Three Choices, None Good

The moral rot of unlimited debt looks "free" but it's unaffordable in the end.

We like to think we're special and this moment in history is special, but alas, we're still running Wetware 1.0 which was coded between 300,000 and 60,000 years ago, when the last "out of Africa" migration finally got traction. Since then, the code has been tweaked a bit here and there (adults can now digest dairy products, etc.), but we're running the old code, and so we make the same mistakes and follow the same emotional pathways as individuals and as groups.

Which leads us to our current predicament, which is not unique: we're living on debt, "money" borrowed from the future, a future we're assuming will be so over-supplied with energy and other goodies that we'll be able to pay all the interest we're piling up with ease.

All the charts below are shouting "parabolic," as in crazy-unsustainable increases. There's the federal debt, $36 trillion, up 4X from the 2008 spot of bother, there's TCMDO, total public and private debt (McMansions, university degrees and SUVs all paid for with debt), student loans from zero to $1.5 trillion, Medicare and Medicaid, now 1/3 of the federal budget, and so on.

How did we get here? Let's start with what's not taught in Econ 101: primary surplus. Every economy--from households to empires, meaning this is scale-invariant--generates a surplus from its production of goods and services, or it runs a deficit, meaning it has to get more money from somewhere to support its consumption.

The question then becomes, how is the primary surplus being spent? (Or put another way, how is it being distributed across the economy and society?) There are only three options: 1) consume it, 2) invest it and 3) save it / hoard it.

Without making a conscious choice, the US has chosen to "invest" most of its primary surplus in moral rot, unproductive frauds, skims, scams, monopolies, cartels, regulatory capture, grift and graft.

This is the problem with giving an irresponsible teenager a no-limit Platinum credit card with an easily ignored admonishment to "stick to a tight budget, pay the balance off every month." Uh, right.

Since the US can borrow unlimited trillions on its credit card, we can "afford" to burn our surplus on grift, graft, inefficiency, cronyism, profiteering, etc. Since our surplus was squandered on moral rot, we have to borrow trillions to pay for what the citizenry wants and what politicians must promise to get re-elected.

Wetware 1.0: we like windfalls and free stuff, and so every program becomes a "third rail" politically: touch it and you don't get re-elected. But if you borrow a few "free" trillions a year, you get re-elected.

We love windfalls and free stuff and hate hard choices, but that's all we have now. We have three choices in how we deal with our dependence on parabolic debt to sustain our profligate lifestyle:

1. Run the debt up to the point that nobody is dumb enough to lend us more, and then default on the debt / go bankrupt. All our creditors are wiped out.

The problem here is all debt is an asset to the wealthy entity that owns it as an income stream. Since the wealthy run the status quo in a manner that serves their interests, they're unlikely to be thrilled with debt jubilees that zero out their assets and income or messy defaults that end up doing the same thing.

So nix that option. The wealthy want to keep their wealth and income streams, and since they own US Treasuries, they're not going to approve defaulting on that debt.

2. Inflate the debt away with sustained high inflation. So we borrowed $1 when $1 bought a lot of stuff, and now we've inflated everything so it takes $10 to buy what $1 bought back then. Now we can pay back the $1 with a fraction of the earnings it took back when we borrowed it.

We've already taken that step--what once cost $1 now costs $10. So the next step is to do another 10X reduction in the debt via inflation.

In previous eras, authorities reduced the silver content of coinage to near-zero, effectively devaluing the money, i.e. inflating away the debt. What cost one mostly-silver denarius in the good old days soon cost 100 devalued denarius.

This looks like some pretty easy hocus-pocus to pull off, but there's a catch: Catch-19, which is devaluing the money devalues trust in the leadership, social contract and the future, all of which leaves the economy and society a hollowed-out shell awaiting a stiff breeze to push the whole system off the cliff.

