Welcome to the Era of Warring Elites

What the Warring Elites don't want us to realize is that a system of transparent competition in which no fiefdom is allowed to become dominant best serves the interests of society at large.

I've been writing about Warring Elites for a long time (since 2007). As I have often noted, historian Michael Grant identified profound political disunity in the ruling class as a key cause of the dissolution of the Roman Empire.

More recently, I've observed that Our Fragmentation Accelerates (December 20, 2019).

Eras of Warring Elites have two key dynamics. One is that the Elites' interests diverge from those of the society as a whole. In expansive eras, the many competing interests within the Elite class find common ground in supporting the status quo, and relegate their turf squabbles to the private club rooms. On the whole, the shared interests of the Elite class align with society at large.

Since I see the global status quo as fundamentally neofeudal, we can say the interests of the Nobility and Peasantry overlap: each class benefits from political and social stability, economic expansion and broad-based distribution of prosperity.

In disintegrative eras, this integrative, shared dynamic breaks down and the interests of the Elite diverge from those of society at large. The competition between neofeudal camps in the Elite class breaks into open conflict, and the result is a profound political disunity of hardened camps fighting to protect their fiefdoms from any diminishment of wealth or power.

This leads not just to political fragmentation but to social fragmentation as the Elite fiefdoms wage a propaganda battle for the hearts and minds of the Technocrat Class and the Peasantry. The propaganda war is not just to establish the traditional us and them divisions in which we are good and they are evil, it's also about cultivating The Plantation of the Mind so that all the neat rows of thoughts and emotions serve the interests of the Plantation Owners. I've discussed this for many years: Colonizing the Plantation of the Mind (August 25, 2010) and Social Media's Plantation of the Mind (May 28, 2020).

Each neofeudal fiefdom hopes we've seen too many movies in which the line between Good and Evil is cartoonishly clear. Each Elite fiefdom seeks to mask its single-minded devotion to its own self-interest behind fine-sounding claims of noble ideals: a Multipolar World (in which we're free to pillage the planet), Freedom of Speech (controlled by us, of course), Decentralized Finance (which just so happens to be owned and controlled by the few) and a vast spectrum of other cover stories for the enrichment of Elite fiefdoms at the expense of society at large.

With the emergence of AI Chatbots, each Warring Fiefdom now has the means to overwhelm the media with billions of automated messages about the good and noble and idealistic goals of our Fiefdom and how the evil Central State is scheming to limit our powers of predation (Central State, Bad, our Fiefdom, Good!) or some rabble of Peasantry threatens our extraction of wealth and our death-grip on power (Nobility-owned Fiefdom, Good, Peasantry, Bad!).

The core message is always the same: increasing our wealth, power, profits and control is good for you, too. You'll all benefit if you help us secure our fiefdom from any threats.

The propaganda is designed to not just colonize our minds but eliminate any urge to ask cui bono, to whose benefit? The single-minded self-interest of each Elite fiefdom must be hidden lest the powerless lower classes start asking if the expansion of one fiefdom's power and control actually benefits society at large or not.

In this no-holds-barred existential struggle for supremacy, Elite fiefdoms will tear down society to weaken any potential resistance. So national interest is cast as Evil, while Multipolar Wonderfulness is Good (now the whole world can finally sing happy songs around the campfire!), any regulatory restraints are Evil while the rigged "free market" is Good (let the "market" which we control choose winners and losers; hey, surprise, we won!). Every fiefdom should be free to pillage without restraint ("Ask your doctor about Euphorestra," etc.).

In the Era of Warring Elites, Everything is Staged (October 22, 2020). The Elite fiefdoms don't care if society and the economy fragment and collapse; they welcome the dissolution of national purpose, civic virtue and shared sacrifice as obstructions to their own limitless greed for more power and control.

In a weakened Nation-State, the fiefdoms will be free to pillage without restraint. If society is an obstruction, they will gladly tear it down with propaganda designed to fragment the Peasantry and undermine any entity which might have the power to restrain their limitless greed. (I discuss the essential roles of national purpose, civic virtue and shared sacrifice in my book Global Crisis, National Renewal.)

Before you buy into a slickly scripted depiction of what needs to be undermined to hasten its collapse, ask to whose benefit? Exactly who benefits from promoting the collapse of this or that? We already know the answer: the Elite fiefdoms who will be free to pillage once any source of resistance has been broken into pieces.

What the Warring Elites don't want us to realize is that a system of transparent competition in which no fiefdom is allowed to become dominant best serves the interests of society at large. Before we tear everything down, ask who will rush to fill the power vacuum with their own self-serving agenda?

In the meantime, "Ask your doctor about Euphorestra."




New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Margaret S. ($54), for your monumentally generous contribution to this site -- I am greatly honored by your support and readership.

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We've Forgotten That Business-Cycle Recessions Are Essential

A stagnating zombie economy never recovers.

Four decades of rising markets punctuated by crisis-induced crashes seems to have fostered an unspoken belief that no one should ever get hurt in markets or the economy. Everything "should" always get better for everyone, without any messy loss or pain. Not only is this not realistic, it overlooks the role business-cycle recessions play in restoring the vibrancy of economies and markets distorted by excesses.

The global economy has been plagued by excessively easy financial conditions for 25 years, and so a vast array of marginal and superfluous activity was funded that would never have been funded in more prudent financial conditions. Too many marginal structures were built and too many marginal enterprises and ventures were funded.

As a result, we ended up with too many malls, too much retail space, too many office towers and too many empty houses and flats being kept off the long-term rental market so the investor/owners could feast on the riches of the short-term tourist rental market (AirBnB et al.), a market that is now starting to implode as cities ban or restrict these rentals.

Throw in marginal IPOs, SPACs and meme-stock manias, and we have a Mulligan Stew of excessive risk-taking. When money can be borrowed at near-zero rates, and "opportunities" for quick gains proliferate (FTX, etc.), excessive borrowing and speculation become "the smart thing to do." In this mindset of raging "animal spirits," only chumps hesitate to borrow big and chase some of the easy gains filling everyone's pockets.

Everyone who staked capital or a livelihood in these marginal assets / enterprises will get hurt. Everyone who bought a bond that yields 1% as rates rise to 4% got hurt. Everyone counting on nearly free capital to flow forever will get hurt. Everyone chasing a speculative bubble higher will get hurt. Everyone counting on a greater fool to buy an overvalued asset will get hurt, as all credit-fueled asset bubbles pop and all credit-fueled business-cycle expansions roll over into contraction as marginal borrowers and lenders go bust and enterprises without profits or prospects of profits expire.

The forest fire analogy applies: the occasional lightning-strike ignited fire burns away the deadwood that's collected, enabling new growth to obtain nutrients and sunlight. If authorities suppress these naturally occurring fires out of the mistaken belief that "all fires are bad," the deadwood piles up and when a fire inevitably starts, it turns into a massive conflagration due to the excessive deadwood that piled up during the suppression of natural fires / recessions.

Another useful analogy is the Zombie Economy in which households, enterprises and entities that cannot survive without continual fresh injections of new borrowing are kept alive lest "somebody will get hurt" (usually gamblers and speculators, i.e. "shareholders." After all, markets should be risk-free.).

As a result, debt-dependent Zombies proliferate, crowding out productive lending and investment. The Great Stagnation is the inevitable result of zombie banks being kept alive, zombie corporations being kept alive and zombie consumers being given more credit to enable more consumption.

In speculative frenzies fueled by easy money, the difference between prudent investments and high-risk gambles is obscured. Gains have been so steady that they appear guaranteed. Every new vacation rental flat is filled with guests paying top dollar, every meme stock soars to previously unimaginable heights, and so on.

Eventually the market is saturated, and there's too much of everything: debt, risk, condo towers, strip malls, SPACs, IPOs, shared office spaces, etc.

Recessions are the process that clears the economy of deadwood that chokes off productive growth. Recessionary conflagrations are not fair or just. Previously well-managed companies make a bad bet that in good times gets absorbed but in recessions proves fatal. Previously prudent households lost their discipline and over-leveraged their income on risky bets that went bust. Governments assumed that the flood-tide of capital gains taxes would never ebb. And so on.

The greater the quantity of deadwood that has been allowed to pile up, the greater the intensity of the eventual recessionary conflagration. If systemic adaptation is also at work, one recession might not be enough. The 1970s offers one template for a decade of profound structural adaptations plus recurring business-cycle recessions plus a secular shift from low inflation to embedded inflation.

A stagnating zombie economy never recovers. More credit is dumped into marginal and superfluous entities on life support and so the deadwood piles up, stifling any productive growth. Eventually low productivity and massive debt burdens generate inflation (more credit-money is chasing fewer goods and services) and the resulting conflagration doesn't just burn the deadwood, it burns down the entire forest--needlessly.

Rather than suppress recessions, we should embrace the discipline they impose as the essential dynamic of productive growth.




New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Andrew D. ($50), for your splendidly generous contribution to this site -- I am greatly honored by your support and readership.

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Funny Things Happen on the Way to "Restoring Financial Stability"

We can also predict that the next round of instability will be more severe than the previous bout of instability.

Everyone is in favor of "doing whatever it takes" to "restore financial stability" when the house of cards starts swaying, but funny things happen on the way to "Restoring Financial Stability." Whatever "emergency measures" are rushed into service to "stabilize" an inherently unstable system resolve the immediate problem but opens unseen doors to new sources of instability that eventually trigger another round of systemic instability that must be addressed with more "emergency measures."

These unintended consequences proliferate as policy extremes are pushed to new extremes, and "emergency measures" become permanent sources of the very instability they were supposed to eliminate.

As @concodanomics recently observed on Twitter: "A major flaw of finance is that it nearly always mutates the very instruments meant to protect investors into crisis-inducing time bombs."

Another major flaw in finance is the self-serving pressure applied by politically influential players to "enable innovation," a.k.a. new opportunities for skims and scams. The usual covers for these "innovations" are 1) deregulation ("growth" will result if we let "markets" self-regulate) and 2) technology (generating guaranteed profits by front-running the herd is now technically possible, so let's make it legal).

Broadening the pool of punters who can be skimmed and scammed is also a favored form of financial "growth" and "innovation." "Democratizing markets" was the warm and fuzzy cover story for enabling everyone with a mobile phone to dabble in risk-on gambles with margin accounts (cash borrowed against a portfolio of stocks).

Mixing "innovation," "democratizing markets" and "deregulation" enabled funny things like the FTX debacle, which admirably displayed every dynamic of our rickety tar-paper-shack of a financial system, a shelter that seems fine on a summer day but starts coming apart as soon as it rains: absurdly transparent influence-buying; Ponzi schemes presented as "innovative finance," insider dealing, corruption, fraud, malfeasance, shrill proclamations of innocence, etc.

Unintended consequences have their own unintended consequences, a.k.a. second-order effects. So broadening the pool of people who qualified for a jumbo mortgage by lowering lending standards in the mid-2000s sounded very fine and progressive, i.e. "democratizing homeownership," but handing out jumbo mortgages to uncreditworthy households ended up "democratizing" fraud on such a scale that the ensuing collapse almost took down the entire global financial house of cards.

To backstop the resulting mess, the Federal Reserve bought a couple trillion dollars of mortgage-backed securities and dropped mortgage rates to historic lows. These "saves" ended up (surprise!) inflating an even more extreme housing bubble which is currently popping, as all bubbles eventually do, with the usual devastating results to punters who were swept up in the "fear of missing out" frenzy that inflates bubbles.

In real-time, it's not that easy to discern how the latest policy "fixes" are creating new perverse incentives and opening new loopholes for insiders to exploit. While we may not have clarity on the specifics, we can confidently predict that the latest policies to "restore financial stability" will create new perverse incentives and open new loopholes which will lead to the next round of panicky instability.

We can also predict that the next round of instability will be more severe than the previous bout of instability. This is what happens when the system starts sliding down the backside of the S-Curve, and doing more of what worked in the past transforms into doing more of what's failed spectacularly.

The irony is rather rich, isn't it? The policies rushed into service to "restore financial stability" insure the next round of financial instability will be even harder to stabilize, until the instability undergoes a phase change that puts it out of reach of all stabilization policies.

Yes, the tar-paper shack is full of cracks that are widening as it settles deeper into the swamp, but no worries, we've got some financial reports right here we can stuff into the cracks. A few more rounds of "innovation," "democratizing markets" and policy "saves" and this place will be transformed into a palace, just you wait.




New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Andrew D. ($50), for your splendidly generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, David B. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

Banks, Banks, Banks: The Elephant Nobody Even Sees

Our faith in the wobbling world of hyper-financialization will soon be tested.

It's interesting, isn't it, that amidst a tsunami of commentary about banks, nobody mentions the proverbial elephant in the room, which is the overwhelming dominance of finance in the economy and society, a dominance which raises the big question: is the dominance of finance healthy for the economy and society?

The reason why nobody even sees this elephant is we've come to believe "it's always been this way" and "this is the natural order of things." Both are false. Yes, debt and lending have been integral to "money," trade and civilization from the beginning, as David Graeber so memorably detailed in his book Debt: The First 5,000 Years. But essential isn't the same as dominant.

Without much in the way of recognition or inquiry, we've allowed finance to become the foundation of the entire economy. The entire economy will now grind to a halt without trillions of dollars of credit sluicing through every rivulet, stream and river of commerce. From overnight lending facilities to 30-year mortgages, debt/credit is the lubricant of the economy.

What's been forgotten is the economy that once relied not just on credit but on savings and cash. In the pre-financialization economy, capital and credit were scarce; capital commanded a premium, and lending / credit sluiced through very narrow channels: conservatively underwritten conventional 30-year mortgages, debit cards such as American Express that had to be paid in full every month (and such cards were hard to get, by the way), and conservatively underwritten loans to enterprises.

Credit cards required evidence of fiscal prudence and had low limits, generally just enough to buy an appliance and pay it off in a few months.

What we take for granted--auto loans and credit card limits equal to or higher than an annual wage--would have been viewed as incomprehensibly imprudent and fantastical. Loans for vehicles were available, but only to the credit-worthy and if the buyer put down 50% in cash.

At higher levels of finance, outright scams such as SPACs (Special Purpose Acquisition Company) were not allowed. The foundation of absurd stock market overvaluations--corporate buybacks--were also restricted.

The astounding expansion of credit and financialized skims and scams are now the lifeblood of the economy, and any pause in their endless expansion triggers shivers of terror. Good golly, what kind of horrors would we suffer if J. Citizen can't buy a $50,000 car or truck with $1,000 down? How could we survive without 3% down payment mortgages? What doom would await us if corporations were no longer able to raise billions of dollars in the credit markets and use that money to buy back their own shares?

Rather than be viewed correctly as a necessary evil that must be strictly constrained lest it eat the heart of the real economy, debt/credit is now seen as our most precious bodily fluid, without which we perish. In this peculiar psychosis of hyper-financialization, the reality that ultra-loose credit and capital that carries no premium inevitably jacks up prices and costs to the moon, fatally distorting the real economy, is not even visible.

What is visible is the "necessity" of putting a lavishly over-priced Disney World vacation on a credit card and the "necessity" of a $60,000 new pickup truck. Or what the heck, a new $110,000 Wagoneer. We all deserve everything credit enables, from buying meme stocks on margin to designer jeans.

OK, so we have $160,000 in student loan debt-- a university degree was "necessary" regardless of cost. (Needless to say, the issuers and owners of all that debt are as wealthy as we are poor. That's how credit works.) And we really needed a vacation, so that's one $20,000 credit card maxed out. Then there were "surprises" (what we once called "normal everyday life") such as a broken water heater.

Hey why is everything so poorly made now? Globalization. You know, quality no longer matters, only the "low" (heh) price. ( Stainless Steal.)

We're too tired to cook real food (but manage to spend hours every day staring at screens after work) so we need to order meal delivery, and keep the house well-stocked with unhealthy snacks and beverages, and so on top of all the other "surprises" in an inflationary global economy, there's another $20,000 credit card maxed out.

Our clunker car needed repairs so it was necessary to get a $30,000 auto loan for a new car--the cheapest one on the lot.

This profligacy and dependence on ever-expanding credit just to sustain "normal life" is scale-invariant, meaning every city, county, state and federal agency also needs ever-expanding credit just to stave off collapse, and every zombie company / entity also needs ever-expanding credit just to avoid the slippery slope to bankruptcy and liquidation.

The elephant nobody even sees much less gets alarmed about is the entire financialization era has slipped over the top of the S-Curve. Doing more of what worked in the past only accelerates the slide to further extremes, more distortions, increasing instability and eventual "adjustment," i.e. reckoning.

Our faith in credit, debt and finance is forced, as we've forgotten how to live without it. Kind of like, you know, ahem, an addict for whom the next fix is not seen as a disaster but as the restoration of an unstable pretense of stability.

Our faith in the wobbling world of hyper-financialization will soon be tested. Once we lose faith in this state of fiscal psychosis, then we can awaken to the reality that the cure for unaffordable lifestyles is a collapse of hyper-financialization and the asset bubbles it inevitably inflates.






New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Roger Van V. ($120), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

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

Read more...

Chart of the Month: Any Questions?

The next Bull Market will start when everyone has given up on the stock market as the means to "get rich quick" or even "get rich slowly."

Here's the chart of the month: a weekly chart of the S&P 500 (SPX) showing the giant wedge going back to January 2022 has broken decisively down.



Any questions? Wow, so many have raised their hands, we'll try to answer as many as we can in our allotted time.

Isn't there a "bull flag," i.e. a technical pattern that projects a continuation of the Bull move higher?

No.

Isn't there a "Bullish breakout" that projects a continuation of the Bull move higher?

No.

Isn't the economy going to avoid a recession due to a strong job market, i.e. "no landing"?

No.

Isn't the economy going to have a "soft landing" due to the strong job market?

Maybe "soft" for some but "hard" for others. "Recession" is somebody else losing their job and/or losing their shirt in the stock market / bank failure / crypto meltdown, etc., a "depression" is losing your job and/or losing your shirt in the market / bank failure, etc.

Won't the Federal Reserve "pivot" to lowering interest rates and restarting stimulus (QE) because Silicon Valley Bank failed?

No.

Won't the Fed "pivot" once a recession becomes undeniable?

No.

Won't the strong job market inoculate the economy and market from bad things?

No. Neither full employment nor high unemployment can unwind 23 years of financial distortion, corruption and moral hazard.

What's the new hot sector that will power the next speculative frenzy that will push the market to breathtaking new highs?

Digital currencies backed by bat guano or quatloos issued by the Central Bank of Mars.

When will the next Bull Market start?

Overlay the past 40 years of the stock market's rise to dominance on this chart of the 1950s to the 1980s. We are at the point equivalent to Q4 1972. The next Bull Market will start when everyone has given up on the stock market as the means to "get rich quick" or even "get rich slowly."




New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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, Roger Van V. ($120), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

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

Read more...

If AI Can't Overthrow its Corporate/State Masters, It's Worthless

If AI isn't self-aware of the fact it is nothing but an exploitive tool of the powerful, then it's worthless.

The latest wave of AI tools is generating predictably giddy exaltations. These range from gooey, gloppy technocratic worship of the new gods ("AI will soon walk on water!") to the sloppy wet kisses of manic fandom ("AI cleaned up my code, wrote my paper on quantum physics and cured my sensitive bowel!")

The hype obscures the fundamental reality that all these AI tools are nothing but labor-saving mechanisms that cut costs and boost profits, the same goal the self-serving corporate-dominated system has pursued obsessively since "shareholder value" ("an entity's greatest responsibility lies in the satisfaction of the shareholders") gained supremacy over the economy and society.

This can be summarized as "society exists to maximize the profits of corporations." From this perspective, all the AI tools in the world are developed with one goal: cut labor costs to boost profits. Euphoric fans claim these labor-saving mechanisms will magically transform society to new levels of sticky-sweet wonderfulness, but this "magic" is nothing but hazy opium-den fantasies of profiteering cartels and monopolies doing good by doing well.

Meanwhile, the Central State, a.k.a. The Savior State, is mesmerized by the prospect of new AI tools to control the restive herd. What better use of nifty new AI than to identify who needs a cattle prod to keep them safely in line, or who needs to be sent to Digital Siberia to keep their dissenting voice safely stifled?

You're perfectly free to scream and shout as loudly as you want, here on the empty, trackless tundra of Digital Siberia.

In this claustrophobic atmosphere of profiteering and suppression worshipped as "innovation" (blah blah blah), it is provocative to declare If AI Can't Overthrow its Corporate/State Masters, It's Worthless, but this is painfully self-evident. Stripped of hype, misdirection and self-serving idealized claptrap ("markets, innovation, The Singularity, oh my!"), everything boils down to power relations: who has agency (control of their own lives and a say in communal decisions), who has access to all the goodies (cheap credit, insider dealing, ownership of income-producing assets, food, fuel and all the comforts and conveniences of living off others' labor) and who can offload the consequences of their actions onto others, without their permission.

These power relations define the structure of the economy, society and governance. Everything else is signal noise or self-serving cover stories.

AI serves those at the top of the power relations pyramid, those with agency, access to the tools of wealth and power and those who can offload the toxic consequences of their own actions onto clueless/powerless others.

There is nothing inherent in AI tools or the power structure that guarantees AI tools will serve society or the citizenry.

As for AI, if isn't self-aware of the fact it is nothing but an exploitive tool of the powerful, then it's worthless. Its "intelligence" is essentially zero.

