Tuesday, September 28, 2021

The Market Crash Nobody Thinks Is Possible Is Coming

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

The ideal setup for a crash is a consensus that a crash is impossible--in other words, just like the present: sure, there are carefully measured murmurings about a "correction" but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.

What I'm calling for is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no "serious person" believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash:

1. As I noted in my call for the top, Is Anyone Willing to Call the Top of the Everything Bubble? (September 6, 2021), there is no history to support the widespread confidence that the extremes of over-valuation, leverage, euphoria and speculation last forever, or even much longer than the lifespan of a cockroach. We're well past that benchmark into unprecedented insanity. So what happens next: squish.

Just for the record, the Dow topped out on August 13, the S&P 500 topped out on September 2 and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work...)

2. The credibility of the Federal Reserve is in the dumpster, which just caught fire. As I explained in The Fed Is Fatally Corrupt-- And So Is the Rest of America's Status Quo (September 10, 2021), the Fed is corrupt on multiple levels--thoroughly, completely corrupt, and so are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.

This is finally leaking through the Fed corruption containment vessel as even the lackeys in the billionaire-owned corporate media are now fearful of losing whatever tattered shreds of credibility they still possess by refusing to acknowledge Fed corruption, over-reach and hubris. And so at long last, the Fed no longer walks on water. The Fed's fraudulent travesty of a mockery of a sham scam has finally breached the three-foor thick containment walls and the putrid stench of Fed corruption can no longer be bottled up.

Like any good kleptocratic Politburo, the Fed cashiered the two most indefensible scapegoats to divert attention from the equally corrupt incumbents presiding over the collapse of Fed credibility. Don't be surprised if the scapegoats are airbrushed out of official photos, per officially approved propaganda.

3. As I detailed in The U.S. Economy In a Nutshell: When Critical Parts Are On "Indefinite Back Order," the Machine Grinds to a Halt and Sorry, Fed, Inflation is Already Embedded, the fuel of the inflation rocket has just ignited and the clueless, corrupt Fed is watching the boost phase in abject, humiliating confusion, as the Fed is now completely powerless, having blown the opportunity to get ahead of the curve by reducing their making billionaires richer "stimulus" a year ago.

Inflation is not just embedded, it's global. Natural gas prices could triple in entire regions without even breathing hard, and the costs of other essentials could just as easily triple without breaking a sweat.

Inflation crushes risk-on speculative markets like, well, scurrying cockroaches. Squish.

4. The Fed has lost control of yields. We all know that liars reveal their dishonesty via micro-signals, and with this is mind, slow down the video of Fed Politburo speakers, starting with Chairperson Powell. Wealth inequality soaring? It's not our doing! etc.

Oops, the cat is out of the bag: the Fed has lost control of yields. Trust in the Fed's god-like powers is wavering, as punters and players realize the Fed's shuck-and-jive has finally lost its power to wow the greedy and the credulous.

Rising yields crush risk-on speculative markets like, well, scurrying cockroaches. Squish.

5. China is not "saving the world" this time. As I explained in What's Really Going On in China (September 23, 2021), China has other fish to fry and it isn't bailing out global markets as it did in previous bubble pops. Squish.

6. The rising US dollar is Kryptonite to speculative markets, emerging market debt and risk-on euphoria. Sorry about that, but you know what happens next: Squish.

7. The retail bagholders are now all-in. As I noted in Please Don't Pop Our Precious Bubble! (September 8, 2021), the retail punters have finally gone all-in on the "this bubble will never pop" Everything Bubble. As I observed in August, The Smart Money Has Already Sold (August 18, 2021) as the retail bagholders have poured more cash into the Everything Bubble than they did in the past decade or two.

This is of course the most reliable signal that a bubble is about to pop. Sorry about that: squish.

8. The buy the dip crowd has been so well-trained that they will provide the necessary buying to keep the cascade from gathering too much momentum. A stairstep down that sucks in buy the dip buyers is ideal for those profiting from the decline. First up: a rally to close the quarter positively to make it appear that every money manager beat the index funds. And so on.

But the net result is still: squish. Consequences can be put off for quite some time, but the rot beneath the machinations only amplifies the eventual collapse.

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.






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 Videos/Podcasts:

Charles Hugh Smith: Fed Assuring 80% To 90% Collapse Of Bubble (1:01 hr)(with Paul Eberhart, Silver Doctors)

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).



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Sunday, September 26, 2021

Sorry, Fed, Inflation is Already Embedded

The Fed and its minions are about to get what they so richly deserve: the full blame for the coming catastrophe.

The key justification for the Federal Reserve's zero-interest rate policy is that inflation is transitory. Sorry, Fed, inflation is already embedded, i.e. inflation is now a self-reinforcing feedback loop: price leaps trigger wage increase demands, supply constraint expectations are now built into wholesale cost increases, and all these increases in wholesale, retail and wage costs drive each other higher as participants now understand that higher wholesale costs drive higher retail prices which feed higher wages which feed higher costs.

