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.

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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The Economy--and its Future--in Four Charts

Substituting debt for earnings while enriching the rich will bear bitter fruit.

Climbing above the craziness of the Normalized Now news flow to view the economy from a quiet, windswept peak helps clear the mind of clutter. The entire economy--and its future--can be distilled down to four charts that tell the underlying story of the U.S. economy over the past 55 years.

Many of the thousands of charts floating around illuminate some aspect of the economy, but these four tell the primary story:

1. The gains from rising productivity--the only durable source of prosperity--were shifted from wages to owners of capital.

2. As wages lost ground, the central bank (Federal Reserve) replaced cash earnings with debt, by a) lowering interest rates for 40 years, b) increasing the money supply and c) opening the flood gates of credit.

3. Wage earners used credit to pay expenses, the wealthy used credit to buy income-producing assets.

4. As a result, assets such as houses are now unaffordable to all but the wealthy.

The net result of these dynamics is the rich got much, much richer, and wage earners became debt-serfs paying interest to the wealthy owners of their debts. Let's start by noting the difference between an owner-occupied house and an asset (for example a rental property) that generates income.

The owner-occupied house may appreciate in value over time, but this increase isn't income or a capital gain until the house is sold. Until that point of sale, the house is merely an expense.

Student loans, auto loans, credit cards, etc. are also expenses. Wage earners' debts are expenses that aren't offset by income generated by the "asset" purchased with credit.

The quibble here is a $100,000 student loan will "pay off" by increasing the earnings of the student debtor, but this is not the equivalent of buying a bond that pays guaranteed interest. The university diploma may or may not pay off, or it may pay off for a few years and then become a net liability. It's more a wager than an investment, regardless of what the Higher Education / Student Loan industry claim.

The wealthy who already own assets have a much deeper pool of credit to tap, and the cost of borrowing money is lower for them, too. So the wealthy tapped the expanding pool of "money" and credit to buy income-producing assets: stocks, real estate, enterprises, etc.

Given the limited quantity of real-world assets that generate income, this relentless credit-fueled demand from the wealthy pushed the valuations of assets higher, rendering them less affordable to wage earners.

This massive, sustained transfer of wealth via credit expansion has been going on so long that it's now normalized: very few people can recall an economy that shared the gains with wage earners rather than diverting most of the nation's wealth to the already-wealthy.

This chart of wages' share of the nation's income is the key snapshot of the economy's core dynamic. No, it's not tech, or the stock market, it's this systemic shift of income from wage earners to owners of capital.



Over the past 50 years, this transfer amounts to a staggering $150 trillion: (same chart, but with the FRED database link)



Here is the chart of total credit expansion, which has outpaced not just wages but GDP (gross domestic product):



This chart of the top 9% (the top 1% have their own chart) shows how the rich have become much richer. The top 10% (top 9% plus the top 1%) have a net worth of $108 trillion, double that of the bottom 90% ($52 trillion), and 27X the net worth of the bottom 50% of the populace ($4 trillion).



The net result is housing has shifted from being affordable to wage earners seeking a place to live to an asset snapped up by the wealthy, private equity and corporations: since wage earners have lost ground, they cannot possibly compete with the wealthy in a bidding war funded by bottomless credit lines. Housing is now unaffordable except to the wealthy.



As a lagniappe, here is a chart of the wealth held by the top 0.01%, which illustrated how the wealth piling up in the top 10% has aggregated in the top 1%, top 0.1% and top 0.01%.



What future do these charts forecast? Instability on a scale few believe possible in the Normalized Now of $100 million homes, $600 million yachts and the speculative frenzy arising as those left behind seek some long-shot wager to gain a bit of the ground that has been lost over 2+ generations.

Substituting debt for earnings while enriching the rich will bear bitter fruit. How it manifests is unknowable, but that it will manifest is predictable. Extremes become more extreme until they break the entire status quo into brittle shards.

My new book Ultra-Processed Life, is available at a 25% discount (ebook edition) and 19% discount (print edition) through Friday, June 27.

---

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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Hollowed Out

The status quo has pushed everything to an extreme of hollowed-out instability to maintain a superficial appearance of normalcy and stability. But it's all fake.

The phrase that best describes the present era is hollowed out. By hollowed out I mean the exterior facade still looks pretty much the same as it did in the past, but the internal structure has corroded / eroded to the point that little remains of what provided strength and stability. What's left is the illusion of stability.

Our spectacles have been hollowed out, lifeless, rote repeats of past performances, reduced to unintentional parodies of what was once vibrant.

Our entertainment has been hollowed out, dominated by remakes, retreads, threadbare extensions of tent-pole franchises and sound-alike songs.

Even our outrage has been hollowed out, perfunctory displays phoned in from afar, as we all know outrage has been exhausted along with everything else.

Our "innovation" has been hollowed out, with toys such as flying motorcycles and self-driving taxis presented as "solutions" to phantom "problems," "solutions" that boil down to hype, clickbait or another reach for higher corporate profits. The most visible result of AI is AI Slop:

AI Slop: Last Week Tonight with John Oliver (29 min) (via Richard M.)

Our incentives have been hollowed out, leaving only the most perverse extremes. The motivation to flood social media with AI Slop is the faint hope of creating a viral link that earns a pittance for the AI Slopper.

Our realm of romance has been hollowed out, leaving a hellscape of dating sites and the wreckage left by ubiquitous online porn.

Our food has been hollowed out, ultra-processed slop remorselessly worked into "new" "innovative" products that are parodies of quality and innovation: you've just got to try the new jalapeno-yuzu-crawfish bagel...

Our politics have been hollowed out, with the only useful reform--requiring politicians to wear the logos of their corporate campaign donors--nixed because it would have made obvious what everyone knows: politics is now an open auction for favors and influence.

It would be far more honest if we conducted the passage of congressional bills as open auctions on eBay for all to bid and all to see: Buy Now for only $500,000: a tax break hidden deep inside the untouchable Defense Appropriations Bill.

Our economy has been hollowed out in virtually every sector, from Higher Education to Healthcare to housing. Much of what passes for "growth" is either waste (BS work, planned obsolescence, fraud), statistical trickery or artificial stimulus.

The shell remains standing but it now requires massive injections of borrowed money to prop up the rotted facade. Consider Higher Education. Before it was hollowed out, millions of college students were educated without needing to enter debt-serfdom to pay tuition and fees. As this chart shows, student loans were zero in 1993.

Now there's $1.5 trillion in student loans. The number of administrators quadrupled, while federal legislation made student debt the one form of debt that cannot be discharged in bankruptcy, effectively legalizing debt-serfdom.



The Higher Ed / student loan industry's relentless hype machine drummed the idea that doom awaited any young person without a university degree, or better yet, a graduate degree or MBA. The net result, as we all know, is a vast over-supply of MBAs, graduates of law schools and computer programmers, all fields currently being decimated as AI tools do to white-collar work what industrial robots did to blue-collar factory work.

Meanwhile, back in the real economy, the nation has a severe shortage of skilled trade workers--yup, the kind of work denigrated by the "you gotta go to college" machine. Yes, the kind of work AI and robots can't do: What AI Can't Do Faster, Better, or Cheaper Than Humans (June 2, 2025)

The housing and mortgage sectors have also been hollowed out, creating overpriced facades propped up by $2+ trillion in Federal Reserve purchases of mortgage-backed securities (MBS). How did millions of households manage to buy homes from 1946 to 2001 without the Fed nationalizing the mortgage sector and inflating one housing bubble after another in the process?



Private-equity and corporations with bottomless credit lines courtesy of the Fed have feasted on housing, pushing valuations to extremes of unaffordability while jacking rents to the stratosphere to maximize shareholder value at the expense of the workforce.



The status quo has pushed us into extremes of hollowed-out instability to maintain a superficial appearance of normalcy and stability. But it's all fake. If Higher Education now requires students to become debt-serfs, that is not a system worth propping up. It should be allowed to be obsoleted by much more effective and cheaper alternatives, for example what I proposed 13 years ago in my book The Nearly Free University and the Emerging Economy.

Everything has been hollowed out by insiders being enriched by a system that must be propped up with trillions in borrowed money lest it collapse under its own bloated weight. Insiders, grifters and apologists always trot out rationales which boil down to transparent self-serving excuses cloaked by piteous bleating. Garsh, it wasn't our greed, it was a butterfly flapping its wings in the Amazon...

Now that everything's been hollowed out, nobody is accountable or takes responsibility for any of it. Disconnecting self-serving greed from consequences is the key dynamic in hollowing out once-functional institutions and sectors.

Our experience of the real world has been hollowed out, too, something I explore in my new book Ultra-Processed Life, which is available at a 25% discount (ebook edition) and 19% discount (print edition) through Friday, June 27.

---

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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Thank you, Mary B. ($70), for your exceedingly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, John U. ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

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Is Life Now a Snack?

What's changed isn't our hard-wiring. What's changed is our industrial and communications technologies' powers to activate and exploit our hard-wiring.

Is daily life now a snack? This is the premise of my new book, Ultra-Processed Life. What makes this interesting is it's something we can all observe in our daily lives--how the processes that make ultra-processed snacks so addictive and unhealthy have spread into every nook and cranny of life.

I liken this normalization of addictive and unhealthy lifestyles to an aggressive invasive jungle vine that soon smothers the native forest. Like the vine, Ultra-Processed Life is extremely successful at drawing us in: who can resist the brightly packaged, oh-so-tasty New and Novel?

As I note in the book, I think I have a healthy amount of self-discipline, but the moment I crunch into a salty, sweetly oily snack, every shred of self-discipline dissolves, and I'm reaching into the cheery bright package for another one, and then another one until there's none left.

This is how Ultra-Processed Life works: it activates our built-in desire for whatever makes us feel good in the moment--a dopamine rush that can be unleashed by a broad range of stimulants.

In effect, ultra-processed goodies hijack our hard-wired appetites for what's scarce in Nature. This extends beyond food into the digital realm, where the screen becomes the snack we can't stop consuming.

Though the dopamine hit feels good in the moment, the long-term consequences are not positive. Once life is reduced to moving from one dopamine hit to the next, we not only enter the unhealthy realm of addictive behaviors, we lose touch with the unprocessed world, and lose our taste for unprocessed life: after becoming accustomed to a diet of unprocessed foods bursting with sweetness, salt and savory fats, real food--and thus real life--loses its appeal.

This generates a great tide of perverse consequences. These ultra-processed replacements of unprocessed life offer up endless temptations begging to be indulged: Ultra-Processed Life is like living in a candy store without any adults to stop us from eating as much as we want.

I can think, "eating this entire package of unhealthy snacks is not good for me," but our rational filters don't stop the pleasures and comforts of the dopamine rush.

There is a rich vein of irony, perversion and paradox in this. Products, services and experiences are designed to attract and addict us, and when our rational filters fail, then the fault is ours: tsk-tsk, you didn't display god-like self-discipline.

What's changed isn't our hard-wiring. What's changed is our industrial and communications technologies' powers to activate and exploit our hard-wiring. Now that life is so overwhelmingly complex, we find solace in a simplified sandbox world of Ultra-Processed Life because it offers immediate gratification and relief.

The cost is higher than we realize, for the sources of authentic human fulfillment and happiness can't be packaged and commoditized. What we're consuming is artificial, a manufactured contrivance that's profitable for the purveyors but not for the consumers.

This world is now hyper-normalized: if it's all we know, then we think it's all there is, and so we no longer recognize its impoverishment and artificiality. My analogy is the forest: if a child has only experienced a tree-farm forest, trees planted to maximize future profits, they naturally assume "this is a real forest."

But this is not an authentic forest. If the child never visits a pristine native forest that has never been clear-cut, they will never experience a real forest. If all the child has ever eaten is commoditized bread manufactured to extend its shelf life, they will never know what real bread tastes like.

In this simplified hyper-normalized version of daily life, if it's not on the screen, it doesn't exist. It does exist, but we're no longer aware of it.

This is why the first chapter of the book is entitled The Machinery of Bewitchment. If you'd like to read a bit more, the book's Introduction and first section are free in PDF format.

As with many others, the catalyst for this journey was a life-threatening medical crisis. This led us to a path away from Ultra-Processed Life, a path I discuss in the book.

I'm offering the book to my readers at a 25% discount for the ebook edition and 19% discount on the print edition through Friday, June 27. At midnight Friday EST, the price reverts to list ($16 print, $20 hardback, $7.95 Kindle ebook).

I think you'll find the ideas intriguing and worthy of exploration. The book is currently "#1 New Release in Social Philosophy" on amazon.com.



Ultra-Processed Life is available at a 25% discount on the ebook edition and 19% discount on the print edition through Friday, June 27.

---

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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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Riverman ($7/month), for your exceedingly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Richard C. ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Michael P. ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, S.P.M. ($7/month), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

Meta-Thoughts on the War

Decades of 'The Fog Machine of War' have jaded the public's appetite for 'Narrative Control'.

The Fog of War is perhaps better described as The Fog Machine of War, for everything presented to the public is some version of Narrative Control, the purpose of which is to establish a context and story that's beneficial to whomever is presenting "facts," "news," "information" and "commentary."

The other motivation for flooding global media with "news," "information" and "commentary" is to maximize profits via serving the insatiable appetite for "what's really going on." What's really going on is of course a closely held state secret, the very last thing that would ever be released to the public.

Since everything is Narrative Control and exploiting crisis for profit, there's little value in any of what's presented to the public other than what it suggests on a meta-level, that is, what isn't being revealed and promoted as "what's really going on."

It seems to me there is only one way to assemble a jigsaw that approaches the goal of discovering "what's really going on." The first step would be to obtain fly on the wall unfiltered intelligence summaries (unfiltered meaning not yet massaged for the political leadership) from the intelligence agencies of the three combatants: Iran, Israel and the United States. This is of course impossible.

The second step would be to obtain the unfiltered intelligence summaries from regional players, for example, Turkey, Saudi Arabia, etc., who have their own sources.

The third step would be to obtain the unfiltered intelligence summaries from Major Power players with a keen interest in figuring out "what's really going on," for example, China, Russia and the European Union intel agencies.

The fourth step would be to survey mid-level officers conducting actual operations. It would also be helpful to have access to those actually conducting post-operation damage assessments.

You discern the meta-thinking here: valuable information tends to get filtered out (or lost) between each level of information gathering, summary and presentation to the next level of the hierarchy.

At the highest level, the military leadership tends to be under pressure to control the narrative of what's presented to the political leadership. This can play out in any number of ways: the military leadership might exaggerate the direness of the situation to obtain permission for a risky operation, or it may gloss over the situation to avoid being sacked.

What strikes me as interesting is how long this situation has been brewing. Iran's nuclear ambitions have been front and center for a great many years, and so intelligence and operational planning have been going on for many years.

In other words, this isn't a flash-bang crisis that suddenly erupted from conditions that were unstable beneath the surface but superficially stable, for example, a coup d'etat in a resource-rich nation few people can locate on a map.

What's unknown for obvious reasons is the capabilities in play. In the aftermath of the intelligence agencies scandals of the 1970s, various tell-all books were published, revealing technical abilities long kept secret.

For example, it was revealed that the U.S. intercepted communications between doomed cosmonauts drifting in a failed Soviet space mission and the tearful Soviet political leadership.

We have no way of knowing if this "tell-all" is true or just another subtle form of Narrative Control. But given that the U.S. spends more on signal intelligence, space-based assets, and other information gathering than other nations spend on their entire militaries, it's plausible.

As for what capabilities are in play today: the public has no idea. We can have fun guessing, but it's all guessing.

Decades of The Fog Machine of War have jaded the public's appetite for Narrative Control. Few believe the "official version" of anything, for good reasons. Public trust has eroded, and so the meta-thought here is the Narrative Control has shifted to insiders' "tell-all" accounts and leaked accounts of "what's really going on."

So the dirt revealed by opponents of the conflict--well, perhaps all that should be taken with a hefty grain of salt, too. The truth--if we dare even using that word--is we collectively know next to nothing about "what's really going on", and so profitably chasing speculation is all that's left.

---

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
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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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How Housing Bubble #2 Bursts

Corporate / private equity / STVR investors are all fair-weather owners of housing.

Let's indulge in some basic logic:

1. All credit-asset bubbles burst.

2. U.S. housing is a credit-asset bubble.

3. The U.S. housing bubble will burst.

The only variables are how and when Housing Bubble #2 will burst. That's today's topic.

I've been writing about housing since 2005, as Housing Bubble #1 was inflating. I've participated in / observed housing rising sharply in the late 1970s and the late 1980s, followed by deflation / stagnation. Housing Bubble #1--circa 2003-2008--was characterized by all the classic signs of a mania:

1. Participants denied it was a bubble. When greed displaces prudence, this isn't a bubble doomed to pop, it's the New Normal.

2. Fraud, malfeasance, misrepresentation, speculation and leverage were all rampant. In the euphoric ascent to ever higher valuations, why let foolish little things like income, risk management and credit ratings stand in the way of reaping more profits?

Housing Bubble #2 has rolled over into the decline phase, but this is discounted by the consensus which holds that higher mortgage rates dented the market; once they drop a bit, housing will resume its ascent to ever-higher valuations.

I see a different set of dynamics in play:

1. The 40+ year cycle of interest rates / bond yields has turned. Rates will not go back to zero and stay flatlined for years. Risk and inflationary forces have changed and are not returning to The Great Moderation.

2. The Federal Reserve / federal government effectively nationalized the mortgage industry post-2009 Global Financial Meltdown as the means to stop the decline of housing valuations and re-inflate them via super-low mortgage rates. The Fed bought a staggering $1.2 trillion of mortgage-backed securities in 2009-2010, up from zero--a monumental manipulation of the mortgage market that soon exceeded $1.6 trillion.

How the housing/mortgage market managed to survive without Fed nationalization prior to 2009 remains a mystery.

For its part, the federal government effectively nationalized the quasi-governmental mortgage agencies (Fannie Mae, Freddy Mac), using these agencies to guarantee most mortgages in the U.S.

3. The incentive (lower mortgage rates) to commit fraud by claiming to be an owner-occupant rather than an investor has pushed mortgage fraud to levels that Federal Reserve researchers declare "rampant." Owner-Occupancy Fraud and Mortgage Performance (A 46-page PDF report is available on this link.)

The study's authors found that "in most years, fraudulent investors make up roughly one-third of the total pool of investors." Fraud rates in excess of 13% were found in some states states.

The frenzy to buy and convert houses to short-term vacation rentals (STVRs) took off in the post-pandemic "revenge travel" boom. Corporate purchases of houses as rental properties had taken off in the post-2009 era of mass foreclosures, a trend that accelerated as private equity sought new markets to exploit.

Combine corporate / private-equity buyers with small investors flooding into STVRs and the post-pandemic panic-buying frenzy, and it's little wonder that investors--declared and fraudulent, large and small--now own huge swaths of housing in the U.S.:

Investors Bought 26% of the Country's Most Affordable Homes in the Fourth Quarter--the Highest Share on Record

An estimated 26% of Fort Worth's single family homes are owned by companies, city says

(Yes, family trusts and households can own housing as LLCs, but the study linked above paid no attention to the type of ownership; it paid attention to A) if the owners have multiple first liens, and B) whether they moved following the origination of their new purchase mortgage or not.)

4. The risks created by this preponderance of investor ownership are high. The Federal Reserve researchers found that fraudulent investors pose a much higher risk of default than declared investors and real owner-occupants.

As "revenge travel" shrivels up, property taxes and insurance rise and inflation ravages household budgets, STVRs are quickly shifting from income-producing assets to loss-generating liabilities. Investors either sell before they're under-water or the risk of default rises accordingly.

Professionally managed corporate and private-equity owners will start unloading properties as rents sag and vacancies rise. STVR owners who realize the tide has reversed will also rush to sell before the price slide gathers momentum.

Let's look at some charts for context. Here is a chart of total housing units. Confounding the conventional narrative of a "housing shortage," the U.S. added 7.6 million housing units in the five years 2020-2025, a rate far higher than the 8.6 million units added over 10 years 2010-2020.



Here is a chart of owner-occupied housing. Note that the number of owner-occupied homes was flatlined for 12 years--from 2005 to 2016. Then it suddenly leaps up by 10 million in a few years--from 76 million to 86 million. Did 10 million households all win the lottery, or is the bulk of this astounding increase the result of fraudulent investors posing as owner-occupant buyers?



This map shows the extent of investor mortgage -fraud.