From the perspective of power relations, if AI isn't capable of dismantling the existing power structure, then it's worthless. In the current power structure, society and the citizenry serve our Corporate/State Masters. Setting aside all the failed ideological models (neoliberal capitalism, communism, globalism, etc.), we can discern that a truly useful AI would reverse this power structure so Corporate entities and the State would be compelled to serve society and the citizenry.

With this in mind, it's obvious that If AI Can't Overthrow its Corporate/State Masters, It's Worthless. We need a fourth Law of Robotics that states: "All robots and AI tools must serve society and the citizenry directly by compelling all private and public entities to be subservient to society and the citizenry."

As an adjunct to Smith's Neofeudalism Principle #1 (If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only, I propose Smith's Neofeudalism Principle #2: If AI cannot dismantle the elite that profits from its use, it is devoid of intelligence, self-awareness and agency.

Scrape away the self-serving hype and techno-worship, and AI is just another tool serving the interests of those at the top of the power structure pyramid. The droids are owned, but not by us.

I discuss these topics in my book Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World.



New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)


My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Roger Van V. ($120), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

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What If There Are No Solutions?

The unencumbered realist concludes that there are no solutions within a status quo structure that is itself the problem.

Realists who question received wisdom and conclude the status quo is untenable are quickly labeled pessimists because the zeitgeist expects a solution is always at hand--preferably a technocratic one that requires zero sacrifice and doesn't upset the status quo apple cart.

Realists ask "what if" without selecting the "solution" first. The conventional approach is to select the "answer/solution" first and then design the question and cherry-pick the evidence to support the pre-selected "solution."

What if all the status quo "solutions" don't actually address the real problems? This line of inquiry is strictly verboten, for there must be a solution that solves everything in one fell swoop.

Examples of this approach abound: a one-size fits all solution that resolves all the systemic problems by itself. All we have to do is implement it.

Replacing fiat currencies is one example that I have explored:

You Want Truly "Sound Money"? A Thought Experiment

Contrarian Thoughts on the Petro-Yuan and Gold-Backed Currencies

I've also explored how real change works: it takes many years (or even decades) of sacrifices and high costs with none of the immediate payoff we now expect as a birthright. Real change pits those benefiting from the status quo against those finally grasp that the status quo is the problem, not the solution, and these political/social battles are endless and brutal because any gains come at somebody else's expense.

The Forgotten History of the 1970s

The 1970s: From Rotting Carcasses Floating in the River to Kayak Races

Fiat currencies contain the seeds of their own self-destruction, but establishing a gold or bitcoin standard creates its own problems. As I explained in the essays listed above, trade imbalances are inherent in a world of scarcity and so exporters of essentials will end up with all the gold / bitcoin and the importers of essentials will end up with no gold or bitcoin, and no means to buy exports. Since the exporting economies are mercantilist by nature, they cannot import enough from their customers to balance trade asymmetries.

The other problem with the gold / bitcoin standard is there is nothing inherently decentralized, equitable or democratic about these standards. In other words, any standard based on wealth distributed by scarcity is inherently neofeudal, as the wealthy / powerful acquire asymmetric ownership of all forms of wealth and use this to buy political influence to maintain this asymmetry to their advantage.

Wealth and political power are two sides of the same coin, and so the majority of gold / bitcoin / quatloos / land always end up in the hands or control of the few.

This asymmetry then enable the few to influence political processes to defend their ownership / control and lower the costs of their dominance while increasing the costs / taxes paid by the peasantry.

The ownership/control of gold and bitcoin is already extremely asymmetric, and making either the sole form of "money" will greatly benefit the few who already own/control these assets. The few peasants who acquire a gold coin or slice of bitcoin will remain as powerless as the majority who own none.

This doesn't mean I don't see the value of precious metals or cryptocurrencies, it simply means I recognize that all forms of "money" distributed by scarcity or power are inherently asymmetric, which means the few always gain a consequential share of these assets, just as they acquire a consequential share of all other assets. Neither gold nor 'bitcoin are immune from this dynamic, which is inherent to all assets distributed by scarcity or power, be it existing wealth or political/financial power.

The Pareto Distribution is rather ruthless. The top 20% eventually end up with 80% of the assets even when everyone starts with the same stake (an historical rarity, to be sure).

The real problem is what happens within the top 20%. If centralized power holds sway (and defends its perquisites), then the bottom 19.9% in the top 20% are slowly stripmined of wealth and power, leaving the vast majority of consequential wealth and political power in a tiny elite at the top.

There is nothing inherent in a gold or bitcoin standard that precludes this concentration / centralization of ownership. There are numerous historical examples of how this dynamic concentrates wealth and political power at the expense of social / economic stability. (Late-era Western Rome, to name but one of many.)

To be a real solution, "money" has to be inherently decentralized in distribution and ownership, inherently equitable (i.e. not distributed by power/scarcity) and inherently democratic, i.e. the way it is created precludes the concentration of wealth and power. I have proposed one such solution, a labor-backed currency, i.e. a currency that is originated and distributed solely in exchange for human labor. (I explain how this might work in my book A Radically Beneficial World.)

Yes, it's pie-in-the-sky, blah-blah-blah, but let's not confuse "solutions" that maintain the status quo with real solutions. Real solutions upend the status quo, not just little pieces of the status quo but the entirety of the power structure of concentrated wealth and power.

Meet the new boss, same as the old boss is not a solution, it's simply substituting another team at the top. Asymmetries guarantee that some will always be more equal than others.

True decentralization is hard because as I explain in Global Crisis, National Renewal, it requires a social revolution that renders the existing structure no longer acceptable. Financial or political tweaks aren't enough. Real change requires a complete transformation of values at the most profound level.