The problem here is inflation is distributed asymmetrically, along with the primary surplus. The wealthy, powerful elites skim off the surplus, and they're equally adept at distributing the "inflation tax" to the middle and working classes, which soon meld into a single class, the impoverished.

A funny thing about Wetware 1.0 is we're hard-wired to take note of rampant unfairness and eventually we respond in a destabilizing fashion, for example, uprisings, revolts, revolutions, etc.

3. The third option is to root out all the moral rot that's consuming the economy's surplus and our future, scrap all the programs designed in the bygone eras of 50+ years ago (defense, Social Security, Medicare, Medicaid, higher education, etc.) and start from scratch with new programs whose expenses are limited to what the economy generates as surplus.

In other words, go Cold Turkey on our addiction to living on debt.

Yes, I know: ain't gonna happen, because the moral rot is too deep, it's now normalized to the point that we don't even recognize the reality that there's nothing left but a flimsy facade we paint with gaudy colors to hide the rot.

Everyone assumes the empire is forever and can endlessly fund any amount of grift and graft with borrowed money. But this is a self-serving fantasy, not reality. Every empire of debt implodes.

These charts are merely facts. If we find them depressing, that response says something about our refusal to be accountable and responsible for our choices. Who's going to cut up the unlimited Platinum card?

The federal government's Platinum card balance:



The US economy's Platinum card balance:



Student loans Platinum card balance:



Medicare, which has an unlimited Platinum card:



Medicaid, which also has an unlimited Platinum card, though this is obscured by phony "reforms":



There are only three options, none easy, and not making a choice is a greased slide to collapse. The moral rot of unlimited debt looks "free" but it's unaffordable in the end.


Check out my new book Ultra-Processed Life and my new fiction/novels page.

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My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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Illiquid, Overvalued

As "dip buyers" get eviscerated, more dominos fall, and at a tipping point, the herd realizes the tide has reversed and it's time to sell--but alas, it's too late.

Illiquid, Overvalued describes a great many assets that are on the books as "rock-solid investments." Illiquidity means there are few if any buyers for the asset being offered for sale, and this can arise from various conditions.

1. Credit is tight and expensive, limiting the pool of potential buyers to those with cash.

2. Nobody wants the assets because they're grossly overvalued.

3. The pool of buyers with the expertise and financial backing needed to buy the asset is inherently limited.

4. "Animal spirits" have left the room and buyers are "on strike" due to caution / fear of future losses.

Bill Ackman outlined some useful principles of illiquidity in a recent commentary on X in his discussion of the illiquid nature of many assets held by Ivy league university endowment funds:

"Harvard's endowment is principally invested in illiquid private assets including real estate, private equity, and venture capital funds.

Real estate and private equity funds are highly levered so relatively small changes in asset values can have a large impact on equity values. For example, if a real estate fund's asset values decline by 15% and the assets are levered 60%, the fund's equity value will decline by 37.5%.

The increase in cap rates and interest rates have impaired real estate and private equity asset values. These funds do not generally mark to market as public assets are marked leading to a wide disparity between public values and private values when overall values decline.

Venture funds generally mark their assets to the last round valuation so these marks can also be overstated as these values can become stale.

I believe that a substantial part of the reason why many private assets remain private despite the stock market near all time highs is that the public market will value private assets at lower values than they are being carried at privately."

In other words, assets held privately can be "marked to fantasy" because they're not exposed to the market's appraisal of their liquidity and value, which are two sides of one coin: if nobody has the cash and willingness to buy the asset, its value is essentially zero, regardless of its "book value."

When Alan Greenspan issued his mea culpa in late 2013 about missing the subprime mortgage implosion and the resulting Global Financial Meltdown (Why I Didn't See the Crisis Coming Foreign Affairs), he identified two sources of his failure to "see it coming":

1. He assumed markets would remain liquid, i.e. that a buyer would emerge for every seller

2. The total failure of everyone's sophisticated models to predict the collapse of confidence.

The core failure lay in the models' reliance on the notion that humans make decisions rationally as Homo economicus, when the reality is we are extremely prone to irrational exuberance (a.k.a. running with the euphorically greedy herd) and panic (running off the cliff with the herd). He invoked Keynes famous "animal spirits" as the missing variable in economic models.

