Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Financial Crisis Page 1 of 13

Your Late Friday–ermmm, Early Saturday–Dose of Crap Economic News

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On November 14, 2025

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~by Sean Paul Kelley

Good heavens the economic bad news is piling up like a bad car wreck so let’s do some serious rubberknecking, folks, because there is a lot of fucked up shit to watch, just don’t step in it, okay?

We begin with widepsread reports of large institutional investors (hedge funds, investment banks, boutique investment firms) selling off services stocks like leisure, luxury, hotels, and some retail outlets, like Home Depot. That’s a lot of cash leaving equities. But for what safe harbor? It certainly isn’t private credit, like Blackrock which lost 100% on one investment. UBS also lost 100% on another private credit deal. Now, Blackrock lost $150 million on the deal, which for Blackrock is naught but a silly little rounding error, but as they say, $150 million here, a $150 million there and pretty soon you’re talking real money. That cash won’t go to US treasuries, that’s for damn sure. Seriously, who’d invest in US dollars? I wouldn’t fuck a US treasury with Magic Johnson’s dick.

Yeah, I said it. It needed to be said.

Want news even more ominous: JP Morgan Chase, Goldman Sachs and my alma mater (for full disclosure) Morgan Stanley were the lead underwriters of a $1 billion increase in AI firm Coreweave’s $2.5 billion revolving credit facility. The term sheet expands the maturity date from 2028 to 2029. Just a year? Did they attempt any due dililgence on Coreweave’s burn rate? It’s gotta be a fuckton fast–see, Americans can do metrics. FTW!

But really, you know that kind of high-tech equipment becomes obsolete and depreciates faster than that loan reaches maturity. There is zero, zilch, nada, niente, nyet, nein, no way Coreweave’s earning increase that rapidly. To quote Yoda, “Coreweave, Apple certainly not you are.”

Apple’s so profitable it prints money.

I mean, seriosuly, Christ on a popsicle stick: where’s the due diligence? Do investment firms even have compliance departments any more? Where are the regulators?

Yeah, yeah, I know, I know.

But it gets worse: On Nov. 4, Meta agreed to an off-balance sheet $27 billion loan (also known as a Special Purpose Entity, henceforth SPE) from Blue Owl Capital (OBCD). This is financial shenanigans and identical to the accounting legerdemain that led to Enron’s ruin. Pay attention people. This is getting ugly. Enron butt-hurt ugly is how bad this is starting to look. Let me break this down for you, in case you forgot. An SPE is off-balance sheet. That means the company is under no obligation to report it on its SEC required filings. Get it now? Investors have absolutely no way of knowing how much off-balance sheet debt a particular company has. SPEs=bad ju-ju.

To wit: Oracle has a debt-to-equity ratio approaching 500% and that’s just what’s on the their balance sheet. Has Oracle borrowed any money where the debt is accounted for in an SPE?

Guess what, folks? There is literally no way to know if Oracle has any SPE loans outstanding.

My bet: they do.

Speaking of shit credit, or is it credit shit?

Whatever. Moving on.

JP Morgan notes AI linked debt now accounts for 14% of its investment grade corporate index (CGI IG), surpassing US commercial banks as the dominant sector. Who the fuck knew US commercial banks have turned into stingy mozafukas? Can haz dolerz, puleeze?

“What does it mean,” you query, doing your best to ignore my increasingly insulting expletives.

“I know I’m right about the housing market,” he says. Repeating it like a mantra.

Well, it means not only are AI firms taking on loads of traditionally financed debt, but they are bulking up with the anabolic steroid equivalent of debt: unknowable and NON-REPORTABLE SPE debt. They pump this iron to finance AI hyper-scaling. No wonder the main character of the (mostly) true movie, The Big Short, Michael Burry, is closing his fund. Dude shorted Palntir and Nvidia and got caught with his pants down. Sadly, Burry forgot John Maynard Keynes keen paroemia (from the ancient Greek meaning maxim or proverb), when he lost all his money in the 1929 crash: “markets can remain irrational longer than you can remain solvent.”

Also: beware neologisms created on Wall Street. Today’s new phrase is ‘data center credit.’ Sounds positive, aye? It ain’t. It’s a bullshit phrase referring to debt financed for the AI sector by private credit shops. Tons and tons of bullshit, yes?

