Wednesday, April 14, 2021

The Middle Class Has Finally Been Suckered into the Casino

The Fed's casino isn't just rigged; it's criminally unstable.

The decay of America's middle class has been well documented and many commentators have explored the causal factors. The bottom line is that this decay isn't random; the income of the middle class isn't going to suddenly increase at 15 times the growth rate of the income of the top 0.1%. (see chart below)

The income of the top 0.1% grew 15 times faster than the incomes of the bottom 90% because that's the only possible output of America's distorted financial system. The same can be said of the rising asymmetry of wealth: the top 10% own 2.5 more wealth than the middle class (51% to 90%) and 34 times the wealth of the bottom 50% as a result of the asymmetric structure of our financial system.

In a truly market economy, risk avoidance is rational as risk can wipe you out.

In a financial system rigged to reward the biggest and most aggressive speculators, risk avoidance is irrational because all the gains generated by the economy go to the biggest and most aggressive speculators rather than to the most productive workers or enterprises.

The Federal Reserve has stripmined savers and the risk-averse to funnel all the gains to its predatory, parasitic cronies--Wall Street banks, financiers and global corporations, turning rational risk aversion on its head: it's now rational to gamble in the rigged casino, as that's the only avenue left to protect one's stake.

For 12 long years, savers have been eviscerated while gamblers have been ceaselessly backstopped and bailed out by the Fed. In the Fed's rigged casino, it's not only rational to make high-risk bets, it's rational to borrow as much money as you can to increase your stake and leverage your bets--because the Fed has our backs and so every wager on markets lofting higher will pay off.

It's crazy not to max out credit and leverage because the Fed has guaranteed every punter will be a winner. I explained the feedback loop this creates--the more the Fed guarantees markets will never be allowed to decline, the greater the incentives to borrow and leverage ever riskier bets in the Fed's casino--in my post The "Helicopter Parent" Fed and the Fatal Crash of Risk.

The middle class has finally surrendered the last of its rational risk-aversion and gone all-in on bets in the Fed's rigged casino. Big players don't use margin accounts in brokerages; they have immense lines of credit and tools to leverage their bets. It's the so-called retail traders who use margin, and so the unprecedented highs in margin debt are evidence that the middle class has gone all-in on bets markets will only loft higher forever. (see chart below)

Record inflows into equities adds more evidence that the middle class has been suckered into the Fed's rigged casino. (see chart below) Why lose money every day in savings and money market accounts when newbie punters are raking in $250,000 a month playing options on Gamestop?

Alas, the majority of this "wealth" is phantom, as revealed by the chart of tangible (real) / intangible (financial) assets. The Fed's casino prints trillions of dollars and gives them to the biggest gamblers for free, and so the artificial semblance of free money for everyone who gambles is compelling.

Unfortunately, the Fed's casino is only rigged to benefit the Fed's cronies. Everyone else is suckered in to lose whatever they have. The Fed's cronies have been impatiently waiting for the suckers to surrender their rational risk aversion and flood into the rigged casino to share in the Fed's limitless wealth machine: the more you risk, the more you win!

But the wealth is illusory. The Fed can create currency out of thin air and give it to its predatory, parasitic cronies, but this isn't real wealth. Real wealth has to be generated by work and investing in productive assets.

The Fed's casino isn't just rigged; it's criminally unstable. Once the phantom wealth evaporates and returns from whence it came (i.e. thin air), the unfairness of the Fed's financial system will trigger a Cultural Revolution that the Fed will be helpless to control, for everything the Fed can do will only accelerate the unraveling.












If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon 41: Can't get you out of my head (58 min)

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

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).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

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



Become a $1/month patron of my work via patreon.com.




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Monday, April 12, 2021

The "Helicopter Parent" Fed and the Fatal Crash of Risk

All the risks generated by gambling with trillions of borrowed and leveraged dollars didn't actually vanish; they were transferred by the Fed to the entire system.