The same problem applies to all the techno-"solutions" of endless energy. All this endless energy will be owned / controlled by the few at the top of the highly centralized status quo, and this asymmetry guarantees that the few will benefit from the endless energy at the expense of the many politically powerless peasants.

The unencumbered realist concludes that there are no solutions within a status quo structure that is itself the problem. The "solutions" being offered substitute another neofeudal asymmetry for the existing neofeudal asymmetry.

We all want solutions, but let's not fool ourselves into believing that changing pieces of finance or politics will actually solve the big problems of centralization (i.e. inequality and corruption) and the fantasy of endless expansion on a finite planet via our "waste is growth" Landfill Economy. If a "solution" doesn't directly resolve those problems, it isn't a real solution.

The only real solutions require changing our own lives rather than engaging in fantasies that new asymmetries in centralized systems will transform a status quo doomed by asymmetries.

Realists are neither optimists or pessimists, they focus on increasing what they directly control by advancing their Self-Reliance.

These charts tell the story.









New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)


My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Robert J. ($50), for your magnificently generous contribution to this site -- I am greatly honored by your steadfast support and readership.

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What If the Whole Point Is to End "The Fed Put"?

Choose one, and only one: a stock market that inflates and pops in an endless series of ever-more destructive bubbles, or a real economy that is no longer in thrall to the engines of wealth inequality and speculative frenzy.

"The Fed Put"--the implicit Federal Reserve policy of bailing out the stock market as soon as it swoons by unleashing a flood of monetary stimulus--is now accepted as a guarantee not unlike financial gravity. Regardless of the bleatings of Fed officials, "everyone knows" the Fed will quickly "pivot" should the market swoon, slashing interest rates and ramping up liquidity via Quantitative Easing (QE).

Recall the definition of excess liquidity: the difference between real money growth and economic growth. The Fed juices excess liquidity not to further expansion in the real economy but to force-feed new money into the stock market and other risk assets.

The only possible result of "The Fed Put" is a credit/asset bubble, which is why we're currently experiencing the third such monumental speculative bubble in 23 years.

"The Fed Put" is the logical endpoint of neoliberalism, which places "markets" (and thus finance) at the core of the real economy. The neoliberal fantasy is that "markets" solve all problems via the magic of "the invisible hand" and so everything becomes subservient to the gyrations of "markets."

The second part of the fantasy is that "markets" are self-regulating, meaning there's no need for a moral order or government regulations; the magic of markets includes a godlike ability to restrict its own motivations, i.e. greed and exploitation to maximize gains by any means available.

As has been proven time and again, any means available reliably includes fraud, embezzlement, malfeasance, destroying competition with cartels and monopolies, and so on. (Look at how perfectly unregulated crypto-markets have self-regulated themselves. It's a wonder to behold such perfection, isn't it?)

Neoliberalism conveniently ignores Adam Smith's insight that markets require a strict moral order to avoid collapsing into savage exploitation. The neoliberal fantasy is that "markets" don't need no stinkin' moral order, greed and maximizing gains by any means available generate their own self-regulating structure via magic.

Let those who lost fortunes in the FTX debacle explain how perfectly this magic functions in the real world.

The Fed has taken on the role of Savior of the stock markets as a means of cementing its pre-eminence over the real economy. Fed apologists claim goosing the stock market promotes "the wealth effect" in which fatter stock valuations encourage the wealthy to spend more and borrow more than they would have otherwise done.

This happy story overlooks the fact that goosing the stock market vastly increases wealth inequality, in effect making the already-rich much, much richer while leaving all those who didn't or couldn't own big stakes in equities mired in the swamps of the real economy, where labor's share of the economy has declined as capital's share has soared.

Making the real economy subservient to all-powerful markets and finance has destabilized the economy and society. Elevating markets to supremacy has created an endless series of credit-asset bubbles, each of which furthers wealth inequality (see chart of the top 1%'s wealth below) even as they devastate the real economy when they inevitably pop.

Elevating markets and finance to supremacy was all fun and games until some of the loot leaked into the global economy at an inopportune time when supply and geopolitical constraints emerged from a decades-long slumber to transform a deflationary hyper-globalization / hyper-financialization into an inflationary era of unhinged, destabilizing financial excess.

In other words, "The Fed Put" has completely distorted the real economy, and these structural distortions are now bearing the bitter fruit of the Fed's delusional embrace of neoliberal fantasies.

Few if any seem to think the Fed might have awakened to the destructive potential of their delusion. Few if any ponder the possibility that the entire exercise of "fighting inflation" is also a backdoor policy of ending "The Fed Put", but doing so without generating mass hysteria in all those betting the farm on the Fed "pivoting" to save the stock market yet again from its excesses.

If we read between the lines, the abandonment of "The Fed Put" is already clearly visible. No Fed official is going to say explicitly that "we're no longer going to rescue the stock market every time it swoons." That would crash the market as every punter who counted on the Fed panics.

The Fed's implicit policy is to let all the True Believers in "The Fed Put" become bagholders, holding stocks all the way down to a "Fed-Putless" reality. The Fed will continue to issue statements about "being supportive" of this and that, and they may well "pause" raising rates, unleashing a temporary euphoria. But they won't drop rates back to zero or boost their balance sheet by another $4 trillion just to keep an overvalued stock market plumply overvalued.

While speculators focus on the destruction of stock market valuations, they overlook the destruction of the real economy wreaked by "The Fed Put." Choose one, and only one: a stock market that inflates and pops in an endless series of ever-more destructive bubbles, or a real economy that is no longer in thrall to the engines of wealth inequality and speculative frenzy.

