Nothing from Nothing: Alchemy and the Economic Crisis
[pdf]
Karen Pinkus
The most cost-effective way to finance the bailout is for the Federal Reserve, not the Treasury, to buy the bad debt from distressed financial institutions. If the Fed, as opposed to the treasury, buys the bad debt, the funds don’t come out of taxpayers’ pockets but from the Fed’s power to create money. This may seem like alchemy.1
He goes on to explain
that, far from radical, this proposal represents a variation on the normal
practices of the Fed: management of monetary policy and financial crises. The
Fed can and does purchase debt or bonds, for instance with “its own money.” Obviously, the term “alchemy” as used
above is a mere rhetorical figure, a
simile. In the context of Pollin’s proposal, “alchemy” means something like
“magic” or “conjuring something from nothing.” In its very obviousness,
“alchemy” here should not merit our attention, and instead, we should get on
with the “substance” of the proposal. Yet because, as Christian Marazzi,
perhaps more than any other theorist working today, has pointed out, the
markets are based on language, perhaps we should not dismiss “alchemy” as mere figure, and instead, investigate
the multiple directions in which this figure takes us.2 Follow it to its logical conclusions. Given the gravity of the current crisis,
given the degree to which financial instruments are indeed figurative,
phantasmagorical, and immaterial, it may be time to take seriously the
figurative language with which we operate.
“Alchemy” has a long
and complex history in the West, but also in those emerging markets, China and
India. Alchemy means different things in different contexts. Sometimes it is a
practice, the transmutation of lead (or another base substance) into gold,
carried out in secret laboratories by quacks and kooks, or mad scientists or
devout philosophical Christians. Sometimes, it is a theory of philosophical or
form of spiritual redemption, one that may even disavow practice as pure greed.
Sometimes it produces an elixir to prolong life. The variants of alchemy are
overwhelming, and Pollin does not necessarily have alchemy’s rich history in
mind when he uses the term. Why should he, since his use of the term
is…obvious? Indeed, alchemy is common coinage in our day, appearing in
everything from best-sellers on spirituality to goth-rock band names.
Consider, then, this
passage from a book on Rembrandt by historian Simon Schama:
Using a soft-bristled, precisely pointed squirrel-hair brush, the kind favored by seventeenth-century miniaturists, Rembrandt has taken one set of earthly materials (the builder’s) and translated it into another (the painter’s). It seems like alchemy.3
Although the context
is aesthetics and not economics, Schama’s alchemy is remarkably close to
Pollin’s. Perhaps we can note a subtle shading of difference: Rembrandt’s
alchemy is positive (genius), where Pollin’s usage suggests something vaguely
suspect about alchemy, and indeed, throughout its history, alchemy has often
been the subject of critique for its connection to black arts, usury,
counterfeiting, falsification and so on. In any case, alchemy often evokes or is surrounded by ambivalence.
We would not be surprised to find alchemy as
toxic chemistry, linked with the evils of capitalism. For instance, in a highly ironic passage from The Jungle, Upton Sinclair writes:
They were regular alchemists at Durham’s [a Chicago meatpacking plant];
they advertised a mushroom-catsup, and the men who made it did not know what a
mushroom looked like. They advertised ‘potted chicken’—and it was the
boarding-house soup of the comic papers, through which a chicken had walked
with rubbers on. Perhaps they had a secret process for making chickens
chemically—who knows?…’De-vyled’ ham was made out of the waste ends of smoked
beef that were too small to be sliced by the machines; and also tripe, dyed
with chemicals so that it would not show white; and trimmings of hams and
corned beef; and potatoes, skins and all; and finally hard cartilaginous
gullets of beef, after the tongues had been cut out. All this ingenious mixture
was ground up and flavored with spices to make it taste like something. 4
Capitalism may embrace
the possibilities of using alchemy to extract surplus value (think of Marx’s
example of “sophisticated bread”), but in a general sense, institutions and
states are fearful of alchemy’s disruptive power.5 At the end of the thirteenth century, Pope John XXII issues a decree, Spondent quas non exhibent, declaring
transmutation against nature. In 1404 a parliamentary act in Britain forbids
the mutation of gold and silver. The law is repealed in 1689, and alchemy can
be practiced legally, as long as the metals derived from it are deposited at
the mint of the Tower of London, in exchange for their true value in
“authenticated” gold and silver. Now the state can tolerate some alchemy, as
long the product is subject to regulation!6
In the digital world, alchemy as magical
transformation is again mobilized in the economic sphere. In Virtual Money, Elinor Harris Solomon
writes: “A modern alchemy succeeds where the old failed. The ancients of the
Middle Ages [sic] were never able to change lead into gold, but the medium of
electronics turns magnetized particles (bits) into money-like value. Money
seems for a time to be conjured out of nothingness, to be returned to
nothingness either quickly or at an indeterminate moment...Nor do we know, at
this time, whether people will even want to do—and pay in this manner for—much
significant business on the Internet. We don’t yet have a do-it-yourself money
form, although a lot of people are trying to create a demand for one.”7 Point by point, this selection reveals many
contradictory elements. First, the author takes the common sense but reductive
position that alchemy was indeed a practice, albeit one that failed, precisely
because it was based on faulty, “ancient Medieval” science. In the modern period,
thanks to new technologies, it appears that alchemy has finally succeeded,
transforming a base element (bits of digital code) into something of value.