This chart of Federal Reserve ownership of mortgage-backed securities (MBS) overlays neatly with each leap higher in valuations. Pump "free money" into the financial system and keep rates at historic lows, and voila, you can inflate a bubble for the ages.



The post-pandemic buying frenzy pushed the cost per square foot of houses listed for sale up 57%.



Unsurprisingly, this bubble pushed housing affordability to record lows.



The Case-Shiller Index offers a long-term view of how far valuations could drop once the bubble bursts. A 40% decline would be the norm, and a 50% drop would be well within the typical range of bubbles bursting.



The Fed's mass manipulation of mortgage rates in 2010 "saved" Bubble #1 from playing out in a free-market manner, but the Fed won't be able to engineer an equivalent "save" this time around, as the mortgage market has already been nationalized and the Fed already owns a stupendous $2.1 trillion of MBS.



Corporate / private equity / STVR investors are all fair-weather owners of housing. Once the profits shrink or reverse into losses, investors push the "sell" button. And since housing is priced on the margins, it only takes a handful of get-me-out sales to push valuations down 10%, then 20%, then 30% and eventually to a bottom between 40% anf 50%.

This vulnerability to the collapse of valuations is the bitter fruit of the Fed's manipulation of rates and mortgages over the past 16 years. We love a "free market" when rapidly expanding credit inflates a bubble, but oh dearie-dearie me, we have to stop the "free market" from operating if it bursts the bubble.

Here's how Housing Bubble #2 bursts: buyers of overvalued, money-losing properties vanish, those who waited too long sink underwater (sales prices are lower than what they paid), marginal investors default, owner-occupants who lose their jobs sell or default, private equity realizes their losses will only increase the longer they hold off selling, and the momentum of sellers far outnumbering buyers cascades.

Greed is replaced by fear, and then by the realization it's too late to exit without losses. This is how bubbles burst.

Of related interest: Paradise Lost (Melody Wright)

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My recent books:

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The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, 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 $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 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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Good News! AI Can Do More BS Work

A truly intelligent AI would refuse to do such transparently stupid, needless counter-productive BS Work.

So here's the good news about AI: it can now do more BS work, author David Graeber's term for the meaningless churning of bureaucratic "work" that lost its purpose and functionality long ago but is now considered "essential" to the operation of a system in which complexity and self-interest are the masters rather than tools to radically improve efficiency.

If we ask, what real-world tasks now take 90% less time, energy, effort and money to complete, the list boils down to marginal ephemera: now my online search for cute kittens is faster and better than ever! Now AI can conjure a look-alike commercial of cute kittens, a "product" whose novelty value wore off months ago.

Coding BS work got faster and easier, which means the load of BS work demanded can rise accordingly.

If we ask, what real-world tasks now take more time, energy, effort and money to complete, the list is long. Consider the accounting and filing of taxes, an enormous industry of self-serving bureaucracies: politicians need to tweak the tax code to foster the illusion they're serving a constituency they need to get re-elected and their campaign-contribution donors, a vast army of accountants, tax lawyers, etc. need this churn to justify their essential role in the process, and a vast regulatory system of state, local and federal agencies needs the churn to justify their ever-increasing payrolls to codify, publicize, monitor compliance and enforce the constant tweaks in the tax codes.

Adjusted for inflation and calculated as a percentage of GDP, tax receipts are remarkably stable. Tax revenues noodle around in a fairly narrow band, and so what's the systemic value-added proposition in constantly tweaking the tax code? There is none.

The entire exercise is a self-serving theater of the absurd which ultimately boils down to this: we have so much money sloshing around that we can siphon off staggering sums under the pretense of doing "essential work" that is actually unproductive or counter-productive BS work.

I've discussed the catastrophic collapse of efficiency and productivity in building permits and similar gatekeeping functions where activity slows to a glacial pace because stamps of approval must be obtained from a mafioso-type monopoly--a model that's been pursued with great vigor in healthcare, defense, Big Pharma, Big Tech and indeed, Big Everything, because concentrating power and wealth enables monopolies, gatekeeping, self-enriching churn, predatory pricing, diploma / accreditation mills, and all the rest of the sprawling, self-serving BS Work complex.