Irrational "animal spirits" generate "tail risk," events that supposedly happen only rarely but when they do happen, they trigger outsized consequences, and the Fed's models failed to accurately account for "tail risk" because they happen more often than statistical models predict.

All this boils down to illiquidity caused by a panic-button urgency to sell and a profound reluctance to buy: When "animal spirits" are confident in ever-higher asset valuations, participants place a constant bid under the market because prices will keep going up so I'll make more money. This constant bid is called liquidity: cash is flowing into the asset class, be it stocks or housing or cryptocurrencies or commodities.

When "animal spirits" turn to panic, sellers rush to sell as buyers vanish as they fear that prices will keep going down so I'll lose more money. Buying into a downtrend is known as "catching the falling knife": the initial "buy the dip" players have their heads handed to them on a platter, and those on the sidelines decide not to try to catch the falling knife.

This is an illiquid market: the bid keeps dropping until buyers are willing to gamble that "this is the bottom." But should asset prices continue sliding after an initial euphoric pop higher--"the bottom is in, buy!"--then those who held back find their caution reinforced: that wasn't the bottom after all, and everyone who jumped in lost money.

As every surge of "buy the dip" players loses, the market goes bidless--everyone who wanted to play "catch the falling knife" has been burned, and those who have lost the "animal spirits" to gamble stay out. Bids (offers to buy) dry up and asset prices crash to levels no one in the greed-euphoria stage could imagine were even remotely possible.

Those who follow liquidity assume that the more cash sloshing around the system, the more money will flow into assets. But this assumes participants are rational and prices are "fair value". When panic takes hold of the herd, no matter how much cash is sloshing around, none of it will be gambled on a losing bet.

Take a look at this chart of the Nasdaq dot-com bubble, and note the bubble symmetry: what shot up soon plummeted back to pre-bubble levels. Stocks that had reached $60 per share were recommended as "buys" at $45--a rational play perhaps, but wildly off the mark, as the stock eventually bottomed at $4.

When sellers desperate to sell swamp buyers, prices decline. If bids dry up, prices crash.



There is a domino-like effect to euphoria /liquidity turning to caution and then to panic / illiquidity. When overvalued illiquid private assets are sold at huge discounts, this topples the first domino of caution in professional money managers, who then move to sell the overvalued assets on their books to credulous "retail" investors and overseas buyers.

As "dip buyers" get eviscerated, more dominos fall, and at a tipping point, the herd realizes the tide has reversed and it's time to sell--but alas, it's too late.

The Federal Reserve can pump billions of dollars of credit "liquidity" into the financial system, but if nobody wants to "catch the falling knife," the credit will just sit there untouched, as everyone who was dumb enough to borrow money and gamble it away--leaving the debt still to pay--has already been wiped out.

Illiquid and overvalued: two sides of the same coin.


Check out my new book Ultra-Processed Life and my new fiction/novels page.

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My recent books:

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Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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To Make America Great Again, Start Here

Our status quo is so thoroughly corrupt that it's no longer even seen as corruption, it's just BAU--business as usual.

It's a big ask, but let's depoliticize the phrase "make America great again" and consider what this would actually entail, not as a lobbyists' grab-bag of tax breaks for the wealthy and arcane giveaways in 500-page Congressional bills, but as a restoration of the fundamental foundations of greatness.

In the conventional contexts of the current era, this boils down to ideology and finance. If we dial back culture-war over-reach and free up "market forces," for example, this will restore America's greatness.

The problem with all this kind of thinking is it's superficial and banal, for it ignores the real source of America's decline: the moral rot that has eroded every institution and every nook and cranny of our society. Whenever I mention this moral rot, I get immediate push-back of this sort: corruption has always been around, so today is no different from previous eras.