“Ha-ha, he said stupid, stupid!”

There is also news that insurers are placing more than 50% of assets needed to guarantee/backstop annuities and life insurance policies into private credit shops. This is a terrible idea. Annuities are insurance policies designed to pay out in the event you live too long. Life insurance is, well, insurance against not living long enough. This is stupid. Epic stupid and civilization-ending risky. It’s like giving the nuclear football to Beevis and Butthead stupid.

Oil prices are soft/down to flat. Texas rig counts are down again this month, rig counts are considered a leading economic indicator.

Now to news out of the Big Apple tonight that absolutely shrivels me testes–say it with me like a pirate! As my little sister used to say to me, “you are so not fun.”

Anywho: the head of the NY Fed convened an emergency meeting of bank heads to discuss one of the Fed’s key lending facilities. I’m almost certain this is in response to the rising private credit loses and how they resemble Bear Stearns blowing up two subprime hedge-funds in 2007, the precise moment the 2008 financial crisis began.

Most distressing is today’s down volume high. It’s one like we’ve never seen before. The downward volume and amount of stocks closing on the downside blew out a 35 year high. This screams louder than Rob Halford singing ‘Victim of Changes’ live at the US Festival in 1983.  It’s also an indicator of deeper stresses affecting equity markets.

This is what we now call, in the algorithm-trade dominated age, a mechanical sell-off. All of Wall Street’s proprietary algorithms saw red and initiated the mother of all sell offs. This already spectacularly terrifyingly narrow advance is getting narrower. And it is growing more brittle by the day. Why worry? Are markets worried about private credit shops lending to off-balance sheet AI SPEs? Is liquidity getting tighter? Risk limits getting ripped to shreds? Doesn’t really matter. It’s a big signal that should overpower the noise. But it won’t. 

Wall Streets useful idiots will do their duty and cheer until the real crisis begins to unravel. Sooner now, than later. You can bank on that. Just don’t do it in US dollars. That would be dumb. Epic-like dumb. 

More great economic news: large corporate bankruptcy filings, as of mid-November, rise to 15 year high. That’s higher than the COVID-19 crisis. To date 655 public companies have filed for bankruptcy. Good times, aye?

Finally, a postitive thought, in a manner of speaking. The only thing the equity markets have going in their favor right now is this: the almost impossible to prevent or deny Christmas rally. It’s damn near as reliable as the Monsoons.

So, if the econ shit does hit the fan, it’ll happen after January 1.

The Next Big Crash Is On Its Way

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On October 1, 2025

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Ever since Greenspan took over the Fed and the 87 crash when they figured out their playbook, the US has only had unavoidable stock market crashes. The Fed is always there to juice markets higher and to jump in at the least sign of a normal (pre-Greenspan) market correction.

But sometimes the irrational stupidity overwhelms even the Fed, because they are both stupid and ideologically unwilling to ever force a correction. This happened twice: the dot-com boom and crash and the Mortgage backed security boom and crash (if we bundle shitty mortgages based on lies together, they become not shitty, because we’re pretending they aren’t all basically the same thing!)

Now we’re going to get the AI Boom crash. I’m well over 90% on this. The AI booms is in the “wildly stupid over-claiming” stage. It’s not that token based AI isn’t a real tech, or that it doesn’t have some uses, but the claims of it completely changing everything (replacing a third of the workforce, acting without human help to run things, being able to cure cancer and make huge theoretical breakthroughs) are obvious over-reaches. So far every academic study that comes in shows that AI isn’t even good at the one thing everyone anecdotally agreed it was good at: writing code. Right now it seems to mainly be a good way to cheat at university, to have a fake relationship, or to bypass Google’s shitty search (which is what I use it for.) It hallucinates, the hallucinations cannot be removed because they are integral to the tech, and the code it produces, even when it works, is a huge mess that will cause massive maintenance issues.

In addition:

  • Since it doesn’t actually mostly reason, it requires data sets bigger than all the data in the world if it is to keep improving;
  • If it uses the data it itself produces, it experiences model collapse.
  • None of the American AI companies make money per query. Every query costs more than they can charge.
  • It requires a vast build-out of energy and data centers, of the “over a trillion dollars” variety. There literally isn’t enough money to pay for OpenAI and Anthropic’s dreams, and there isn’t a product at the end of it that could pay back all that money.
  • About 40% of the US stock market is now based around NVidia and the AI companies.
  • NVidia has now invested in Open AI, so that they can turn around and buy more NVidia cards.
  • The Chinese offer an open source AI which is almost as good and with costs somewhere between one fifteenth and one-thirtieth as much, so that it might actually be profitable AND since it’s open source, Trump can’t have a mini-stroke and decide to cut you off at his whim.

It’s my annual fundraiser. This allows us to cover the changeover of hegemony from America to China, environmental collapse, internal US fascism, what a better society would look like, Gaza, AI, the coming stock market crash and various other issues. As of this writing we’ve raised about $2,700 out of a $12,500 goal, from over 25 people. It’d be great if you can help out (please don’t donate if your financial situation is dire.) You can Subscribe or Donate here or contact me at admin-at-ianwelsh-dot-net if you need another way to donate (mail, usually. A lot of cash apps don’t work in Canada.)

Throwing all this money at AI if it really was the epochal “tech to end all techs, the singularity, dude” that the tech-bros claim it is might make sense. But I don’t see the evidence that this is the case, and even if it is, why not use the Open Source Chinese variety?

In fact, my guess is that this version of AI, based on this model and this generation of chips, is not even as big a deal as the internet was. Everyone was right that the internet was going to be HUGE, they just over-invested before it was and before people knew who the winners (Google, Facebook, Amazon) were going to be.

But so far AI doesn’t even look as important as the internet, but the spend is way larger than the internet build-out of the turn of the millennium.

But even if AI turns out to be a HUGE deal, it’s going to crash out of this bubble and we’ll find out later who can make money doing what.

The Fed will paper the AI market crash over, making hundreds of billions or even a trillion out of thin air to save the rich from their own stupidity and greed. Again. But this will be the LAST crash the Fed will be able to save the capitalists from. The one after will either wipe the capitalists out, wipe out America, or both.

Big Picture Financial Collapse

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On August 5, 2024

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Though newer readers will be forgiven for disbelieving it, during my early online career I was primarily considered a finance and economics blogger, though I’d write about almost anything. Among other things, I predicted the financial collapse, including the DOW bottom and the month it would happen in. A correspondent once went thru the Wayback machine and found that there were less than forty people who made the prediction in advance.

I lost interest somewhere around 2010 and moved my primary focus to other topics: at the time mostly ideology and how it interacted with the political economy. There was no reason in continuing: my goal had always been change, and the Fed, Congress and Obama had all confirmed that the only change was to be the end of any real spar of capitalism.

So I’m not going to write about the proximate cause of the current financial collapse, but instead look at the bigger picture that lead here.

First we have the offshoring of real industry, primarily to China. There is a real economy, and financial skyscrapers, no matter how high, are based on them. The bottom line is that the West no longer has the industry to hold up the skyscraper.

Second is that the 80-now long bull market was entirely a creation of government policy: mostly thru the Federal Reserve, but with serious assists from Congress and the President. There was a time when stock buyback were illegal, for example. There was a time when the Fed didn’t run a “the markets must always go up” policy: in fact, during the 50s and 60s the stock market traded sideways, even though real economic growth was, by every measure, higher than in the post 80 period.

Third is the response to the 2008 financial collapse. Not the collapse itself, but the response, which was to bail out the people and institutions which had caused the crash, to immunize thru fines and agreements those who had engaged in massive and widespread fraud, to force the burden onto homeowners by allowing banks to steal houses; and in general terms to ensure that the same people who had caused the crisis were in charge afterwards, but more powerful and controlling larger institutions.

Then they patted themselves on the back and said they’d saved the world. Capitalism isn’t a system I like, but one of its virtues is that if you fuck up you go out of business: if you’ve made a lot of bad decisions you aren’t allowed to keep making bad decisions. Bernanke, the Fed, Congress and the Presidency put an end to that dynamic and essentially ended even the shadow of real capitalism in America, and indeed, in the West.

