Law is about analogizing new cases to old ones. Engineering, and problem solving generally, is about correctly analogizing unsolved to solved problems. You can fill in similar cases yourself...
Analogy is just pattern recognition. (A is like B, even though they are not identical.) Pattern recognition, in turn, is required for high level perception. We do not see mere patches of color, but a 3‐D world of objects with trajectories. In other words, we see the world in terms of categories based on similarity, and those similar things are nothing but analogues of one another. Much of our analogizing, then, is unconscious, hardwired into our visual systems.
(Do you see what I'm doing here? Analogizing various cognitive tasks to analogy!)
Not even the laws of logic provide a higher court of appeals. Valid arguments are quite simply the ones analogous to arguments we all immediately recognize as good. In other words, logical validity is just one more pattern we recognize.
So, you can understand why I'd be upset about the SAT dropping its analogies section years ago.
Ok, so the point of this post... Sometimes in the quest for understanding one thing in terms of another, we overreach. We compare A to B and act as if they're somehow the same, when in fact A and B are only alike in the most trivial ways. This is what happens to your visual system when you see a king snake and infer it is dangerous, like a coral snake. Or if you analogize Vino's performance from one race to another (but sadly, probably not his ethics).
The analogy I want to target is already entrenched in language, a prebuilt metaphor: oxygen debt.
Everyone reading this post knows what oxygen debt is. You're in oxygen debt when your aerobic metabolic processes are overwhelmed by the energy demands and "borrow" from the anaerobic system. The debt is repaid when the energy demand drops and your aerobic system clears the lactic acid and restores blood oxygen to life sustaining levels.
When you're in oxygen debt, you can't think about much else but how you're going to pay it back: it's painful. And in a way, that is like monetary debt. But there, the analogy ends.
If oxygen debt were like real debt:
- Wall street would cut your debt into short, intermediate, and long term debt, synthesize it with the debts of others, and sell it off to pensions.
- The lender of oxygen would be taking a risk of default.
- Default on real debt would kill you, or at least render you unconscious until you repaid. (Come to think of it, this is how the mafia collects, pretty much.)
- There would be a Federal Oxygen Reserve that could pump oxygen out of nothing into your bloodstream.
- If you were in oxygen debt, you could lend a bank some oxygen, and they could lend that oxygen back to you and you'd somehow be better off.
Let me hypothesize that we often think about real debt as if it's oxygen debt. Like it would be some kind of violation of natural law if it weren't repaid. But real debt has a real lender, not an impersonal, unbeatable, force like physics or biology on the other side. The real lender takes a real risk. Real default doesn't mean death for the borrower, but loss for the lender and future mistrust of the borrower. That's very very different.
The underlying power of the metaphor, perhaps not from "oxygen debt", but "karmic debt" and the like, has a grip on collective mind. Maybe this is why underwater homeowners won't abandon ship. (Which they absolutely should. Otherwise, to follow out the metaphor, they'll drown.)
It may also be why citizens shrug as governments bail out lenders, but not borrowers. Oxygen will get paid eventually, or you'll die. Same for the bankers and us plebes?
The situation in Europe right now is insane. Greece ran a corrupt, irresponsible government. They don't have the economic potential to *ever* pay the full loans back if their risk drives up their interest rates, as it should, and their economy shrinks with the reined in government expenditures.
So... who do they owe? Primarily, banks in France and Germany, but lots of other lenders as well. A free market solution would let Greece fail and bondholders be wiped out. (Maybe they'd take the Parthenon as collateral.) Greece could renegotiate terms with its lenders, would have a very hard time borrowing in the future, and would be forced to run a balanced budget going forward, without the massive weight of the debt.
It would, of course, be easier to do this if they had their own currency, which they could inflate. This would suck for the French and Greek banks holding the bad debt. It would also suck for people holding stuff that in some way depend on those banks, and so on. I.e., there would be "contagion". What's really strange here is that Germany and France already own some of their banks, having bailed them out two years ago, which means that they are bailing themselves out.
Nothing is like this in physiology.
So anyway, the EU announced a $1 trillion bailout plan instead of letting the scenario envisioned above unfold. 1/3 of the expenditure is coming from the IMF (which is basically the US). And the Federal Reserve is now printing US dollars and lending them to European banks. Don't ask to whom exactly or how much, because we're not allowed to know that stuff.
Anyway, you kind of own Greece now. As do other European governments. Their banks held some bad debt, and heck, we cannot allow them to suffer from that, so we'll take the debt ourselves. That will be much better!
Today's bailout shifts wealth from citizens and governments to banks almost on the scale of the US efforts in the previous meltdown. And the term "moral hazard" does not begin to do justice to the effects. What is now to keep an undisciplined EU government like Spain, Portugal, or Ireland, in line? We've sent a strong signal: big banks will be bailed out; bad governments will be bailed out.
Nobody really seems to care. The focus in DC is on political fights: who will hold what official post in the government? The focus in the gulf states is, I hope, on the blob of toxic oil and dispersant poisoning their fisheries.
What's in store?
The debt chart has just grown more complicated. I don't know whether there will be deflation or hyperinflation. It may be that we enter a Japanese style zombiedom, or we inflate our way out, or miraculous growth levels "cure all". I don't know what will happen, macroeconomically.
I know one thing, which is that bankers will continue to get paid very well, and the American public will shoulder their risk, without Greek style rioting, because we are sheep like that. We will end up owning the Red Roof Inn equivalents of the future.
What happens will bear more than a passing resemblance to what is happening here: