer pressing layer, layer dragging layer, collapsing all the way to the bottom. The whole body all but stopped entire, and then it reached back and dragged the very hide beneath it in too: factories shut, workers lost work, and the ones who could still repay their home loans, could repay no longer.
Five. The ancestor’s eight characters, played out once more
After that year people used many sayings to explain it: subprime loans, liquidity, systemic risk, the failure of oversight. These sayings are none of them wrong, yet they are all too long, and too roundabout too. Guo She’s eight characters of twenty-six hundred years ago are more direct than any of them.
The hide gone, on what will the hair rest, runs the line in the Zuo Commentary, in the fourteenth year of Duke Xi. When the hair grows too thick, too far off the ground, the hide simply cannot bear its weight, and any small motion beneath it, magnified through dozens of layers of hair, arrives at the top as an avalanche.
Here one line must be said, very gravely, remember it: that collapse was no one’s malice. There was no one person seated in some room plotting to ruin a few million families, and the ones who made those bundles, the ones who made those contracts, the great majority were in their own positions doing their own share of work in earnest. Last semester one line was spoken, bring it out again today: that position, walked to the end, needs no bad person, it needs only a crowd of ordinary people each doing their duty. This is no matter of morals, this is a matter of position, and the layers of hair once past what the hide can bear, the collapse is the one stroke that must come, by position.
Six. So it is not to shear the hair off
Speaking to here, a breath of anger has likely risen in the chest: then shear the hair off. The words have to be set clear: this section does not curse finance, nor curse the few derivative layers. The hair has its use, and without it, the little bit of savings in the hands of tens of millions never gathers into a great sum that can build a factory, can lay a railway, and a person who wants to open a plant is forever left with only the little in his own pocket, and no one is willing to take the risk, and no one dares do the thing that takes ten years to return.
The last chapter reckoned those seven accounts, and the sixth was this one, that interest, what it flows back to in the end is someone’s deposit, some old person’s pension. This volume, from beginning to end, is one line: positions differ only in the division of labor. The hair is no evil, and the hide is no nobler than the hair. What is wanted is only one thing: let the hair know it is hair. The hair may grow, may grow dense, may grow handsome, yet the moment it forgets what lies beneath it, the moment it takes itself for a thing that can live without that hide, it has climbed into the hide’s position. In the moment it climbs up, 2008 waits ahead for it.
Seven. What this section set, crossing to the next
This section went back to 2008. It saw clear that hide: one ordinary person, one job, one sum owed monthly. And it saw clear those hairs: layer pressing layer, layer growing on layer, the finest thread at the top already eight, ten layers off from him. The hair grown thicker than the hide by a hundredfold, a small gash opened in the hide, and the whole coat of hair collapsing layer by layer from the top, dragging the hide in at the last. Not malice, but position, the layers of hair past what the hide can bear, and collapse is the necessity.
This layer set firm, the next section goes to ask a more solid question: since the hair cannot but grow, and cannot grow past its measure, then how thick is right? A place, how thick should its hide be, how long its hair? This question has no fixed number, yet the ancestors gave a rule. The next section asks that rule out.
Credit to the ancestors; the mistakes are mine: Tiger Lyon.