Palan-doozan at the Helm

In Farsi, palan–with two long ‘a’s, like the French pronunciation of Sagan – is the saddle for donkeys. Saddle for horses is zeen. Zeen is a noble product, made of leather by skilled craftsmen. Palan is made of cloth and, being exclusively for donkeys, does not require much skill. In fact, you don’t really make palan. You sew it, stitch it from rough cloth. That is the job of a palan-dooz (plural: palan-doozan), someone who stitches palan. It is the lowest of the specialized jobs, just one notch above the unskilled laborer.

In Divan-e Shams, Rumi asks the rhetorical question: What does a palan-dooz do wherever he goes? Why, he stitches palan; that is all he knows.

Geithner is now at the Treasury. The New York Times described his plan for rescuing a banking and financial system that is brought to its knees by the over-supply of junk securities purchased with 95% financing at low interest rates:

The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.

Under the program, the Fed will lend to investors who acquire new securities backed by auto loans, credit card balances, student loans and small-business loans at rates ranging from roughly 1.5 percent to 3 percent.

Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond [their] equity.

So the game that brought down the house is slated go on, only that now the U.S. government will provide the borrowed funds, thanks to its printing press. (Keep in mind that the $1 trillion mentioned is only for starters.) What that would do the position of the dollar as the reserve currency and, from there, to the U.S. power and international standing, will be slow in coming but it will come with the inevitability of night coming after the day.

Recently, Prime Minster Erdogn of Turkey told his critics who were pushing for what he considered a rash decision: “Dear friends, we are not running a grocery store here; we are running the Turkish Republic.”

That distinction is lost on Bob Rubin and his disciples. In his days, he ran the Treasury like a hedge fund. His disciples, including the “brilliant” Larry Summers, think of it as a private equity fund. That sets the direction and limitation of any solution they devise.

The most outstanding feature of the systemic risk brought about by speculative capital – what constitutes risk – is that it narrows the range of the activities within the system at the same time that it excludes the consideration of solutions from the “outside”. A vague realization of this destructive tendency is behind looking for the solutions “outside the box”. More than any revelation, though, the corporate catechism is the confirmation of the limitations within which the system must operate – until it no longer can.