The Federal Reserve is the nation's Helicopter Parent, saving everyone from the consequences of their actions. We all know what happens when over-protective Helicopter Parents save their precious offspring from any opportunity to learn from mistakes and failures: they cripple their child's ability to assess risk and learn from failure, guaranteeing fragility and catastrophically blind-to-risk decisions later in life.

Helicopter Parents generate a perfection of moral hazard, defined as there is no incentive to hedge risk because one is protected from its consequences. Moral hazard perversely increases the incentives to take on more risk because Mommy and Daddy (the Fed) will always save me / bail me out.

For example, when Mommy and Daddy make their reckless teen's DUI charge go away, the teen's already potent sense of godlike liberation from real-world consequences floats even higher. So next time the teen gets into his car drunk and takes his friends on a high-speed spin down Mulholland Drive, he loses control and kills everyone in the car--not just himself but those who trusted his warped sense of risk.

The Fed is the ultimate Helicopter Parent, protecting all the power players in our economy and society from the consequences of their risky actions. By crushing interest rates to near-zero, the Fed has perversely incentivized increasingly risky expansion of credit, and given the green light to there's no limit, spend as much as you want government borrowing.

The Fed's implicit promise to never let the stock market drop for more than a few days--the Fed Put--has incentivized every punter from billionaires to corporations to unemployed people with stimmy checks to max out their credit (or margin accounts) to increase their bets in the market casino.

The Fed has implicitly informed the bigger players that they can bet as big as they want because the Fed will always bail them out, transferring private losses to the public via Fed bailouts, lines of credit, backstops, etc.

The Fed has also signaled it will change the rules as needed to save its Players from loss. Mark-to-Market reveals the insolvency of the Players? Well, we'll just get rid of that. All fixed! (heh)

Once the path of moral hazard has been taken, a fatal feedback loop takes hold: as reckless punters take on more risk to boost their gains, the fragility and brittleness of their positions increases geometrically. This soon endangers not just their own bets but the entire financial system, as it's not just one punter who responds to the Fed's Helicopter Parenting promise of no consequences for taking on more risk--every punter gets the green light to take on more risk because the Fed has our back.

Indeed, now that the Fed Put has been established as unbreakable, it would be irrational not to max out margin to increase one's exposure to risky bets. And voila, margin debt has soared as the Fed has signaled its commitment to bail out every risky bet in the market casino.

Now that every punter has maxed out their margin account to increase their bets on markets lofting ever higher, the Fed has no choice but to increase the system's moral hazard: as punters respond to the Fed's incentives to take on more risk, the Fed has to expand its protection of punters from the consequences of their recklessness, which then increases their recklessness.

Nobody's ever had a more generous and godlike Helicopter Parent than the Fed. But alas, just as actions have consequences (first-order effects), those consequences have consequences (second-order effects): in the case of the Fed, credit and markets, the second-order effects are as catastrophic as the drunken teen's there's no risk I can't handle last race down Mulholland: all the risk that the Fed has supposedly dissipated into nothingness has been transferred to the entire financial system.

All the risks generated by gambling with trillions of borrowed and leveraged dollars didn't actually vanish; they were transferred by the Fed to the entire system, which is itself now too fragile and brittle to withstand even the slightest intrusion of consequence.

The entire financial system is now careening down a treacherous stretch of curves and blind spots, absolutely confident that being dead-drunk on the Fed's promise of never-ending gains in the market poses no risk whatsoever because the Fed has our back.

Unfortunately for the drunken teen, Mommy and Daddy could make the DUI go away but they can't bring the lifeless bodies of those who reckoned their distorted view of risk was actually accurate back to life.

Once the fragile, brittle, disconnected-from-reality system the Fed has created crashes, the Fed will be as powerless as all the other grief-stricken Helicopter Parents to reverse the irreversible consequences of their meddling with moral hazard.







Of related interest:

The West's Descent into 'Cultural Revolution' 1/18/19

Can't Get You Out of My Head (2021) - Part 1 of 6-- Adam Curtis documentary series which includes extensive footage and commentary on China's Cultural Revolution.