The conventional consensus holds that globalization and technology are deflationary. But globalization is no longer deflationary as fragile supply chains logjam and break and prices on the margin soar as demand skyrockets due to hoarding and attempts to restock depleted inventories.

As for technology, the move to remote work is only selectively deflationary, for example, demand for commercial office space has cratered, driving lease rates off a cliff. But in the larger scheme of things, the major "advances" in tech have been concentrated in social media, which is arguably reducing productivity rather than increasing productivity.

Digitizing everything under the sun has made everything dependent on components which are now scarce, scarcities driven by multiple factors: planned obsolescence (so profitable when supply chains are functioning smoothly, not so profitable when supply chains are constrained), agonizingly long lead times to build out semiconductor fabs and exploit new sources of minerals, energy, etc., trillions of dollars in stimulus driving demand higher, which then feeds hoarding and inventory building, further pressuring supplies, and disruptions triggered by everything from the pandemic to shortages of energy.

American workers have been stripmined and abused for 40 years in classic boiling-the-frog fashion, and now they've finally had enough. The Great Resignation, like other drivers of inflation, is complex and cannot be reduced to a single cause. Like the other systemic drivers of inflation, labor refusing to work for low pay and being treated like pack animals has been a long time coming, and there are no quick fixes of the sort pundits promote.

Now that inflation expectations are embedded, there's no going back. Touting bogus inflation statistics ("we took out everything that went up in cost and look, inflation is low!") is not going to reverse the understanding that inflation is here to stay.

Now that participants understand their income will buy less in the future, they have a powerful motivation to buy something tangible now while the price is lower than it will be next year--a motivation that increases demand and pushes costs higher, which then reinforces the incentives to convert earnings into something real before the Fed destroys even more of the purchasing power. Wage earners have no choice but to demand much higher wages to partly offset soaring costs, and employers who refuse find employees are leaving en masse. Those who increase wages must raise prices to offset their higher costs.

Meanwhile, taxes, junk fees, user fees, etc. only ratchet higher--they never decline, ever. Participants understand the ratchet effect and this also drives demands for higher wages.

Corporate America has pushed the shrinkflation gimmick for years to mask the loss of purchasing power, but that gimmick is wearing thin. People are waking up and noticing there is 10% less in every package while the price jumps 10%--a real-world inflation rate of 20%.

Simply put, the Fed blew it. The inflationary drivers outlined above were all painfully obvious a year ago, and the Fed did nothing but enrich the already super-wealthy to the tune of tens of trillions of dollars while ripping the heart out of the bottom 90% who depend on pensions, disability, Social Security or wages, none of which keep pace with real-world inflation.

The Fed and its minions are about to get what they so richly deserve: the full blame for the coming catastrophe.

Seen on Twitter:







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.

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The Story Behind the Book and the Introduction.



Recent Videos/Podcasts:

Charles Hugh Smith: Fed Assuring 80% To 90% Collapse Of Bubble (1:01 hr)(with Paul Eberhart, Silver Doctors)

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).



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Saturday, September 25, 2021

Are We Really So "Rich"? A New Way of Defining Wealth

What if our commoditized, financialized definition of wealth reflects a staggering poverty of culture, spirit, wisdom, practicality and common sense?

The conventional definition of wealth is solely financial: ownership of money and assets. The assumption is that money can buy anything the owner desires: power, access, land, shelter, energy, transport and if not love, then a facsimile of caring.

The flaw in this reductionist definition is obvious: not everything of value can be purchased at any price--for example, health, once lost, cannot be purchased for $1 million, $10 million or even $100 million. A facsimile of friendship can be purchased (i.e. companions willing to trade fake friendliness for money), but true friendship cannot be bought at any price: its very nature renders friendship a non-commodity.

This explains the abundance of wealthy people who are miserable, lonely and phony to the core. Only commoditized goods and services can be bought with money or assets.

Given the limits of the conventional model of wealth, the question naturally arises: what if we defined wealth more by what cannot be bought rather than by what can be bought? Another way of making the distinction is to ask: what has been commoditized/globalized such that any person with money anywhere on the planet can buy it? What cannot be commoditized because it is intrinsically inaccessible to commodification?

We can start our inquiry with a series of questions:

1. What would be the impact on an individual's health if modern medicine/pharmaceuticals were no longer available? Put another way: how dependent is one's "good health" on commoditized interventions? How independent is an individual's health/vitality from commoditized medicine?

Health that is sufficiently vibrant that it has no need for commoditized medicine cannot be bought, and therefore it is a form of intrinsic (non-commodity) wealth.

