The Danger of Financial Jargon


The world is full of priesthoods. On the one hand, there are the calculations that the pros make in private; on the other, elaborate ritual and language, designed to bamboozle and mystify and intimidate. To the outsider, the realm of finance looks a lot like the old Nile game. In The Economist, not long ago, I read about a German bank that had some observers worried. The journalist thought that the bank would be O.K., and that “holdings of peripheral euro-zone government bonds can be gently unwound by letting them run off.” What might that mean? There’s something kooky about the way the metaphor mixes unwinding and holding and running off, like the plot of a screwball comedy.

It’s the same when you hear money people talk about the effect of QE2 on M3, or the supply-side impact of some policy or other, or the effects of bond-yield retardation or of a scandal involving forward-settling E.T.F.s, or M.B.S.s, or subprime loans and REITs and C.D.O.s and C.D.S.s. You are left wondering whether somebody is trying to con you, or to obfuscate and blather so that you can’t tell what’s being talked about. During the recent credit crunch, many suspected that the terms for the products involved were deliberately obscure: it was hard to take in the fact that C.D.S.s were on the verge of bringing down the entire global financial system when you’d never even heard of them until about two minutes before.