Solomon’s main point is to stress that e-money (sometimes known as cyber-cash)
could potentially, in some not-so-distant future, represent a new money form, a
form of exchange or barter, but in any case, one that is not based merely on
reserves of actual, material, cold hard cash. We have not yet reached this golden age, since e-commerce today is still
based on plain old dollars and cents. Solomon’s casual analogy reveals that we cannot yet think outside of the
money system. Moreover, she suggests that her alchemical e-money could
potentially originate in a dematerialized state and return to that state (“...to
be conjured out of nothingness, to be returned to nothingness either quickly or
at an indeterminate moment.”).
Solomon’s “real alchemy” of the ancients was far from such a practice. For many alchemists the work involved engagement with a very real material (lead, or other ores). They were metallurgists, proto-chemists, pharmacists. Had alchemy succeeded, it would have resulted in the creation of a very real material (gold) that could be, in theory, freely exchanged on a market in which it had already established itself as the supreme value. This holds true in spite of the fact that a great deal of the alchemical literature either dissimulates or fails to mention gold as a product altogether. The Great Work is never followed by a spending spree. On the contrary, alchemical treatises tend to include disclaimers stating that although the Great Work was achieved, the product never reached the marketplace. In a treatise titled Introitus [The Open Entrance to a Closed Palace, perhaps written by Thomas Vaughan under the pseudonym “Eirenaeus Philalethes”] for instance, we learn that the silver and gold the (pseudonymous) author produced were so pure that they could not be traded. By bringing them to the market, the author would risk being unveiled as an alchemist and being persecuted by greedy adepts and nonbelievers. The author regrets the fact that he must keep his product to himself, not because he would like to spend gold for the purchase of other goods, but because he cannot share in his good spiritual fortune.8
Ultimately, what this brief discussion hopes to
tease out from Pollin’s brief article is the suggestion that when the Fed
performs “alchemy” it is buying, holding or selling financial instruments, but
not actually ordering the mint to print more money or dealing with anything
material. The Federal Reserve is a name for the group of people that do these
transactions. It is not a real place where real gold lies in reserve, any more
than the Nasdaq (represented by a shallow storefront in Herald Square) is a
real market where bodies circulate; or any more than the island where Christian
Rosencruetz fans the fire under a pair of slowly baking homunculi in The Chemical Wedding of Christian
Rosencruetz, one of the most important narratives of alchemy’s golden age
(the seventeenth century).9 The Fed has no engagement, however ambivalent, with lead, or with baser,
alloyed forms of precious metals. Nor does the Fed produce a narrative of
spiritual fulfillment. The Fed is being asked to move money around, but that
money is nothing tangible. According to economists, we are supposed to rest
assured that what the Fed does may seem like “magical transformation” but it is
actually serious business. For instance,
as Pollin reminds us, the Fed recently bought up debt of Fannie Mae and Freddie
Mac “to further support market functioning.” Sounds good, no? Yet I, for one,
am not reassured. It might be preferable for the Fed to engage in alchemy,
because at least then they would have some material content, something to touch.
Some might choose to imbue this material with metaphysical powers, but we could
point to something ultimately physical; some thing that one could choose to value as one would wish.
1 Robert Pollin, “Ending
Casino Capitalism,” The Nation (October 13, 2008), 7.
2 See, for instance, his astoundingly prescient Capitale & Linguaggio. Dalla New Economy all’economia di guerra (Rome: DeriveApprodi, 2002).
3 Simon Schama, Rembrandt’s Eyes (New York: Knopf, 1999), 13.
4 Upton Sinclair, The Jungle (New York: Modern Library,
2002), 109.
5 Marx writes about
sophisticated bread as a disgusting example of attempting to extract surplus
value. Adulterated bread, including “a certain quantity of human perspiration
mixed with the discharge of abscesses, cobwebs, dead black-beetles, and putrid
German yeast, without counting alum, sand, and other agreeable mineral
ingredients” represents a type of sophistry that “knows better than Protagoras
how to make white black, and black white, and better than the Eleatics how to demonstrate ad oculos that everything is only
appearance.” Karl Marx, Capital, Vol. I,
edited by Frederick Engels, trans. from the third German edition by Samuel
Moore and Edward Aveling (1887) (New York: International Publishers, 1967),
249. Even the sacramental host may be adulterated in such a manner, says Marx!
It is important, I think, to focus on the fact that the bread, the sausages,
and the host are all material and digestible for all that they may be
distasteful. The same cannot be said of inverse floaters and other exotic (but
toxic) forms of credit that are blamed, in part, for the current mess.
6 “An Act to Repeal the
Statute made in the Fifth Year of King Henry the Fourth, against the
multiplying Gold and Silver.”Anno Regni Gulielmi et Mariae, Regis & Reginae Angliae, Franciae & Hibernia (
7 Elinor Solomon, Virtual Money:
Understanding the Power and Risk of Money’s High-Speed Journey into Electronic
space. (New York: Oxford Univ. Press, 1997), 85.
8 Eirenaeus
Philalethes (pseudonym of Thomas Vaughan?) Introitus apertus ad occlusm regis
palatium (1645) Translated by John Languis as Secrets revealed or an open entrance to the shut palace of the king. London, 1669.
9 Johannes Valentin Andreae. The Chymische Hochzeit. Christian
Rosenkreutz (1616) Trans. Edward
Foxcroft (1690); notes and commentary John Warwick Montgomery. (The Hague: M.
Nijhoff, 1973). The text is organized into seven days, during which the
narrator is invited to attend a wedding and undergo a series of trials to test
his moral worth. On day five, for instance, the narrator and his fellow adepts
are taken on boats to open sea inhabited by sirens, nymphs and sea-goddesses.
They land at an island composed of a tower of Olympus where the narrator and
several chosen men tend the fire. Perhaps each day of the story corresponds to
a phase of alchemical transformation, but there is no gold at the end, only
shame at the narrator’s own hubris and a promise to attempt redemption.