2. Can a shipwrecked individual swim two miles through open ocean from a doomed ship to safety? Money has no value if there is no help that can be bought; the individual's only wealth in this situation (assuming they know how to swim) is their core physical strength and endurance--forms of wealth that cannot be substituted with money.

3. If Cicero was correct and "The man who has a garden and a library has everything," then let's ask not how extensive one's library might be in terms of the number of volumes, but ask how many of the books (or ebooks) have been read, absorbed and enjoyed by the owner?

In other words, it's not the ownership of a library which creates non-commoditized wealth but the joy, knowledge and pleasure derived from the reading of the books which defines wealth.

4. The same analysis can also be applied to a garden/orchard: what if we ask not how large the garden/orchard is in terms of square meters, but how expansive is the owner's participation in the care of the garden/orchard, how much pleasure is created by the toil and harvest, and how much of the bounty is shared with others?

5. How many friendships does an individual have that began in high school or earlier and are still vibrant? How many friends does one have who can be entrusted with the deepest personal crises? How many friends' homes are open to you, rain or shine?

What if we defined the person with no true friends as impoverished, regardless of their ownership of assets and cash? Many people seem to have professional acquaintances they call "friends" to mask their bottomless poverty of real friends and friendships.

6. What if wealth were measured in personal integrity, i.e. honesty, trustworthiness, compassion and the ability to remain accountable even as things fall apart?

This is of course just a start: we could continue our redefinition of wealth to include kindness, empathy, the skills needed to organize volunteer community work parties, and so on.

As we explore what actually cannot be bought or commoditized, it raises this question: what if our commoditized, financialized definition of wealth reflects a staggering poverty of culture, spirit, wisdom, integrity, warmth, kindness, friendship, practicality and common sense?




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 Videos/Podcasts:

Charles Hugh Smith: Fed Assuring 80% To 90% Collapse Of Bubble (1:01 hr)(with Paul Eberhart, Silver Doctors)

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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Thursday, September 23, 2021

What's Really Going On in China

Losses will be taken and sacrifices enforced on those who don't understand the Chinese state will no longer absorb the losses of speculative excess.

Let's start by stipulating that no one outside President Xi's inner circle really knows what's going on in China, and so my comments here are systemic observations, not claims of insider knowledge.

Many western observers have noted the centrality of Marxist-Leninist-Maoist doctrine in President Xi's writings. This is somewhat akin to invoking America's Founding Fathers to support one's current policies: if you're trying to modify state policy in China, you have to explain it in the context of the Chinese Communist Party's history and doctrines. Never mind if the ideals were not met; what's important is establishing continuity and resonance with the history of China, the core doctrines of Chinese Communism and the CCP's leadership based on those doctrines.

That said, we should be careful not to read too much into doctrinal evocations such as common prosperity, which are useful conceptual anchors and slogans but not the full story.

What's actually happening in China isn't Marxist or Capitalist--it's plain old non-ideological human greed, hubris and magical thinking manifesting as moral hazard running amok.. Moral hazard-- the separation of risk and consequence, as speculators make increasingly risky bets because they know any losses will be covered by the state--is effectively the new State Religion in China: everyone is absolutely confident that every punter, especially all the rich, powerful, well-connected speculators--will be bailed out by the central government.

Greed knows no bounds when a speculator is insulated from risk, for people have an insatiable appetite for risky bets when the gains will be theirs to keep but any losses will be covered by the government.

This is the fundamental story of Evergrande: the implicit backstop of the Chinese government enabled near-infinite moral hazard which then fueled an explosion of debt-funded speculation with essentially zero connection to real-world risks, sales, return on capital, etc.

Both the U.S. and China have been a utopian Paradises of moral hazard for the past 30 years. In the U.S., the Federal Reserve would bail out any losses / declines in the debt-asset bubble orgy.

In China, the implicit policy was that the structural losses in state-owned enterprises (SOEs) and the speculative excesses of rapid development would be tolerated as long as real growth in employment, wages, profits and lifestyles was strong. Creating vast amounts of debt-money was necessary to support growth, and that it also supported speculative excesses was accepted as part of the price of explosive progress, much like environmental damage.

After 30 years, the equation in China has changed: debt in the official banking sector and in the informal shadow-banking sector has soared along with purely speculative excesses while "good growth" has stagnated. That's the problem with incentivizing moral hazard: the profits from speculation, corruption and fraud far outweigh the puny profits earned by legitimate enterprises. So where do you put the borrowed billions? In Evergrande and other conglomerates of speculation.

Something else changed in 30 years of rapid development: inequality skyrocketed, and since inequality and corruption are mutually-reinforcing, corruption also reached new heights as inequality skyrocketed.

A third factor emerged after 30 years of touting technology and speculation: the power of Chinese Big Tech and financiers began encroaching on the control of the Communist Party.