While it's self-evident that self-interest and greed manifest as corruption, it's not true that the systemic corruption of the present is no different from previous eras--it's worse, much worse because it's now normalized, and so we accept the most outrageous forms of corruption as "normal."

So private equity buys a company, loads it with debt, transfers all the borrowed cash to the private equity "owners," and then leaves the company a sinking hulk that soon declares bankruptcy. Or when private equity snaps up hospitals and healthcare clinics and prices rise not for better service but to "reward the owners," this plundering of "healthcare" is just good solid MBA-school maximization of shareholder value.

What few seem to notice is the barriers that limited the pillage and plundering of the private and public-sectors have all eroded or been hollowed out. The legal framework is now a mirror-image of the financial sector, a series of facades that mask the pillage and plundering: of course it's profitable, but it's also legal.

The social barriers have also been dismantled. There are no taboos left, as "anything goes" is the modern zeitgeist. The notion that corporations have a social responsibility to the community they're embedded in is now a quaint whiff of nostalgia, along with the notion that corporations have an implicit responsibility to serve the larger national interests as well as "shareholder value."

Every institution has been hollowed out by self-service. Is it any wonder than younger generations have near-zero trust in institutions, given that their PR veneer of "public service" is just a cover for milking the system for private gain?

If you read histories of capitalism--for example, Fernand Braudel's three-volume Civilization and Capitalism, 15th-18th Century ( Volume 1, Volume 2, Volume 3) you discover that "capitalism" only functions as advertised if it is embedded in a moral order, something Adam Smith understood.

In early European capitalism, Christianity (Catholic and Protestant) provided this moral order. In China, Confucianism provided the moral foundation of the society and the economic - political structures.

Consider Xi Jinping's campaign to unify Confucianism and Marxism. This is not an anachronism, it reflects Xi's understanding that Marxism does not provide the moral foundation needed to limit the corruption undermining China. Only restoring a Confucian moral order can do that.

I explored this in some depth in this essay Pieces of the China Puzzle (April 27, 2024).

Here is an excerpt:

As the author noted, "his attempted synthesis of Marx and Confucius has prompted bafflement, even mockery, among observers outside and inside China."

To me, there is nothing baffling in this synthesis; it not only makes perfect sense, it can be understood as essential in the broader context of China's history and culture.

If we truly want to make America great again, as opposed to using the slogan as cover for more grift and graft, then we have to start by recognizing the moral sinkhole we're in. Institutions, the government and corporations have all lost our trust because they're all cesspools of self-serving corruption.



No, this is not "normal" or "the way it's always been." Those are the excuses we deploy to avoid facing the truth: our status quo is so thoroughly corrupt that it's no longer even seen as corruption, it's just BAU--business as usual.

There will be consequences, for a society that lacks a moral foundation is a society shorn of value, a society of fakery, PR and narrative control designed to mask maximizing my gain regardless of consequences pillage and plunder.

When a hard rain finally falls, it will surprise us, for in our grandiosity and hubris, we imagined we were gods, immune to the fatal consequences of our corruption.


Check out my new book Ultra-Processed Life and my new fiction/novels page.

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My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

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America's "Healthcare" System Is Now a Structured Financial Skim/Scam

"Healthcare" grift, graft, fraud and financialized skims / scams will bankrupt the nation.

I've been writing about America's healthcare system for 18 years, emphasizing two enduring themes: 1) our lifestyle is unhealthy, with predictable consequences and 2) healthcare as it is currently configured will bankrupt the nation all by itself.

This recent article on how having a baby without complications now costs over $44,000 adds a third theme: the tragi-comic insanity and absurdity of the "healthcare" system that has been normalized, as if this is the only possible way to organize healthcare:

"And They Wonder Why The Birth Rate Is Declining": A Mother Went Viral For Revealing The Costs Of Being Pregnant In America:

Lastly, Kayla reveals that her baby received a bill, too, which added up to $12,761.30 without insurance. For their family of five now, the cost of insurance per month is $2,500 -- a nearly $400 increase from when they were just a family of four. "We're still waiting for him to process on our insurance," she explains, "so, for now, this is the cost without it."