This meant that resources were terribly misallocated, and that further economic decline was inevitable, since there was no possibility of a new economic elite rising based on actually producing good products and solving real problems. It also mean that further financial crises were inevitable, and that in the end those crises would not be able to be papered over, because, Virginia, there may be no Santa Clause but there is a real economy where things have to actually be made and built and grown and dug up and refined.

The fourth factor is the decline of US dollar hegemony. It isn’t obvious in the numbers yet, but it’s real and those who are making long term bets against it will regret doing so. I won’t go on about this, since I’ve written a dozen articles or so on the topic in the last two years.

We’re at the end of somewhere between two and five centuries of European/Western world superiority and dominance. It’s going to suck for Europe, the Anglosphere and most of our allies. There’s just no way around that, and the decision points are past. A recovery is theoretically possible, and I could even write an article giving the outlines of what’s necessary, but there’s no political possibility of doing it and our current elites are too incompetent to make it work anyway. A revolution which throws out our entire leadership class is a pre-condition and by the time we got that done, the day would have passed anyway.

All of which is, I suppose, just a long way of saying “economic decline sucks and isn’t going to stop,”

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Why Economists Are Wrong About How Good The Economy Is, And Regular People Are Right

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On October 30, 2023

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Practically every day I read an economist like Paul Krugman or Brad DeLong talking about how the economy is the best ever, but ordinary people just don’t get it, and must be idiots influenced by propaganda.

Someone’s an idiot on this subject, but it’s not ordinary people.

Mish Shedlock had a good article on medical inflation. Here’s two charts from his article. First, costs:

Second, CPI for medical:

You might be noticing a—slight disconnect. The cost of medical care services (which is what you care about as a patient) are dropping, according to the Bureau Of Labor Services (BLS).

Mish has the extended explanation, and you should read his whole post.

Now, back in 2020 I wrote an article on how inflation statistics are bullshit. One example was automobile costs. Here’s the chart from that.

Yeah. right.

The inflation statistics, at the this point, are complete bullshit. Absolutely worthless in entire categories.

When it comes to how good people feel two things matter: how many people have a job, and how much money they’re making. When economists look at wages, they look at “inflation adjusted wages.”

How much your money buys. So, since the inflation numbers are garbage, the inflation adjusted wages are garbage.

A long time ago Stirling Newberry gave me a rule of thumb, which is that people are fooled in generalities but not in specifics. Which is to say, people know what hurts or feels good in their own lives, though may be completely clueless about the generalities. But when you take a survey asking people how the economy is doing, what you’re really asking is “how does it feel for you and people you know.” The answer is “shitty.”

I’ve personally seen, in Toronto, Canada, foodprices increase at least two-thirds. If I buy the shopping basket I bought for $30 in 2020, it now costs me about $50. A lot of things have doubled in price. Rent is way up for most people.

And when I talk to other people, no matter where in the US or Canada they’re from, I hear the same thing. So I’ve never believed the BS talk about the “best economy ever.”

Back in the 90s, there was a rather good book titled, “Economists are bad for your health.” Economists are clueless. North of 99% of them missed the 2000’s housing and financial bubble, for example. The advice they give on how to run economies is almost always not just bad, but terrible, at least for 96% or so of the population.

The most important requirement to understanding the world is accurate perception. Truth, if you will. If you don’t know the truth, you’re going to draw the wrong conclusions. Economists believe BLS stats, so they’re full of it. Add to that the fact that Economics as a discipline is mostly wrong about almost everything macro, and economists are out to lunch in a very dangerous way.

(Note that I predicted the financial crisis, publicly, in advance and spent years before that writing about the bubbles. All the necessary information was available, if you didn’t think nonsense like markets being self-regulating and housing prices always going up. A correspondent once did a search to find out how many people predicted the crash in advance. He found 39. Where were all the economists, who are supposed to understand the, well, economy?)

Anyway, ordinary people are right. Their wages haven’t increased enough to make up for the increases in key prices. You can skip on a lot of things, but not food and shelter, and skipping on medical services is bad too. As for autos, well, most people need them or they can’t get to work or go shopping.

We have late imperial disconnect: the elites live in a world where everything is great, while ordinary people live in the real world, and it sucks.

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Delusion Regarding the Fall of Neoliberalism and Globalization

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On September 25, 2020

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So, the article below was published December 8th, 2015.