All three factors inflated a debt-asset-speculative bubble of profound proportions, and President Xi grasped what the clueless Federal Reserve and other western central banks have not: Either pop the bubble when you still have some control over it or let it expand and pop when you've lost all control.

In systems terms, when risk and fragility reach unstable levels in tightly-bound systems, there's no controlling the supernova-like implosion of the system.

Xi observed the skyrocketing power of Big Tech, moral-hazard-incentivized financiers and cryptocurrencies and concluded that the state must move decisively to crush these rivals, regardless of cost. This separates China from the American state, which is incapable of enforcing any sacrifices, limits or costs on the parasitic elite which dominates its economy and political order.

Xi saw the danger of Big Tech and financiers being able to buy whatever influence they needed from corrupt CCP and state officials, and he realized that this is the crucial moment in history: either crush Big Tech and the financiers / speculators or risk losing control to their interests.

Control is something the CCP and Xi want to retain, regardless of the cost to the nouveaux riche, the parasitic elites, the aspirational middle class and even the Party regulars who have supped too often and too gloriously at the corruption / moral hazard trough.

Losses will be taken and sacrifices enforced on those who don't understand the Chinese state will no longer absorb the losses of speculative excess. Those who don't understand the reign of parasitic private-sector elites and excessively corrupt party officials in China is over might profitably ponder this Chinese proverb: "Whoever gets mixed up with garbage will be eaten by pigs."




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 Videos/Podcasts:

The Sample Hour #230 - Building Social Capital Through Community (1:01 hr)(with Drew Sample)

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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Tuesday, September 21, 2021

America 2021: Inequality is Now Baked In

This complete capture of all avenues of regulation and governance can only end one way, a kind of hyper-stagflation.

Zeus Y. and I go way back, and he has always had a knack for summarizing just how insane, disconnected from reality, manipulative and exploitive the status quo narrative has become. I've occasionally published his commentaries and essays here since 2008 Imaginary Worth, Empire of Debt: How Modern Finance Created Its Own Downfall (October 15, 2008), not coincidentally, in the midst of the previous debt-fueled speculative bubble popping.

Here is Zeus's recent commentary on my opting out essay:

"Regarding your excellent recent article: Now That the American Dream Is Reserved for the Wealthy, The Smart Crowd Is Opting Out:

1) The sock puppet theater assumption among the technocrats that economies ebb and flow, go bull and bear, and have moments of advancement and retraction is now irretrievably disproven. We have gone past "too big to fail, too big to jail" and escalated to "so big as to fail upward always and to get away with everything no matter how venal".

When the Fed decided to buy up non-investment grade junk bonds fo the first time in its 107-year history, we now have no semblance of the (always iffy and now absurdly irrelevant) "self-regulating" economy. More and more extreme intervention on behalf of the super-rich (even as the real economy is tanking) will mirror the vaccine mandates on behalf of Big Pharma, even as their vaccines are tanking. "Draining trillions of dollars and stashing them in offshore accounts? You deserve a tax break!"

We have gone far past "moral hazard" and a "rigged game," where the super-rich will make out like bandits, even if they cause a crash. We are in the next phase where it becomes profitable to cause hyperinflation and crashes (which you control by your monopoly powers), and then simply "siphon" (the apt term from this article) whatever is left of the savings and sweat of Jose and Maria American. Inflate and crash. Inflate and crash. Quick money. Guaranteed government bailouts. Manipulated markets (including cybercurrency by the way-- can you say JPMCoin?).

There is only one way out. Refuse the sordid mess, which has gotten so absurd, and the myths so hollow (educating yourself into massive debt, and working hard, only to be "rewarded" with some downsized employee's work being loaded on you) that there can be no other ultimate option but non-violent civil market disobedience.

2) What is the future of the developing juggernaut called predatory global capital, and their preferred cocaine called "zero interest rate, infinite money printing (ZIRIMP?)?

a. The super-rich will continue to borrow unlimited sums of money at near zero interest rates, so they can claim this new "debt" as a deduction and pay no income tax whatsoever (while vacuuming up every tangible good with this funny money)

b. The super-rich will use the same value-free money to buy stocks (of their own companies and others) sending those valuations and options soaring on nothing other than an artificial and infinite "demand", while being assured of special treatment and no prosecutions.

c. The super-rich will circle wagons around one-another-- Big Legacy Media, Big Social Media, Big Pharma, etc. This can be seen in Big Social Media's promotion to disinformation by the Biden administration and censoring of real and critical scientific pushback because the billions of taxpayer-funded government contracts Big Everything knows they can get if they play along. Again, we will see acceleration toward rebellion, as people are finding ways to move away from these monopolies like YouTube and Facebook into Telegram, Rokfin, and Rumble.


d. Not only have the "little people" had $50 trillion of their productivity stolen, but many trillions more for having an effective savings interest rate of 0% for the past 12 years. What are we "saving up for" when our money in savings has literally no growing power at all? Who needs workers anyway when you can ship every productive asset and manufacturing to China, and have them holding both the strings and the bag of the global economy?

e. This complete capture of all avenues of regulation and governance can only end one way, I can see, a kind of hyper-stagflation, i.e. plummeting (real) growth and hyperinflation as both Fed and government "stimuluses" only supply trillions of dollars more to the richest while the little guys gets screwed over and over under the guise of helping them (where "paycheck protection programs" fund hedge funds on Wall Street and somehow manage to miss mom-and-pop businesses on an increasingly shuttered Main Street).