One user said, "America's healthcare system is a joke... how does the newborn have a $12k bill?"

It's more than a joke--it's travesty of a mockery of a sham of a system that actually improves health. There's an even darker side of the picture--the takeover of the system by financiers and fraudsters--which truth be told is a redundancy.

We can now add a fourth theme: stripped of purposeful opacity, America's "healthcare" system is nothing more than a structured financial skim/scam. Before we dig into that, here are a few of the dozens of posts I've written on "healthcare" since 2008:

U.S. Lifestyle + "Healthcare" = Bankruptcy (June 19, 2008)

The "Impossible" Healthcare Solution: Go Back to Cash (July 29, 2009)

Why "Healthcare Reform" Is Not Reform, Part II (December 29, 2009)

Sickcare Will Bankrupt the Nation--And Soon (March 21, 2011)

How Healthcare Became Sickcare (March 18, 2022)

Let's start with what childbirth cost back when healthcare was paid in cash. Here are the costs of childbirth in 1952 at one of the finest hospitals on the West Coast, The Santa Monica Hospital: $30:



According to the BLS Inflation Calculator, $1 in 1952 is $12.13 today, so adjusted for inflation, the $30 fee to deliver a baby would be $363 today. Here are maternity rates from 1952:



A private room was $19, or $230 in today's currency. OK, so we have fancier equipment now, more staff, etc., but really--does that explain what once cost less than $1,000 in today's money--paid in cash, no insurance--now costs $44,000? No. Here's why: structured financial skims/scams.

Dutch Rojas (@DutchRojas) is a go-to source for explaining the opaque way "healthcare" skims / scams siphon off hundreds of billions of taxpayer dollars. Consider these X posts:

Why is healthcare expensive?
You go to your doctor.
Same building, same service.
But now it's 3x the price, because they sold to a health system.

The secret?
A "facility fee" was added.
Medicare and commercial payers just hand it over.

It's not for better care.
It's for ownership.

Every consolidation deal is a bet against the patient and you're footing the bill.

And the politicians love every bit of it...

Provider Taxes: The Most Elegant Grift in American Healthcare
It's not a tax.

It's a laundering operation.

Here's how it works:

North Carolina's 'nonprofit' health systems are running a $40+ billion hedge fund operation disguised as healthcare.
They're extracting hundreds of millions in tax exemptions while paying CEOs tens of millions.

This is the largest wealth transfer scheme in the American healthcare system.

This doesn't even include outright Medicare/Medicaid fraud, overbilling, unnecessary tests, medications and procedures, and a nearly endless menu of other enrichment schemes passed off as "care." These billions go to the "owners," not the frontline healthcare providers / workers.

Lastly, let's consider a few charts. Here is my 2008 diagram of the building blocks of an unhealthy lifestyle:



The cost of insurance continues rising, becoming ever more burdensome and ever more unaffordable:



Yes, the number of retirees is expanding, but this parabolic rise in Medicare costs far exceeds the rise in the number of retirees.



The same can be said of Medicaid.



"Healthcare" grift, graft, fraud and financialized skims / scams will bankrupt the nation. Thanks to the purposeful opacity of the complex funding streams, we can't even figure out what is actually "care" and what's just another skim / scam.

Our starting point should always be: this is not the only way we could organize "healthcare." We could have a rational, transparent, competitive and affordable system. But to get that, we first have to completely dismantle the current system, and everyone skimming billions will fight with all their billions in campaign contributions to stop that from ever happening. As a result, the nation will be bankrupted by greed.

Check out my new book Ultra-Processed Life and my new fiction/novels page.