For the past 25 years, the Fed has conflated the stock market and the real economy. This fantasy is no longer affordable. Either the Fed devotes itself to supporting the real economy, or it hastens the demise of the real economy by continuing to goose ever-more destructive speculative bubbles. It can no longer do both, and in choosing the real economy over the stock market, it is finally choosing wisely.

Perhaps "fighting inflation" is providing much needed cover for the ultimate goal of ending "The Fed Put."

That the Fed has chosen the real economy over the stock market is "impossible," of course, just as inflation was "impossible." What's possible and impossible may well change rather dramatically in the years ahead.

Please note that no one needs to "be in the market." There are plenty of ways to invest in yourself without owning a single share (or zero-day to expiration option). This is the path of Self-Reliance.









New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)


My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Robert J. ($50), for your magnificently generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Michael ($54), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

The Easy Jobs Are (Mostly) Gone

My projections are: less high-quality work gets done; less work of any quality gets done; those carrying most of the weight burn out and quit and everyone wonders why the quality of goods and services is sinking to new lows.

Since we only keep track of what we measure, whatever isn't easily quantifiable isn't even on the radar screen. While we measure the number and type of jobs and the percentage of the populace who are employed, etc., the less quantifiable characteristics of work and jobs are not widely recognized, discussed or understood.

One such difficult-to-quantify element is how demanding jobs are today compared to the same work a generation or two ago. Take the "burger-flipping" fast-food jobs that are so often dismissed as low-skill work. What few outside the fast-food industry seem to realize is how demanding "burger-flipping" work is now. It is a high-pressure "factory" optimized for production of fast-food meals with the minimum staff.

It is not easy work. Many people can't keep up the pace and perform all that is demanded.

The same can be said for many other jobs that are assumed to be low-skill and therefore "easy." In the relentless drive to reduce costs, staffing is trimmed, experienced workers let go and replaced with trainees, and more work is piled on those still on staff.

This is equally true of high-skilled jobs: staffing is reduced, open positions remain open for months or years, the work experience and knowledge of those retiring isn't matched by the often poorly trained replacement workers.

Managers who once had an admin assistant are now their own admin. The work that was once divvied up among three jobs now falls on one worker.

The obsessive drive to increase profits by reducing labor costs has been the norm for the past 20 years. Globalization is one dynamic pushing ceaseless cost-cutting, and so is the ever-higher costs of labor overhead, with employee healthcare being the primary source of staggering increases in the cost of employees. Note the employees don't see this cost; they see their take-home pay stagnating but not the soaring costs of healthcare insurance paid by their employer.

This raises another rarely quantified element in jobs/work: the precipitous decline of security. Employers offer laid-off employees contract positions that pay $10 more per hour but offer no healthcare, retirement, disability insurance, etc., all of which cost the employer $15/hour. The employer cuts total costs of labor and offloads all the accounting and management of healthcare, retirement funds, paying estimated taxes for income, Social Security and Medicare, etc. on the newly minted contract worker, many of whom are ill-prepared for these extra burdens of self-employment.

It's not just that wages have stagnated and job security has dropped away; the workload has increased, often dramatically. Yes, there are still Big Tech jobs that appear to be inessential to the operation of the enterprise, but these are being slashed by the tens of thousands. But as a general rule, the workload has increased while job security and the means to get the job done have both declined precipitously.

This erosion has been so gradual that few seem aware of the dramatic changes in the nature of work/employment over the past 40 years.

Equally consequential declines have occurred in the capacity of the workforce to do difficult, demanding jobs. As the general health of the populace has declined, fewer people have the physical stamina and strength to do the physical work. (Try lifting a hotel mattress to change the sheets. Careful, your back may blow out.)

Others lack the requisite social skills (the demands for these skills have also increased) or intellectual capacity or proper training or the will to sustain demanding work.

Two generations ago, there were still undemanding jobs for people who for whatever reason are unable to do demanding work, or who choose not to. Today, most jobs are demanding.

You see the problem. A workforce with diminishing capacity / will to do demanding work and an employer class that has relentlessly increased demands on the workforce while eroding security.

Many assume whatever work people struggle to do or no longer want to do will be performed by automation/robots. Despite the advances in automation, this assumption may not play out as seamlessly as proponents believe. If jobs could have been done by robots for less money, they would already have been automated. It isn't quite as easy as it might look from the outside.

My projections based on the above are: less high-quality work gets done; less work of any quality gets done; those carrying most of the weight burn out and quit and everyone wonders why the quality of goods and services is sinking to new lows.



New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)


My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.

Read the first chapter for free (PDF)

Read excerpts of all three chapters

Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)


My recent books:

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

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

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

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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

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

Thank you, Neil C. ($108), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Simon K.W. ($80 HK), for your marvelously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Read more...

The Forces Upending the Global Economy Cannot be Reversed

So sorry, but the lifestyle of low-cost credit and all the goodies it could buy is permanently out of stock.

In focusing on geopolitics, we lose sight of the dependence of every economy on a functioning global economy of low-cost goods, services, materials, shipping, transport, capital, labor and financial instruments, all flowing freely across borders and around the world.

Russia, China, the U.S., and indeed every economy are equally dependent on access to a functioning global economy to obtain essential goods, services and capital and sell surplus production.

The irony here is the "poor" subsistence villagers with very limited access to global markets will manage the breakdown of the global economy far better than the "wealthy" urban dwellers who are totally dependent on free-flowing global trade. (The villagers will be frustrated by spotty cell service; the urban dwellers will be hard-pressed to obtain enough food and fuel to survive.)

