Introducing “toxic assets”

A new term entered the lexicon of financial and economic journalism: toxic assets. (The picture illustrates the search volume and news references to the term, taken from Google Trends.)

“Toxic assets” are high risk financial paper whose contents are uncertain, obscure, but one is sure that they are bad, evil, contagious, and will kill you. The term is shorthand in the media’s quick flow of opinion and analysis, and it works to heighten our sense of danger and urgency. Toxicity frames our present predicament as a clean up job. The crisis is like an offshore oil spill needing first containment, then sweeping of the sludge.

Ontological work of this kind, done in the media, is an integral part of knowledge making.

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6 thoughts on “Introducing “toxic assets”

  1. Tiago,

    Admittedly I have very little knowledge of this subject, but if we look back at the S&L crisis of the 1980s there were loans which were considered bad risks. The failing savings and loans sold their portfolio through the government. S&Ls and other which were in the position to buy the “good” assets did so and the “bad” assets were assumed by the taxpayers.

    Is there something similar going on here? “Toxic” could be the term for these bad assets that the taxpayers are asked to buy.

    I assume that the present difficulty is understand which assets are good or bad. So if companies buy what they think will be good and it later turns out to be bad — the implication is that the government will make further adjustments to bail them out.

    This kind of privileging through risk-minimization shaped the modle of sucess in the late 80s. It seems to imply a similar effect going forward.

    What do you think?

  2. My search on the New York Times database did not give me references to the term “toxic assets” in the 1980s. I take your point that we have been there already, but my intuition is that we have changed its name and our understanding of it through our naming.

  3. So if the term “toxik” is rather new (with this meaning), then what does it say about our society, the media and the place (prominence ?) of biological, or environmental or medical explanations (or analogies) ? What about the fear of climate change, disease, pollution and the like ?

    Maybe Clement has something to say ?

  4. I guess that was what I was asking. So, there is no reason to believe that the name is he same, but the underlying method of dealing with the problem (assuming it is similar) is the same. This is what I am trying to sort out. 1) the problem is fundamentally different 2) the method of dealing with it is fundamentally different 3) both.

    I was getting the impression from your post, and now your reply, that there is something new implied by the method of dealing with “toxic” assets.

    Again, I am no specialist, but my instinct is that this is more similar to the 1980s than to the 1930s.

    By being wrong I hope to understand more about what is going on right now.

    On another note — commercial paper? Crowding out or Liquidity trap?

  5. I have been listening to Bloomberg on the Economy, a podcast by a guy called Tom Keene. He has had every specialist you could imagine on the show, short of interviewing Paulson or Bernanke. He has had chief economists of banks (investment and commercial), journalists, academics, book authors, think tankers, the lot. They all have a conviction of what the analogy should be and the week (if not the day) after they are all proven wrong. No one knows.

  6. It seems to me that “toxic assets” is a new variation on the theme of the organismic analogy: the body politic and the economic body display systemic properties akin to those of a living body, and economic policy is akin to medical intervention. “Regulation of the economy”, “healthy economy”, “shock therapy” … The thing is, are those analogies merely ornamentary, or do they imply more? (such as: just like medicine is to be professed and practiced by experts, economic regulation should be in the safe hands of expert – economists.)

    But I also think that as Tiago and Arnold said, “toxic” adds a new twist, mixing medical metaphor with ecological ones. Such ecological metaphors are surely around for long (from “economy of nature” to “predatory pricing”), but with climate change, pollution and other ecological issues being permanently on the agenda, they are bound to multiply. No need to look very far: one does not have to be much post-modernist to suspect that “markets for tradeable pollution permits” is a kind of enforced economic metaphor on environmental matters.

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