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Ultra-Processed Life print $16, (Kindle $7.95, Hardcover $20 (129 pages, 2025) Read the Introduction and first chapter for free (PDF)

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $16, (Kindle $6.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $15, (Kindle $6.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $15 print, $6.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $6.95, print $16, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $6.95, print $15, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $3.95, print $12, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $3.95 Kindle, $12 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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The No-Win Bubble "Wealth Effect": Either Way We Lose

Spoiler alert: this ends badly.

I have endeavored to explain how our economy has changed dramatically over the past 50 years beneath the surface. Nothing that's going to happen in the future will make sense unless we understand this, so refill your beverage of choice and let's go through what changed.

Wages gained ground 1945 - 1975, and lost ground 1975 - 2025. In the "glorious 30" (Trente Glorieuses) years of sustained global growth 1945 - 1975, wages' share of the economy remained around 50% of the nation's income. As the economy expanded, wages increased in step with the economy.

Since the mid-1970s, that trend has reversed. Wages have lost ground for the past 50 years. As the economy expanded, wages' share declined, meaning the economy's gains flowed to capital rather than wages. (Chart #1 below)

This wealth transfer was non-trivial: $150 trillion was siphoned from wages to owners of capital.

As the chart below shows, Federal debt as a percentage of GDP declined in the the decades of organic growth, meaning the economy expanded from increases in productivity, efficiencies and resource extraction, as opposed to the synthetic growth of using debt / financialization to boost consumption.

Financialization took off in the 1980s as unlimited credit for financiers enabled a synthetic boom of corporate takeovers and mergers. Financialization expanded into every nook and cranny of the economy in the 1990s and 2000s, so that assets such as the family home became commoditized assets that could be sold as securities to global capital.

As the Federal-debt-GDP charts illustrates, Federal debt rose faster than GDP as financialization hollowed out the US economy. The acceleration of globalization from 2001 advanced this hollowing out.

The destabilizing nature of financialization manifested in 2008 as the Global Financial Crisis, when heavily financialized subprime mortgage securities catalyzed a global meltdown.

the 2008-09 crisis and response was a critical juncture in American history , as the organic economy became subservient to the synthetic economy of debt, bubbles and "the wealth effect," the toxic harvest of hyper-financialization and hyper-globalization.

Federal debt, which has risen from 40% of GDP in the early 1980s to 60% in 2007, exploded higher to 120% as the synthetic "growth" of using debt to inflate asset bubbles that generated "the wealth effect" became the engine of consumption.

As a result of policy decisions made in 2008-2010, our economy became dependent not on wages but on "the wealth effect" for consumption: as asset valuations bubble higher, the owners of the assets feel wealthier, and are incentivized to borrow and spend more of their phantom wealth.

The top 10% of US households now account for 49.7% of all US consumer spending: The U.S. Economy Depends More Than Ever on Rich People: The highest-earning 10% of Americans have increased their spending far beyond inflation. Everyone else hasn't. (WSJ.com)

The problem is that unlike wages, which are broadly distributed, asset ownership is concentrated in the top 10% of households, so "the wealth effect" dramatically boosted wealth and income inequality. So all the synthetic "growth" since 2009 has flowed to the top tier of households as wages' share of the nation's income continued losing ground.

This sets up a can't win scenario: if the Everything Bubble that drives "the wealth effect" continues inflating, wealth inequality will crack our society wide open. If the bubble pops, consumption implodes, jobs will be lost and the Great Recession that was pushed forward in 2009 will kick in with a vengeance.

Beneath the superficial surface of rising GDP, the policies of inflating debt-bubbles to drive "the wealth effect" have hollowed out not just the economy but society. Courtesy of @econimica (X/Twitter), these charts show the pernicious consequences of relying on debt for consumption and channeling gains to the owners of assets.

The net effect was to load younger generations with debt while funneling the majority of Federal spending to the older generations who also happen to own most of the assets. Since younger workers couldn't buy assets when they were cheap, few have gained from "the wealth effect."