Resistance, Revolution, Liberation: A Model for Positive Change (book)

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (book)

Inequality and the Collapse of Privilege (book)



If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon 41: Can't get you out of my head (58 min)

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

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).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

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



Become a $1/month patron of my work via patreon.com.




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.

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Friday, April 09, 2021

Is a Cultural Revolution Brewing in America?

The lesson of China's Cultural Revolution in my view is that once the lid blows off, everything that was linear (predictable) goes non-linear (unpredictable).

There is a whiff of unease in the air as beneath the cheery veneer of free money for almost everyone, inequality and polarization are rapidly consuming what's left of common ground in America.

Though there are many systemic differences between China and the U.S., humans in every nation are all still running Wetware 1.0 and so it is instructive to consider what can be learned from China's Cultural Revolution 1966-1976.

China's Cultural Revolution was remarkably different from the Party's military-political victory of 1949. Where the political revolution was managed by the centralized hierarchy of the Communist Party (CCP), the Cultural Revolution quickly morphed from a movement launched by Mao into a decentralized mass movement against all elites, including Party and state elites which had been sacrosanct and untouchable.

The Cultural Revolution is not an approved topic in China today, and that alerts us to its importance.

Although ostensibly launched by Mao (as part of his 1966 purge of Party rivals), the Cultural Revolution very quickly devolved into a decentralized, semi-chaotic movement of Red Guards, students and other groups who shared ideas and programs but who acted quite independent of the Party's central leadership. (In systems language, semi-chaotic dynamics are emergent properties.)

If you examine Mao's statements that supposedly launched The Cultural Revolution, you'll find they're not much different from his many pronouncements in the 1950s and early 1960s, none of which sparked a violent national upheaval. The Cultural Revolution cannot be traced back to Mao's control or plans; rather, Mao served as the politically untouchable inspiration for whatever measures the local cadres deemed necessary in terms of advancing (or cleansing) the people's revolution.

The important point here is that the Cultural Revolution was not controlled by the political authorities, even as they maintained control of the Party and central government hierarchy in Beijing. But this was nothing more than an illusion of control: the forces of the Cultural Revolution had broken free of central command and control, even as the Red Guards expressed their loyalty to Mao and the principles of the Party as the politically approved cover for their rampage.

That's the irony of Cultural Revolutions: the authorities cannot claim it is a political counter-revolution because the cultural revolutionaries proclaim their loyalty to the ideals and principles the authorities claim to be upholding.

Cultural Revolutions in effect claim the higher ground, eschewing political influence for direct action in the name of furthering the ideals which the authorities have abandoned or betrayed.

Given the fragmentary nature of The Cultural Revolution, the history is equally fragmentary-- especially given the official reticence.

A recent academic book, Agents of Disorder: Inside China's Cultural Revolution, provides granular detail on the fragmented, decentralized, rapidly evolving dynamics of the movement:

"(The author) devoted decades to examining the local records of nearly all of China's 2,000-plus county-level jurisdictions. He found that factions emerged from the splintering, rather than the congealing, of class-based groups. Small clusters of students, workers, and cadres struggling to respond to Mao's shifting directives made split-second decisions about whom to align with. Political identities did not shape the conflict; they emerged from it. To explain this process of identity formation, he offers a theory of 'factions as emergent properties' and suggests that similar dynamics may characterize social movements everywhere."

In other words, groups modified their alliances, identities and definitions of "class enemies" on the fly, entirely free of central authorities. Factions splintered, regrouped and splintered again. In the chaos, no one was safe.

Those who lived through The Cultural Revolution are reticent about revealing their experiences. Even in the privacy of their homes in the U.S., their voices become hushed and their reluctance to give voice to their experiences is evident.

The unifying thread in my view is the accused belonged to some "counter-revolutionary" elite --or they were living vestiges of a pre-revolutionary elite (children of the landlord class, professors, etc.)--and it was now open season on all elites, presumed or real.