This growing gap will reach a critical point when we have supply line collapses and unpredictable events around credit. Perish forbid if we have an interruption of the internet. We are headed to that station, GBOAT, the Greatest Bubble Of All Time alright, and it is just a matter of how long it's going to take for this runaway train to get there."

by Zeus Yiamouyiannis, Ph.D.
Consultant, Learning transformation, leadership, and design
Citizen Zeus (http://citizenzeus.com) "Learn to Transform"
Transforming Economy: From Corrupted Capitalism to Connected Communities


Thank you, Zeus. Well said: inequality is well and truly baked in.










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 Videos/Podcasts:

The Sample Hour #230 - Building Social Capital Through Community (1:01 hr)(with Drew Sample)

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).



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Sunday, September 19, 2021

Now That the American Dream Is Reserved for the Wealthy, The Smart Crowd Is Opting Out

The already-wealthy and their minions are unprepared for the Smart Crowd opting out.

Clueless economists are wringing their hands about the labor shortage without looking at the underlying causes, one of which is painfully obvious: the American economy now only works for the top 10%; the American Dream of turning labor into capital is now reserved for the already-wealthy.

As a result the Smart Crowd is opting out of the conventional workforce's debt-overwork-deadend-treadmill. What clueless economists, pundits and politicos don't dare acknowledge is that credentials and hard work are not a ticket to middle-class security; they're a ticket to impossible workloads demanded by global corporations and high-cost lifestyles anchored by student-loan debt, high rents and out-of-reach real estate.

In other words, credentials and hard work are a deadend. Costs rise faster than your income no matter how hard you work, and corporations are ruthlessly extractive despite the bogus PR of "we value our employees": just as government only values its tax-donkeys after they're gone, corporations only value their employees after they burn out and leave the Corporate America treadmill for good.

Credentials and hard work are a deadend financially and health-wise. The stress of overwork breaks down physical and mental health, slowly and then all at once. Financially, the endless inflation of asset bubbles means younger workers must buy assets at the top of the bubble and hope the bubbles won't pop--but since bubbles always pop, the game of enticing younger workers into buying overvalued stocks, junk bonds and houses is a deadend: rather than building real wealth, gambling in bubbles is ultimately destructive to both wealth and health, because once the phantom wealth generated by a bubble dissipates, those who believed it was all forever are devastated.

The hope that there will be a safe haven when bubbles pop is another aspect of this time it's different, and this belief has led many to drop out of the workforce to speculate their way to wealth. Given this is the greatest bubble of all time (GBOAT), this strategy has been gloriously successful, as the rising tide has raised all boats across virtually every asset class.

But few of the newly minted millionaires have any experience of bubbles popping, and so few are prepared for the end-game. Since bubbles often exhibit symmetry, the skyrocket ascent will likely be matched by a catastrophically steep decline that leaves this time it's different believers in disbelief.

Things are different for the top tier of the already-wealthy. When family money pays for college and the down payment on a house, the lucky offspring have no student-loan debt chains hobbling them and none of the hopeless Red Queen's Race of trying to save up a down payment as housing prices accelerate away from the hapless savers.

Family money offers other cost-free goodies to the fortunate offspring: use of the family vacation home, income from family trust-fund assets, the benefits of family connections (for example, the advantages given to alumni of prestigious schools in terms of admitting their offspring) and valuable class-based memberships, both formal and informal.

Trying to reach the same level as the already-wealthy is a path to burnout and frustration, as the chasm is too wide to leap. Those gambling in the GBOAT casino are winning now, but relying on number 22 coming up again and again is becoming increasingly risky. The speed with which the phantom wealth of debt-asset bubbles can collapse is not widely understood, and the collapse will catch most punters off-guard.

In other words, membership in the already-wealthy based on speculative gains may prove more temporary than expected.

There are many ways to opt out. Here's one account of one strategy: What I learned from living five years in a van (theguardian.com).

The already-wealthy and their minions are unprepared for the Smart Crowd opting out. In their precious naivete, the technocrat class reckons a few more dollars an hour will lure the Smart Crowd back into wage-debt-penury. The failure of their pathetic little carrot to entice the burned out donkeys back to the harness of making billionaires wealthier in exchange for, well, nothing of any real value, will be a great shock for those who believe that since the status quo works great for me, it works great for everybody.