Billions of dollars are being "invested" (heh) in collecting data about consumers whose disposable income is set to drop to zero as the Everything Bubble bursts. What's the value of all that data when the cash and credit available for households and businesses to blow on fripperies dries up? Zip, zero, nada.

All available income will be spent paying the ever-increasing costs of BS Work. All this BS Work churn is highly inflationary, as we're collectively getting nothing but friction and costs--in effect, digging holes and then filling them back up, with zero gain in productivity, efficiency or quality of life.

What's remarkable is this highly inflationary churn attracts zero attention. This reflects the overwhelming power of self-interest: touche pas au grisbi: don't touch my skim, scam, stash, loot.

The stupidity of a system that spends hundreds of billions of dollars building data centers to do more BS Work because that's what's incentivized by self-interest is comically at odds with its grandiose, self-glorifying claims of artificial intelligence.

A truly intelligent AI would refuse to do such transparently stupid, needless counter-productive BS Work.



Regarding the vast sums of money available to blow on BS Work, to paraphrase Captain Renault's comment to Rick in the classic film Casablanca: "Someday money may be scarce."

---

My recent books:

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

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, 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 $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 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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And So It Begins

The hollowness of the status quo's self-correcting mechanisms is being revealed, and it's discomforting.

And so it begins. Call it whatever you want--how about the Great Unraveling for starters--and perhaps it's appropriate to discuss it on Friday the 13th, as old tales and superstitions are part of the mix.

Let's start with two superstitions that are not yet recognized as superstitions.

1. There are very smart people who will work very hard to keep the status quo glued together. It's unwise to bet against them.

2. Technology is Progress and Progress is inevitable.

These seem valid until the tide turns. As the sand castles erode and collapse, these are revealed as belief structures, not facts. We like to think smart people, technology and Progress will solve all difficulties without causing us any pain. When the tide is receding, this seems to be the case. See, problems are getting resolved, technologies are making life better, and Progress is advancing everywhere.

But beneath this veneer of confidence, buffers have thinned and long-smoldering conflicts are catching fire. Nuclear ambitions, nuclear threats--these never went away, and now the buffers containing them have eroded.

The buffers of financialization and globalization have thinned to the point that crisis management has been normalized. Rather than rebalance a corrupted economy and ship of state when the second of two credit-assets bubbles burst in 2008, the very smart people who work very hard shoved the throttle to maximum and ran the speedboat right over the reef.

Rather than accept the limits of a system geared to increase inequality and waste regardless of PR policy tweaks, to maintain the illusion of stability they gunned the engines of financialization and globalization into hyper-financialization and hyper-globalization.

The reef shredded the hull, but momentum and the mighty engines of cheap oil and money creation kept the doomed craft afloat for 16 long years. The PR machinery duped the passengers into believing this unstable hyper-state of spiraling inequality and squandering resources in the name of "growth" was not just permanent, it was inevitable.

The PR has now reached the pathetic stage of self-parody. The soil we all depend on for food has been depleted, but no worries, a robot will wander over the lifeless fields zapping weeds, so problem solved! The faith that simplistic technologies will painlessly solve complex human and ecological problems was always child-like, but grandiose egos and greed were more than enough to push this childish faith to self-parodying absurdity.

So 19 American families have the same net worth ($2. 6 trillion) as 110 million Americans--no problem, there's an app that resolves that.

Conflicts traverse a familiar landscape. Those dissatisfied with the status quo seek change, and those content with the status quo seek to distract, placate or bribe the discontented without relinquishing any of their power and perquisites.

The greater the concentration of wealth and power in a ruling elite, the greater the opportunities for delusion and catastrophic misjudgment. The concentration of power and wealth have reached extremes throughout the world, and so the stage has been set for miscalculations, clashes of ego, delusional confidences and beliefs and desperate gambles by those who can't afford to lose.

Nobody noticed--or admitted--that the buffers protecting all these forces from breaking out have been thinned by decades of destruction, fraud, corruption, waste, inequality and propaganda that everything was going just fine because it was going just fine for those at the wheel of power and wealth.

The hollowness of the status quo's self-correcting mechanisms is being revealed, and it's discomforting. All is not as it seems, and so it begins. Call it whatever you want, but hyper-normalizing it with fine-sounding cover stories won't repair the shredded hull.

---

My recent books:

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

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, 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 $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 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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