Over the weekend, I re-read A Merchant of Venice, and I was struck by the fact that Shakespeare manages to include in the play virtually every element of the current financial crisis. Scene one begins with a discussion of risk assessment, and Antonio’s belief that he has managed to tame the vagaries of commercial fate through diversification. Asked by Salarino if he “Is sad to think upon his merchandise” (I.i.40), Antonio responds:
Believe me, no. I thank my fortune for it
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year.
Therefore my merchandise makes me not sad. (I.i.41-45)
Having ignored the problem of fat tails and black swans, Antonio decides to engage in a bit of dodgy finance. He borrows in the wholesale market from Shylock under terms that appear favorable, but have a huge downside in the unlikely event of his default. Antonio, of course, is unconcerned. From his point of view he is getting cheap money by taking on what seems like an extremely remote risk. He then takes these borrowed funds and uses them to make what can only be described as a no doc, subprime loan. Bassiano wants money for a speculative venture — the wooing “In Belmont [of] a lady richly left” (I.i.161) — and Antonio agrees, in effect renting out his credit rating:
Try what my credit in Venice can do;
That shall be racked even to the uttermost
To furnish thee to Belmont to fair Portia.
Go presently inquire, and so will I,
Where money is; and I no question make
To have it of my trust or for my sake. (I.i.180-185)
Shylock, for his part, does not approve of the loose monetary policy in Venice, which he rightly blames on wild lending practices, such as Antonio’s loans:
How like a fawning publican he looks.
I hate him for he is a Christian;
But more, for what is low simplicity,
He lends out money gratis and brings down
The rate of usance here with us in Venice. (I.iii.38-42)