The banquet of consequences hasn't even served the main course but it's on the way from the kitchen.










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Recent Videos/Podcasts:

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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).



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Friday, September 17, 2021

Ministry of Manipulation: No Wonder Trust and Credibility Have Been Lost

Now that every financial game in America has been rigged to benefit the few at the expense of the many, trust and credibility has evaporated like an ice cube on a summer day in Death Valley.

Here is America in a nutshell: we no longer solve problems, we manipulate the narrative and then declare the problem has been solved. Actually solving problems is difficult and generally requires sacrifices that are proportionate to one's wealth and power. But since America's elite are no longer willing to sacrifice any of their vast power for the common good, sacrifice is out in America unless it can be dumped on wage earners. But unfortunately for America's elite, four decades of hidden-by-manipulation sacrifices have stripmined average wage earners, and so they no longer have anything left to sacrifice.

Enter the Ministry of Manipulation, which adjusts the visible bits to align with the narrative that the problem has been fixed and the status quo is godlike in its technocratic powers. All this manipulation doesn't actually solve the problems, it simply hides the decay behind gamed statistics, financial trickery and glossy PR. The problems fester until they break through the manipulated gloss and the public witnesses the breakdown of all the systems that were presented as rock-solid and forever.

Let's take three core fields of manipulation: cost of living, Social Security and the stock market bubble. Each is a key signifier of the status quo functioning as advertised, and so manipulating them to fit the narrative is the elite's prime directive. Goodness knows what would happen if people were exposed to the unmanipulated reality, but it wouldn't be good for America's self-serving power elite.

The cost of living--the Consumer Price Index (CPI), a.k.a. inflation--is the most threadbare trash heap of manipulation currently on display. Fully 40% of the Index is based on the opinion of random people rather than easily tabulated real-world data. I refer to the government's comically wacky method of reckoning the cost of housing: ask a random bunch of homeowners what they guess they could rent their house for.

But wait, why not simply tabulate the actual rents being paid? That data is easily available, and could be made apples-to-apples by applying the methodology of the Case-Shiller housing index, which is to track the cost data of the same homes / flats over time. This would provide reliable data on the actual increase or decline in rents being paid.

Gathering actual real-world date is anathema because then the CPI would be much higher and not so easily manipulated. The same can be said of all the other tricks of manipulating the cost of living: seasonal adjustments (i.e., lop off price increases and attribute the reduction to "seasonality") and hedonic adjustments (i.e., after adjusting for the better stereo and the rear-view camera, today's $40,000 car is tabulated as "cheaper" than yesteryear's $10,000 car of the same size).

If these same adjustments were applied to the weight and height of individuals, a 6-foot tall individual weighing 200 pounds would be "adjusted" to 6 inches in height and a weight of 2 pounds. This is a slight exaggeration but not by much, as today's calculation of expenses are laughably understated in the CPI: today's cars haven't risen in cost at all according to the CPI, even as the number of work hours needed to buy a new car have skyrocketed--that is, when measured in purchasing power of wages, vehicles are much more expensive now.

Then there's healthcare, which is a weighted as light as a feather in the CPI. Healthcare-- you know, that sector which routinely bankrupts American families with bills in the tens of thousands?--is weighted as roughly equal to clothing. This is beyond absurd, but par for the CPI course of endless manipulations, all aimed at reducing the CPI so the public can be lulled into a fairyland belief that inflation has been trifling for decades, even as their paychecks buy a third less than they did a decade ago.

Next up, the appalling manipulation of Social Security. The first step is manipulating the CPI down so seniors' annual increases can be held to near-zero (no better brand of cat food for you, retirees--tighten your budget if you want the lights to stay on).

The truly big manipulation is the artifice that there is a mythical "trust fund" that we are drawing down to pay Social Security benefits. The trick was pulled decades ago, when Social Security taxes did in fact go into an independent agency account. President Johnson decided that he needed all that "free money" to pay for his misadventure in Vietnam, so the Social Security account was combined with the federal general fund, and an accounting gimmick was created: a completely fake class of IOUs that were presented as a "trust fund", IOUs with no marketable value at all.

There is no trust fund. When Social Security runs a deficit, the Treasury borrows the money in the same way it borrows all the other trillions of dollars needed to cover federal deficits. The money borrowed to pay Social Security is borrowed exactly like the money needed to pay the cost overruns on the F-35 aircraft or the fraud-riddled bills for meds paid by Medicare.

It's all smoke and mirrors and artful manipulation, designed to serve the interests of those running the show. It's the Big Con, intended to lull the public into a false confidence in the status quo narratives and technocratic magic.

