Initially Paulson had a problem. He believed that lenders from Countrywide to Morgan Stanley were "crazy" in extending so much credit to people with no money; for example, "at Countrywide lenders were not allowed to ask an employer for proof of an employee's salary."

      That certainly qualified as nuts yet Paulson lacked  a way to make the disaster bet without exposing himself to indefinite losses. If he shorted Countrywide and the company's stock suddenly skyrocketed  he had to come up with whatever extra money was required. In a volatile economy a rise might occur so Paulson searched for a better way to bet on the collapse predicted by his analysts detailed charts.

   Enter Georg Simmel and a group of inventive bankers. Simmel argued (in The Philosophy of Money)  that people -and only people-create value when they compare one glass vase, one car or one bond to another. Without the point of comparison, it is impossible to establish value and watch the process of "lively interaction" that always occurs when people decide the economic worth of anything on earth. For lively interaction think of the controlled pandemonium in the pits of a futures exchange; and for the points of comparison that create economic value think of the Antiques Road show. Whether a toy, a sword or a Tiffany necklace, the item is worth more if it is in pristine condition and in the original box or scabbard. Add in the authentic signature of the maker, and, during the lively interaction of an auction, the item's value could rise very quickly..

    In Paulson's case, a comparison like shorting Countrywide's stock seemed a bad or too risky bet. If bankers wanted he and his colleagues to invest, they needed to erase that sense of caution by fabricating transactions that promised a greater rate of return. Paulson therefore saw a magnificent opportunity when a group of bankers created "a standardized easily traded CDS (Credit Default Swap) contract to insure mortgage based-backed securities made up of subprime loans." In English, you bought a fixed figure insurance policy and cashed in if the bonds tanked. It was a "no-brainer" to Paulson because, for, say $500,000 a year in premiums you insured an incredible $100 million dollars of debt.

     Over time Paulson and his colleagues bought up a boatload of Titanic credit default swaps. At times the buyers became impatient. Misery remained on hold because the economy was taking far too long to collapse. As Jeffrey Libert (not part of Paulson's team) summed up the mood, "I was hoping, praying that another hundred thousand people would lose their homes."

   Renter Georg Simmel. He argued that, as early as 1900, money had turned into many people's most important value. You received power and prestige because of how much money you had -not  how you got it-  and Paulson's was the Greatest Trade Ever because he and his firm sometimes made a billion dollars a day in profit. In 2007 Paulson's two principal funds recorded "gains of 590 percent and 350% respectively."

      Despite these legal and legitimate gains, some people argued that Paulson behaved immorally. Betting on disaster seemed a rotten way to make a lousy much less a magnificent living. But, in explaining a bet on misery, Simmel stressed a point neglected by Paulson's critics. By definition, capitalism was both "soulless" and "heartless". A trader's goal was not to create jobs or worry about families on the street. A trader's mission was to find the most profitable points of comparison between, e.g., two bonds or between a bond and a credit default swap. Paulson had done just that and it was absurd to criticize him for seizing an opportunity neglected by others. So, stow the envy and ask yourself this question: How many Americans would say no if offered the opportunity to make a quick billion or two?

    Even though Paulson soon owned a mountain of default swaps, he was still "eager to expand his wager against risky mortgages because accumulating it in the market sometimes proved a slow process."  So, Paulson arranged meetings with a number of bankers and asked them to create new bonds, all tied to the "most rotten" of the subprime mortgages. Making money from both sides simultaneously, the banks would sell the bonds to investors with bullish economic views and Paulson "could buy (credit default swap) protection on $1 billion or so of mortgage debt in one fell swoop."

     Some bankers created and sold the bonds; others thought that Paulson's thirst for profit knew no bounds. "It was a reputation issue, and it didn't pass our moral compass. We didn't think we should sell deals that someone was shorting on the other side", said one banker.

   But, in Paulson's defense, he never hid his intentions. Quite openly, he was taking the misery side of the bet; presumably savvy investors bet on prosperity and, according to the rules of trading and capitalism, all trades posted winners and losers. From this perspective even deliberately creating the most rotten bonds was nothing more than an inventive way to increase the chance of profit for a fellow who thought that subprime mortgages promised economic catastrophe.

    Zuckerman argues that Paulson "defied Wall Street and made financial history." His $4 billion payout for 2007 "was the largest one-year payout in the history of the financial markets."

     Moreover, with a great deal of pride in his work, Paulson wanted to tell his story. He gave Zuckerman no less than fifty hours of interviews and Paulson's picture adorns the front pages of The Greatest Trade Ever. Paulson is smiling and when Zuckerman asks what's next, Paulson explains that "he is betting against the dollar...it's like Wimbledon...When you win one year, you don't quit, you want to win again."

    Paulson is the perfect example of capitalism taken to its logical extremes. So, rather than have President Obama and the Tea Party activists focus on bank bonuses -the tip of the subprime iceberg- we ought to follow Simmel and use John Paulson's bets on misery to ask questions like these.

   Is the capitalist system as soulless as Simmel argues? If so, those who endorse capitalism should stop piously complaining about "obscene" profits and accept that , however extraordinary, a $4 billion payday went to the smartest guy on the block. He got what he deserved and so did we.

  Equally important, is Simmel right that our culture's values are so shallow that we award the greatest power and prestige to those with the most loot? John Paulson cannot be blamed for being Wall Street's "greatest" or richest trader.. If Simmel is right, his bet on misery compliments contemporary culture rather than contaminates it.

    Simmel wanted to have a debate about values, about a world in which the means -money- had become the greatest end in life. It's time to have that debate. Otherwise we are spitting in the wind, lamenting the certain excesses of the system rather than admitting that Paulson's winnings are, for many Americans, as envied and praised as the many, magnificent mansions he now owns.