Monday, July 18, 2011

Books Down, Gold Up: Whither Words?

If you can’t put your money in books, perhaps you could buy gold.

The link is purely speculation, but it is a plausible story after the events of yesterday. The deadline for bids in the Borders bankruptcy auction passed apparently without any qualifying bids. During the hours that followed, gold prices spiked, hitting a new all-time record.

There are, to be sure, other reasons for the price of gold to go up — among them, concerns about both the euro and the U.S. dollar, with investors worried about sovereign defaults in both places and a possible wave of financial bankruptcies to follow.

Still, whether they are connected or not, gold and books are moving in opposite directions.

It is perhaps not so surprising that no investment funds were eager to take on the debt associated with the Borders bookstore chain. What is surprising, though, is the reason behind the lack of bidders for the chain as a whole. According to reports, multiple major U.S. publishing houses would not agree to grant going-concern status to the lead bidder, if it were to be the buyer of Borders. These publishers’ books would have to be taken out of Borders stores and liquidated separately next week, a messy and probably contentious process that would make keeping the stores open more trouble than it was worth. If the lead bidder could not get this concession from most of the publishers, there was no point in any other bidder making the attempt. That, and not the absence of interested parties, is the reason why there were no bids. But what this means is that book publishers collectively decided they were better off forcing Borders into liquidation.

I am not sure why that would be. Perhaps the publishers felt certain that a reconstituted Borders would soon fail again, and they thought their interests were better served with a liquidation happening this summer rather than next — but if so, that is a view not shared by most financial observers or the bankruptcy court. Perhaps they worried that keeping Borders’ stores open increased the risk that all the U.S. bookstore chains might fail. Whatever the specific reason, the industry is turning back from its previous view that more books on more shelves in more stores was the way to maximize the industry’s revenue. The new view is that the greater advantage is to be found in having fewer stores with smaller inventories. That is, the book industry as a whole is in retreat.

Meanwhile, gold — the one form of money that is fully understood without any written words to identify it — is ascendant. It is as if people are turning away from words. That is not really the case. People are consuming more information in the form of written words this year than ever before, including this blog as one small example. Words, though, do not merely inform. Words are also the elements that form the complex arrangements among many people, making possible such things as financial systems and retail chains. Clearly, in that arena in recent years, something has gone terribly wrong.