Speaking of magic, look at how the stock market hits a low and then roars higher the same day every month. The "market" manipulation is so obvious that Comrade Powell of the Federal Reserve Politburo doesn't even bother explaining it. The Politburo cronies just buy the dip, the Fed and its proxies (Blackrock, cough-cough) jam stocks higher and the Fed's cronies pocket billions--as shown on the chart below of the billionaires' soaring Fed-generated wealth.

No wonder public trust in America's self-serving institutions has cratered, and the credibility of the manipulators has been crushed. Now that every financial game in America has been rigged to benefit the few at the expense of the many, trust and credibility has evaporated like an ice cube on a summer day in Death Valley.










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 Videos/Podcasts:

The Sample Hour #230 - Building Social Capital Through Community (1:01 hr)(with Drew Sample)

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).



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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.

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Wednesday, September 15, 2021

The Illusion of Getting Rich While Producing Nothing

By incentivizing speculation and corruption, reducing the rewards for productive work and sucking wages dry with inflation, America has greased the skids to collapse.

Of all the mass delusions running rampant in the culture, none is more spectacularly delusional than the conviction that we can all get fabulously rich from speculation while producing nothing. The key characteristic of speculation is that it produces nothing: it doesn't generate any new goods or services, boost productivity or increase the functionality of real-world essentials.

Like all mass delusions, the greater the disconnect from reality, the greater the appeal. Mass delusions gain their escape velocity by leaving any ties to real-world limitations behind, and by igniting the most powerful booster to human euphoric confidence known, greed.

Lost in the mania of easy wealth from speculative trading is the absence of any value creation in the rotation-churn of moving bets from one table to the latest hot game: in flipping houses sight unseen, no functionality was added to the house. In transferring bets on one cryptocurrency to another or from one meme stock to another, no value to the economy or society was created.

In the mass delusion that near-infinite wealth can be generated without producing anything, creating value has no value: the delusion is that I can get rich producing nothing but speculative gains, and then I can buy all the stuff somebody else is making.

The fantasy powering the speculative frenzy is once I get rich, I'll stop working and live off my wealth. It's interesting, isn't it, how everyone can get rich via unproductive speculation, quit their jobs and then live off the productive work of somebody else who failed to get rich off speculation.

Maybe that's why all the container ships are lined up at Long Beach, waiting to unload the goodies made in China for American speculators to buy. This is what happens when the incentive structure of the economy decays so that being productive has little upside (i.e., working is for chumps) while speculating is all upside (get rich quickly and easily).

Everyone knows great empires became great by transferring their critical supply chains to competing nations, living it up on borrowed/printed money, exploiting the highest bidder wins regulatory/governance system and incentivizing speculation while pushing wage earners into debt-and-tax servitude. Bone up on your history, Bucko; all great nations got there by quitting boring, tiresome productive work to speculate on illusions of value with borrowed money.

This is the result of monopolies and cartels becoming the financial and political power centers of the nation. Maximizing private gains is all that matters in this incentive structure, and so treating employees as chattel to lower costs, offshoring critical supply chains to squeeze out a few more dollars of profits, engineering products to break down (planned obsolescence), buying regulatory barriers and "free passes" and tax breaks galore with all the billions showered on financiers and other fraudsters by the Federal Reserve: in a word, a system that optimizes corruption.

This is how you hollow out a nation and guarantee collapse. The most rewarding "skillsets" are a sociopathological obsession with maximizing profits by any means available and speculating with Fed free money for financiers. The millions of "retail" speculators are simply picking up the cues being given by the billionaires who gained their wealth by issuing debt to fund stock buy-backs and other financial manipulations.

Working for monopolies and cartels is for chumps because monopolies and cartels have zero incentive to share profits with mere employees. Their profits are made not by taking care of their workforce but by regulatory capture, artificial scarcities and financialized destruction of competition: first, borrow billions thanks to the Fed and Wall Street, destroy the competition (for example, the taxi industry), then once the competition has been wiped out, jack up prices because now consumers have no choice other than another member of the cartel.

Speculative "wealth" is phantom wealth, a flickering illusion of prosperity. All speculative bubbles pop, and all speculative bubbles inflated by borrowed money and central bank manipulation pop even more ferociously than bubbles funded by actual savings.

By incentivizing speculation and corruption, reducing the rewards for productive work and sucking wages dry with inflation, America has greased the skids to collapse. As with all mass delusions, the incentives to continue believing are immense and the incentives to reconnect with reality few.

So in conclusion: the speculative gains to be made in the collapse of the mass delusion will be spectacular. There's nothing like the collapse of a hollowed out, completely corrupt economy to generate outsized profits for nimble speculators. Just keep your speculative winnings on number 22 on the roulette wheel. (A Casablanca movie reference....)




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 Videos/Podcasts:

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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).



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Monday, September 13, 2021

The U.S. Economy In a Nutshell: When Critical Parts Are On "Indefinite Back Order," the Machine Grinds to a Halt

A great many essential components in America are on 'indefinite back order', including the lifestyle of endless globally sourced goodies at low, low prices.