What generates such spontaneous, self-organizing violence on a national scale? My conclusion is that cultural revolutions result from the suppression of legitimate political expression and the failure of the regime to meet its lofty idealistic goals.

Cultural revolutions are an expression of disappointment and frustration with corruption and the lack of progress in improving everyday life, frustrations that have no outlet in a regime of self-serving elites who view dissent as treason and/or blasphemy.

By 1966, China's progress since 1949 had been at best uneven, and at worst catastrophic: the Great Leap Forward caused the deaths of millions due to malnutrition and starvation, and other centrally planned programs were equally disastrous for the masses.

Given the quick demise of the Let a Hundred Flowers Bloom movement of open expression, young people realized there was no avenue for dissent within the Party, and no way to express their frustration with the Party's failure to fulfil its idealistic goals and promises.

When there is no relief valve in the pressure cooker, it's eventually released in a Cultural Revolution that unleashes all the bottled-up frustrations on elites which are deemed politically vulnerable. These frustrations have no outlet politically because they're threatening to the status quo.

All these repressed emotions will find some release and expression, and whatever avenues are blocked by authorities will channel the frustrations into whatever is still open.

A Cultural Revolution takes the diversity of individuals and identities and reduces them into an abstraction which gives the masses permission to criticize the abstract class that "deserves" whatever rough justice is being delivered by the Cultural Revolution.

As the book review excerpt noted, the definition of who deserves long overdue justice shifts with the emergent winds, and so those at the head of the Revolution might find themselves identified as an illegitimate elite that must be unseated.

I submit that these conditions exist in the U.S.: the systemic failure of the status quo to deliver on idealized promises and the repression of dissent outside "approved" (i.e. unthreatening to the status quo) boundaries.

What elite can be criticized without drawing the full repressive powers of the central state? What elite will it be politically acceptable to criticize? I submit that "the wealthy" are just such an abstract elite.

To protect itself, a repressive status quo implicitly signals that the masses can release their ire on an abstract elite with indistinct boundaries--a process that will divert the public anger, leaving the Powers That Be still in charge.

But just as in China's Cultural Revolution, central authorities will quickly lose control of conditions on the ground. They will maintain the illusion of control even as events spiral ever farther from their control. The falcon will no longer hear the falconer.

In other words, once the social pressure cooker valve gives way, then the unleashed forces soon grasp that there are few limits on what they can criticize as long as they do so within an implicitly approved narrative--for example, "the wealthy" hoarded wealth and power and so it is just to claw it back by whatever means are available. Since the government failed to do so, the people will have to do so.

The extreme inequalities of wealth and power that are now the dominant dynamic in America are heating the cultural pressure cooker, and when the pressure can no longer be contained, then being recognized as wealthy will shift very quickly from something desirable to something to avoid at all costs.

The lesson of China's Cultural Revolution in my view is that once the lid blows off, everything that was linear (predictable) goes non-linear (unpredictable, fragmented, contingent, emergent, prone to extremes, uncontrollable). If America experiences a Cultural Revolution, the outcome won't lend itself to tidiness or predictability.

To use an analogy from previous blog posts, if the pendulum is pushed to an extreme, when it's released, it will reach an equivalent extreme (minus a bit of friction) at the opposite end. That could be an unexpected but entirely foreseeable Cultural Revolution.

Those who claim that can't happen in America are safely outside the pressure cooker, protected by a delusional confidence that since I'm doing great, everyone is doing great. Since real political agency is no longer allowed, then the pressure will find release outside the political system. It's just Wetware 1.0 running defaults few recognize.



Of related interest:

The West's Descent into 'Cultural Revolution' 1/18/19

Can't Get You Out of My Head (2021) - Part 1 of 6-- Adam Curtis documentary series which includes extensive footage and commentary on China's Cultural Revolution.