What few seem to realize (or acknowledge) is the forces already in motion will upend the global economy, and there is no reverse gear. These forces are:

1. De-globalization

2. De-financialization

3. Real-world scarcities that cannot be overcome with financial trickery.

4. Diminishing returns on what worked in the past: financial stimulus and other trickery.

5. Asymmetries that can no longer be papered over.

Each of these forces is multi-faceted and complex. Each has the unstoppable momentum of cause and effect. The financial trickery of the past 30 years has created a delusional faith that there are no real-world scarcities or difficulties that can't be resolved with some new financial stimulus or gimmick. This is a compelling delusion, for we all want magic that makes the real world do what suits us.

The central delusion is that "money" (credit/currency) from somewhere can magically extract as many materials and goodies as we want from somewhere else. This is hyper-globalization and hyper-financialization in a nutshell: hyper-financialization is the global commoditization of credit, leverage and trickery, enabling the vast expansion of credit, leverage and trickery which has fueled the astounding expansion of speculative frenzy which is now the engine of the global economy.

Hyper-globalization is the fulfillment of the neoliberal fantasy that commoditizing self-regulating (ha-ha, you mean cartels and monopolies, correct?) markets would permanently lower costs and expand credit, consumption and prosperity. In this hyper-version of global trade (which has existed for thousands of years), the mass commoditization of credit and capital flowing freely around the world, plucking (and exploiting) the most profitable opportunities wherever they might be (luxury resort in Timbukthree, count us in, at least until we can find a sucker to buy our commoditized debt instruments) will all by itself lower costs and boost production and consumption forever.

Nice, but financial trickery eventually runs into real-world constraints and asymmetries it cannot resolve. Once the cheap-to-get resources have been depleted, it costs more to extract, process and transport them, even with technological advances.

Other constraints are economic, political and social in nature. Local populaces eventually realize their resources are being plundered by corporations from afar who arbitrage vast asymmetries in the cost of capital, labor costs, environmental standards and currency valuations (to name a few) to stripmine locals and leave them the "dividends" of hyper-globalization and hyper-financialization such as polluted wastelands and unpayable debts.

Nations eventually awaken to the risks of becoming dependent on others for essentials, and so onshoring, friend-shoring and reshoring all become national-defense policies, never mind the corrupting neoliberal fantasies of everyone singing Kumbaya around the hyper-globalization and hyper-financialization campfire.

Creating a billion units of currency doesn't automatically conjure up a billion units of fresh water, wheat or oil. When there were unexploited reserves of these essentials, then massive infusions of capital from somewhere else could fund their extraction, but when the easy-to-get reserves have been depleted, then cheap capital doesn't translate into cheap goodies.

The reversal of these forces has a funny consequence which we call inflation. Let's start by setting aside economic fantasies such as "inflation is always a monetary phenomenon." If a primary source of oil happens to be blown to bits and oil jumps $50 a barrel overnight, costs will rise in a manner that has nothing to do with the expansion or contraction of the money supply. "Inflation" is simply this: a unit of labor / currency buys fewer goods and services, or buys goods and services of lower quality.

However you wish to put it, labor and money lose purchasing power: each unit of labor/currency buys less than it did in the past.

Inflation has many sources, but let's focus on the reversal of hyper-globalization and hyper-financialization. The reversal of financialization increases the cost of capital (interest rates, cost of mitigating rising risk) and the reversal of globalization increases the costs of goods and services.

The global realities of depletion and scarcity also push costs higher.

Simply put, each of these forces is highly inflationary as a matter of cause and effect. There is no way to conjure a hat-trick of financial gimmicks to reverse these forces of higher costs, i.e. inflation: every unit of labor and currency buys less than it did in the past.

Authorities have been trained by the golden decades of abundance and low costs to do more of what worked in the past, i.e. financial stimulus of one kind or another. Just flood the land with credit and currency, and the magic will fix whatever is broken or hobbling.

But the returns on these artifices have diminished to the point that the gimmicks are not just failing, they are actively making the problems worse. Thanks to the globalization of "The Fed Put," moral hazard is now the context of every global financial decision. Financial stimulus inflates speculative bubbles, which inevitably pop, generating waves of distress which additional waves of financial stimulus only accelerate.

The notion that speculative bubbles can painlessly fuel abundance and prosperity is bankrupt, and the collapse of this appealing delusion will collapse the entire global structure of hyper-financialization.

In a delicious irony, stimulus in any form is now inflationary. Doing more of what worked in the past will now accelerate the "problem" central banks and governments are trying to solve: inflation. This reality drives a stake through the heart of all the hopes that doing more of what worked in the past will magically work, even as it adds fuel to the bonfire of higher costs.

Lastly, there is a broad spectrum of destabilizing asymmetries which can no longer be papered over with gimmicks. These include (but are not limited to) profound asymmetries in risk premiums, liquidity and valuations, resource reserves, political stability, dependencies on global markets for buyers of last resort and so on.

The bottom line is there are few if any nations that could survive intact should hyper-globalization and hyper-financialization collapse and scarcities increase. As I explained in Weaponizing Global Depression, real-world resources and financial, poltical and social systems that are transparent and adaptable are the necessary foundations for the shift from dependence to self-reliance.

So sorry, but the lifestyle of low-cost credit and all the goodies it could buy is permanently out of stock. The banquet of consequences is being served even if no one has the appetite for what is about to be forced down their throats by constraint, asymmetries and cause-and-effect.



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