The pull quote is:

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

Nothing has changed, the process has simply continued. Notice the repression going on in the US right now. Since I wrote it, the UK left the EU, there was massive resistance to Macron in France, and so on. We have massive fires all over the world: Australia, California, South Africa the Amazon and more. Wealth continues to concentrate at the top, etc, etc…

These convulsions take time. Slap the start of the actual fall as 2020, with the UK’s Brexit, and we’ve got 12 to 20 years to go. This one’s going to be bad, really, bad, simply because of climate change and our vast over-exploitation of limited resources. There’s going to be a lot of real hunger and lack of water, and so on.

The next age is undetermined, but one possibility is a centrifugal period. It is hard to imagine a future in which, India, for example, survives as a unified nation. For that matter, I’m not sure I’d put my money on China holding together over the middle run: 50/50 it’s fallen into warlordism by 2050 to 60.

The simple way to make your guesses is ask if a country can feed itself with domestic production AFTER the effects of climate change. If it can’t even feed itself now (or only barely); or if it is going to have serious water issues (water, obviously affects agriculture, so it’s not really two things), then the smart money is that it’s going to break up or lose effective control of various hinterlands.

And if you’ve got resources a more powerful nation on your border wants, well, that could go very badly for you. (My fellow Canadians, who seem clueless about how violent Americans are, should take note here.)

On the upside, this will be a very interesting period to be alive, if you can stay that way.

Natalie Nougayrède writes in the Guardian about The Front National’s victory in France:

Marine Le Pen has no solution for France’s problems, her economic programme is all about retreating from the outside world and Europe. Her social vision is of a mythical, homogeneous France that never existed. What she has to sell is an illusion. It’s only because so little else is on offer that people are buying.

This analysis is, there is no kinder way to put it, delusional.

And Nougayrède should know it, because she writes:

The impact of globalisation marked the end of what the French demographer Jean Fourastié coined Les Trente Glorieuses (The Glorious Thirty), the 1945-1975 period when France was modernising and increasing its international influence. There is much twisted nostalgia in the rise of the National Front.

Nougayrède blames this on the oil shocks, which the entire West failed to handle (note that Japan, far more vulnerable to the oil shock, DID handle it. Their later failure had other causes). She notes that France’s elites have not, since 1975, been able to turn things around, something I have noted as well.

But she is wrong about a retreat from globalization being delusional. The simple fact is that in France and almost every other country (including, by the way, most African countries), growth was better before globalization, and the proceeds of that growth were distributed to their populations much more evenly.

This is a fact, and you can only argue against it by invoking China (which used classic mercantalist policies, and was not meaningfully party to the 1945-1975 consensus economy.)

There will always be trade. There will always be global movement in goods, capital, and ideas, but more is not always better.  In fact, one can easily argue that more is rarely better.

As for “Europe,” the fact is that increased integration has not been to the benefit of most Western Europeans. That assertion is, again, extraordinarily hard to argue against and is especially true of the creation of the Euro.

Nougayrède wants France’s leaders to fix things, and not to fail, but she is very nearly as delusional as them. She admits that their failure has led to the rise of Front National, but cannot admit that their policies have failed, economically, along the lines that Marie Le Pen says they have.

Just because someone is a near-Fascist does not mean they are wrong about everything. I have no tolerance for LePen’s brand of Imperialism and cultural supremacy, but she, like Trump, is telling a lot of truths to a lot of people who feel like their country has been on the wrong track for a long time. (In the U.S., white, working class male salaries peaked in 1968. No matter how much you scream about white privilege, you are a fool if you expect white males to gravitate towards anyone who doesn’t at least pay lip service to reversing that.)

As an economic project, the EU is a failure for many of its members, including France. There are exceptions (Germany, Poland, etc.) but the losers cannot be expected to just sit there and take the beating forever. The “beating” has been exacerbated by Europe’s deliberate imposition of austerity. It is not just that Europe’s elites have failed to create a good economy, it is that they have deliberately made the economy worse for the majority of residents in many of its countries.

Until we can honestly evaluate the failures of neo-liberalism, and gut globalist cant which claims more trade and capital flows are always a good thing (and, even if they aren’t, are “inevitable”) we cannot fix the economy.