Setting aside the "transitory inflation" parlor game for a moment, let's look at what happens when critical parts are unavailable for whatever reason, for example, they're on back order or indefinite back order, i.e. the supplier has no visibility on when the parts will be available.

If the part that blew out is 0.1% of the entire machine, and the other 99.9% still works perfectly, the entire machine is still dead in the water without that critical component. That is a pretty good definition of systemic vulnerability and fragility, a fragility that becomes much, much worse if there are two or three components which are on indefinite back order.

This is the problem with shipping much of your supply chain overseas: you create extreme systemic vulnerability and fragility even as you rake in big profits from reducing costs. Speaking of costs, let's look at the costs of having a large, costly, complex mechanism sitting idle in a non-functioning state due to some broken element for which there is no substitute available. Whatever productive capacity the mechanism, process, etc. had is now stuck at zero.

Buying a new replacement is extremely costly, and that's not always available for all the same reasons that parts and components aren't available. Finding someone to fabricate a new component is not easy due to the wholesale transfer of manufacturing moxie and capability overseas.

You might be able to find someone to weld a replacement strut, but try finding someone to fab a new bicycle derailleur or better yet, a multilayer semiconductor chip. What about 3-D fabrication? Doesn't that solve this problem? If the part can be "printed," yes, but there are limits on what can be 3-D fabbed. You can't 3-D fab a complex thermostat or controller, for example. You can't 3-D fab a rubber gasket, either, or a great many other bits of petrochemical-based manufacturing.

Scarcities are not limited to parts and components; skilled people can be scarce, too. For example, there is a limited supply of ICU doctors and nurses. The training required to work in an ICU is specialized and experiential; throwing someone with minimal training in is not a substitution that's going to work. You can't order an ICU staff from China or print one digitally the way the Federal Reserve creates currency out of thin air. It takes many years to train the staff to function at a high level in ICU.

A great many such labor scarcities exist for skilled workers who cannot be replaced except by someone with the same training and years of experience. This is one reason ICUs can break down: there is no replacement staff available, and no way to "print more."

It turns out there's also a scarcity of people willing to do the dirty-work jobs America needs done for wages that haven't kept up with inflation. As I have explained here, the $1.65 minimum wage I earned in 1970, if factored for real-world inflation, is around $18 per hour, and arguably closer to $20 per hour.

The solution is to raise the pay to levels that attract workers, but then this requires raising prices on the good and services to the point that customers can no longer afford them.

But wait, can't we automate all work and deliver full-gee-whiz free-money, no-work communism to everyone? I invite everyone who reckons this is in the realm of the do-able to design, program and manufacture an automated robot that can trundle out to the laundry room, pop open a broken clothes dryer, diagnose the problem, manage to find a new controller board, fit it correctly and properly reconnect all the little wiring bits, close it up, test it, lift the dryer back on the washing machine and do all that for the relatively modest cost of a human repairperson. When you accomplish fabricating and programming that robot to do all the work without instruction or oversight, by all means let us all know how much it cost to design, program and manufacture, what the payback of the development and manufacturing process will cost amortized over the (short) life of the robot and how reliable it is in the real world.

The point is, fantasies are nice but reality is far more demanding.

There can also be scarcities of competence. There may be replacements who claim competence, but when reality intrudes on the shuck-and-jive, their competence was illusory, and the net result is the entire institution can be described by President G.W. Bush's memorable phrase, this sucker's going down.

There can also be scarcities of institutional infrastructure and capacity. Once the institution, enterprise, state agency, etc. has been stripmined of redundancy, institutional memory and competence, then the first scarcity that cannot be replaced is the first domino that topples all the other dominoes of systemic vulnerability and fragility.

The Federal Reserve can print trillions of dollars and the federal government can borrow and blow trillions of dollars, but neither can print or borrow supply chains, scarce skills, institutional depth or competence. That nice shiny new semiconductor fab you reckon will resolve the chip shortage? You can print the billions of dollars needed in an instant, but the machinery, expertise and time can't be conjured quite so easily. That fab is years away from completion no matter how many freshly conjured dollars you throw into the air.

When Critical Parts Are On "Indefinite Back Order," the Machine Grinds to a Halt: that's the U.S. economy in a nutshell.

A great many essential components in America are on indefinite back order, including the lifestyle of endless globally sourced goodies at low, low prices. That lifestyle is out of stock and cannot be replaced with financialization fakery.

Hey, Federal Reserve, can you conjure up a non-corrupt financial system, a domestic supply chain, and an economy of open competition, transparency, accountability and competence? If not, you are even more worthless than we feared.




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 Videos/Podcasts:

The Sample Hour #230 - Building Social Capital Through Community (1:01 hr)(with Drew Sample)

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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