I would suggest that the roots of the present economic crisis are not financial, but semantic. Once “leverage” replaced “debt” as the term of art for borrowing someone else’s money, we were cooked even if we didn’t know it at the time.

It’s not entirely clear when this shift occurred, but the concept took flight during the 1980s along with the junk bond market and the federal budget deficit. The mania for leveraged buyouts that marked the era simply could not have happened had it been dependent on something as pedestrian as debt. Being a mighty enterprise, it required a mighty engine.

In casting around for support, all those math majors and MBAs called upon the skills of the liberal arts aficionados they had long left behind, at least in terms of earnings power, and debt was reborn as leverage. It was a canny move.

Leverage soars. It is powerful, as the Greek mathematician Archimedes recognized. “Give me a lever and a place to stand, and I will move the world,” he declared. Until not too long ago, he and his successors were happily perched at the corner of Wall and Broad Streets, hoisting away. Debt, it must be said, is a drag, with Puritan overtones suggestive of homemade dresses and self-abnegation. Debtors go to prison; the fashionably leveraged go everywhere, or did until recently.

Of the lessons to be re-learned in the current crisis, this one has been largely overlooked: language has consequences. From the Oracle at Delphi to today’s euphemistic approach to finance, the misuse of language – or more precisely the use of language to obfuscate plain meaning – has been at least as harmful as any number of algorithms.

As we clean up the financial mess, we should perhaps take a moment to make sure that our nomenclature is in order as well.

-Mike MacMillan