By effectively impoverishing the nation's younger generations, we've chosen a demographic doom-loop as marriage and birth rates have collapsed from 2007. Guess what happens when you make starting a family and buying a house unaffordable to younger generations? They no longer start families and have children.

As the Boomer generation retires, the legacy of retirement programs designed in the 1930s (Social Security) and the 1960s (Medicare) is fiscal bankruptcy as these programs are driving the expansion of federal spending and borrowing.

It's called a Doom Loop, with no exit, for all speculative asst bubbles pop. Once "the wealth effect" reverses, assets get sold off to raise cash and since only the wealthy can afford to buy them, there's no buyers left, so valuations crash.

It didn't have to be this way, but our leadership chose poorly, and the consequences will fall on us. Let's go through the charts supporting this grim reality.

Wages share of the national income has declined for 50 years.



As a percentage of GDP, Federal debt has tripled from 40% of GDP to 120% of GDP as synthetic "growth" replaced organic growth:



Thanks to the policy decision to reply on "the wealth effect" for consumption, wealth inequality has soared: the net worth of the top 10% (34 million Americans) is 2X the net worth of the bottom 90% (306 million Americans) and 27X the net worth of the bottom 50%--170 million Americans.



Most of the future expansion of Federal spending and debt is in programs for the older generations and rising interest payments on the expanding debt to pay for these programs.



Here are Econimica's explanatory comments on his three charts reprinted below:

"Federal Reserve policies have far-reaching consequences, well beyond interest rates and economics / finance. Given the Fed is a non-democratically elected entity making policy that is ultimately deciding the winners and losers or our modern-day society...perhaps it's time for a rethink of the power that has been handed to them?

Consider since 2007 (when ZIRP & QE were implemented):
---US births (blue columns) have declined by -0.7 million/yr (-16%...or 12 million fewer births than Census projected since '07 w/ the delta only continuing to grow)
---US female childbearing population (red line) +4.2 million (+11%)
---US 65+yr/old pop (white line) increased +27 million (+72%)

Think of who the economic / financial policies implemented since '07 favor (elderly/institutions holding the bulk of assets) and who they punish (young adults w/ little to no assets to shield them). Young adults have made the logical choice to have fewer or avoid children altogether. Unless something dramatic changes, suggest births/families will continue moving significantly lower and the future of the US working class is likewise deteriorating.

2007 was also the interest rate driven explosion in student loan debt and consumer debt (vehicles, credit cards, etc.) to allow a flat consumer population to continue consuming more."



Note how debt serviced by younger generations exploded higher from 2008 while the population and workforce made only marginal gains.



GDP minus federal debt was positive until 2008-09, and has since crashed into deeply negative territory. It's called eating our seed corn, spending money borrowed from future productivity and generations to fund unsustainable consumption today. Spoiler alert: this ends badly.



Regardless of assurances that this bubble will never pop, all bubbles pop, and they do so with remarkable symmetry, returning to their starting point.



Either way, we lose: if the Federal Reserve manages to keep the Everything Bubble inflated, we decimate the nation's younger generations, fatally destabilizing our society. If the bubble finally pops, all the phantom wealth that's been propping up consumption goes to Money Heaven, gone for good.

We will collectively bear the burdens of catastrophically short-sighted / self-serving policies of 2009-2025 for decades to come. Beneath the easily gamed statistical veneer, our economy and society have been hollowed out to the benefit of the few at the expense of the many.

These are real-world problems, not monetary problems. Unfortunately, playing around with "money" doesn't make all this go away: stablecoins, Universal Basic Income (UBI) and Modern Monetary Theory (MMT) are all disconnected from the real world: what ultimately matters is resources extracted, productivity and efficiency, and how the gains and losses of these real world factors are distributed.

"Money" in all its manifestations is simply the unit/medium used to instantiate the distribution.

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