Resistance, Revolution, Liberation: A Model for Positive Change (book)

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (book)

Inequality and the Collapse of Privilege (book)



If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon 41: Can't get you out of my head (58 min)

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

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).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

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



Become a $1/month patron of my work via patreon.com.




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, Richard S. ($50), for your outstandingly generous contribution to this site -- I am greatly honored by your steadfast support and readership.

 

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Wednesday, April 07, 2021

What Could Go Awry?

All of which sounds very pretty indeed, but it does raise a question: can risk really be destroyed, or can it only be transferred? And if it can only be transferred, then what's it been transferred to?

What a remarkable moment in time: every asset is lofting higher, with no limits in sight. The path ahead is already well-scouted: the U.S. economy will add a million jobs a month until the cows come home, Covid will continue fading until it basically disappears as an issue, the dollar and volatility will continue their death-march toward zero (good for risk assets), oil and commodities are entering a new super-cycle of growth, as are stocks, bonds (now that pesky yields are falling), cryptocurrencies and housing-- all are entering super-cycles of high growth and essentially limitless expansion of speculative gains.

It's dreadful having a skeptical default setting, but there you have it: what could go awry? Seemingly nothing. Everything's accounted for and for anything out of the blue, we have the trusty Fed Put, the Federal Reserve's implicit promise to crush any spot of bother with a wall of freshly issued dollars and near-infinite credit.

Look on our works, ye Mighty, and despair, for we are the greatest power in the Universe! Resistance is futile, and so on. Indeed.

Since we're in an era in which speculators in any asset can't possibly lose, it's no surprise that punters are borrowing buckets of cash to increase their stake in the casino's can't lose gaming tables. The chart of margin debt offers an instructive history of can't lose speculative borrowing.

Margin debt is money borrowed from brokers against the collateral of stocks, mutual funds, ETFs, etc. The more your portfolio rises, the more money you can borrow on margin because your collateral is rising.

Let's start with the sad, pathetic pre-speculative Stone Age of the 1950s, 60s and 70s, dreary decades of rapid economic expansion and higher wages but dismally low levels of margin debt. The poor cave-creatures back then made little use of margin debt because their lives were an unending misery of risk. Back in that Dark Age, stock market participants could actually lose money--oh the horror!

The Black Death of risk roamed the land unhindered, until the all-mighty Federal Reserve established its impregnable fortress of the Fed Put: every market decline will be crushed, and speculators will be rewarded.

And so the glorious age of Speculative Mania began. The rules to guaranteed gain were simple:

1. Buy every dip, as the Fed Put would soon reverse any decline.

2. Borrow as much money as possible and throw it onto the gambling tables because the larger your bets, the greater your gains.

With risk vanquished, everyone who embraced speculation became a winner--a big winner. Only chumps didn't buy GameStop calls and reap a quick $250,000 or more in a few weeks.

And so margin debt soared and speculators prospered. All was right with the world. But then inexplicably, some sort of glitch occurred and the dot-com euphoria popped and stocks actually dropped. Punters received the dreaded margin call for cash or they had to liquidate their positions to reduce their margin debt.

Stocks soon recovered, and easy-to-borrow money flooded into housing and stocks, lifting markets to new euphoric heights. Another inexplicable glitch occurred, however, and that bubble popped, too, with extremely awkward consequences--the Global Financial Meltdown. But after the Fed tossed around a few tens of trillions of dollars in backstops, guarantees, mortgage purchases, bond-buying, lines of credit for any bank that faced losses, and so on, that strange interlude ended and margin debt and speculative gains continued their march to new heights of glory and guaranteed gains.



Which brings us to the present unprecedented levels of margin debt and can't lose speculative mania. Everyone is supremely confident that inexplicable glitches are now impossible, and nothing can possibly go awry on the path to new super-cycles of growth and speculative gains.

All of which sounds very pretty indeed, but it does raise a question: can risk really be destroyed, or can it only be transferred? And if it can only be transferred, then what's it been transferred to? The only possible answer appears to be the financial system itself. But never mind skeptical questions, the Fed Put is now the greatest power in the Universe and so speculative gains are guaranteed, forever and ever.

"Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.



If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon 41: Can't get you out of my head (58 min)

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

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).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

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



Become a $1/month patron of my work via patreon.com.




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, Willard S. ($100), for your outstandingly generous contribution to this site -- I am greatly honored by your steadfast support and readership.

 

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Sunday, April 04, 2021

What's Changed and What Hasn't in a Tumultuous Year

Inequality is America's Monster Id, and we're continuing to fuel its future rampage daily.

What's changed and what hasn't in the past year? What hasn't changed is easy:

1. Wealth / income inequality is still increasing. (see chart #1 below)

2. Wages / labor's share of the economy is still plummeting as financial speculation's share has soared. (see chart #2 below)

What's changed is also obvious:

1. Money velocity has cratered. (see chart #3 below)

2. Federal borrowing / spending has skyrocketed, pushing federal debt to unprecedented levels. (see chart #4 below)

3. Speculation has reached the society-wide mania level. This is evidenced by record margin debt levels, record levels of financial assets compared to GDP and many other indicators. (see chart #5 below)

Interestingly, every one of historian Peter Turchin's 3-point Political Stress Index is now checked. Recall that these are core drivers of consequential social disorder, the kind that leads to empires collapsing, the overthrow of ruling elites, social revolutions, etc.

1. Stagnating real wages (i.e. adjusted for real-world inflation): check

2. Overproduction of parasitic elites: double-triple check

3. Deterioration of central state finances: check

But what about social changes? This is an interesting topic because social changes are less easily tracked (few even ask relevant questions and compile the data). Social trends are often more difficult to discern, as surveys may not track actual changes in behavior: people may give answers they reckon are expected or acceptable.

Here are four long-term trends that may have been accelerated by the pandemic:

1. The residents of overcrowded tourist destinations are sick of tourists and are demanding limits that protect increasingly fragile environments and resident quality of life.

Here's a typical observation of a resident in Hawaii now that tourists are coming back:

Sunday I saw a group of 30 spring break tourists littering the beach with red cups and bottles of alcohol and trash. They had a table full of booze on the beach and were happily leaving their trash everywhere. No masks and no cares for Hawaii. When they left, instead of using the beach access they all climbed over the fence into someone's yard because it saved them a minute of walking.

No I don't miss tourists.


This is a global phenomenon. The absence of tourists has awakened a powerful sense that the profits (which flow into elite hands, not local economies) have taken precedence over the protection of what makes the destination worth visiting.

2. Work from home is here to stay. The benefits are too personal and powerful. Corporations demanding a return to long commutes and central offices will find their most productive employees are giving them "take this job and shove it" notices as they find positions with companies that understand that you can't turn back the clock or ignore the benefits of flexible schedules.

3. Consumer behaviors have changed and are continuing to change. This is not just an expansion of home delivery; it's a re-appraisal of big-ticket spending on concerts, entertainment, sports events and many other sectors that depend solely on free-spending consumers who ignore the recent doubling or tripling of prices.

4. Perceptions of the wealthy are changing. I touched on this topic in The Coming War on Wealth and the Wealthy (1/5/21) and The Coming Revolt of the Middle Class (1/27/21). Inequality is America's Monster Id, and we're continuing to fuel its future rampage daily.
















If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

AxisOfEasy Salon #40: Subprime Attention NFTs (1:01 hrs) --NFTs--non-fungible tokens...

Disconnects between the Economy and the Financial Markets (FRA Roundtable, 41 min)

My COVID-19 Pandemic Posts


My recent books:

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).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

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



Become a $1/month patron of my work via patreon.com.




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Thank you, Martin B. ($10/month), for your outstandingly generous pledge to this site -- I am greatly honored by your support and readership.

 

Thank you, Ignacio M. ($5/month), for your magnificently generous pledge to this site -- I am greatly honored by your support and readership.

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