France, like about half of the EU, should leave the Euro. It should re-impose tariffs on a wide variety of goods and produce them in their own countries. Yes, they would cost more, but wages would be higher. It should also move radically to non-oil-based energy (as is true of, well, almost everyone).

These basic policies are not difficult. Corbyn is not wrong to say “make the necessary adjustments so it will work today, and go back to post-war policies.”  It failed,  yes, but it was the last economy which spread money evenly through the economy.  Make sure it’s not sexist and racist, update it for new energy technology, and try it. It may not be the best solution (I’d like some fairly radical changes), but it’s certainly not crazy, given that it did give France those 30 great years.

The failure to deal with the oil price shock doomed the post-war world, yes. But it is 40 years later and we have technology and knowledge they did not have.

Until the developed world’s sanctioned intellectuals (as opposed to pariahs like myself and my ilk) and their masters come to grip with these facts, the population will continue to turn elsewhere. They may turn to sane and reasonable people like Corbyn, or they may turn to people like LePen and Trump, but people will not put up with “it’s going to get worse for the forseeable future” forever.

We can have reasonable policies, which will make the world better for everyone (even if that means there will be a lot less billionaires–the Corbyn solution), or we can have the rise of fascists and their left-wing equivalents.

The room in the mushy middle for those who aren’t willing to do something radical to fix the economy and other problems is narrowing. It will continue to narrow.

Our current elites will not adjust, so the question is: Who will we get? Corbyn and FDR? Mussolini, LePen, Trump?

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

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What Negative Interest Rates Mean and What We Should Do

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On August 21, 2019

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Alright, so Germany has now introduced a zero interest bond. That means, given inflation, people will get back less effective money than they started with.

At this point, outside the US, the average interest rate is negative.

As Stoller pointed out, that means that people with money can’t figure out anything productive to do with it which will make a profit.

That means that capitalists and banks, including central banks, have failed. It is their function, in a capitalist society, to allocate resources. Money represents resources: people, stuff, and land.

Now if we lived in a utopia, with no real problems, this would make sense, but we don’t. There are tons of real problems which need solving, lots of money floating around, and other capacity indicators show there are people and resources which are not being used, or which could be redeployed.

So capitalism is failing to do what it’s supposed to do, and so are capitalists.

The correct action in a situation like this is to get that money working. The government could borrow it massively, and do what needs to be done. It could (and I would suggest this is the better option) tax it away, and then spend it.

If capitalists absolutely insist on private enterprise doing the work, then they should massively raise taxes on any income or capital gains not used productively, and not count less productive things like loans–they should stipulate that the money must be invested into business activity. They should make stock option grants, stock buy-backs, and all similar activities intended to allow cash-outs impossible. They should get rid of private equity; just make it illegal. Almost all of its activity destroys viable business to create a pay day for a few people.

Heck, you should do away with all those things anyway.

People are very confused about profit. Profit is mostly socially constructed. It is not an independent variable. Taxes, laws, and regulations determine what is profitable and what isn’t. Billions of subsidies, tax breaks, and favorable land deals make extraction industries profitable, for example. Banks get to print money. Media companies like Disney rely on characters and ideas which, in the past, they would long have lost control over. Companies are allowed to pollute for free, to use vast amounts of water for nominal prices, and so on.

Meanwhile, a vast array of regulations and nickel and dime costs makes it impossible for small business to compete. Try starting a bank. Yeah, good luck with that.

This, too, is by design. Before Reagan, regulations were set up to make small businesses easier to start and keep running.

The point is that if investors can’t find anything in which to invest, government has failed to tweak profits correctly. You shouldn’t get rich in land speculation unless you’re building stuff that should be built. You should get rich in alternative energy, but mostly you don’t. You should get rich in making homes that are healthy and energy neutral, but instead we keep building unhealthy and environmentally-degrading housing.

You should make money rebuilding infrastructure, or building high speed trains, or reducing carbon, or reforesting, or making fish and phytoplankton stocks recover.

Yet, you don’t, so these things which need to be done in order to, like, avoid a few billion deaths, don’t get done.

That’s government failure.

Capitalism does not work without effective government control, if it is the dominant economic mode in a society.

So. We have lots of stuff that needs to be done. We have lots of resources and money which aren’t doing those things and, indeed, resources and money which apparently can’t find anything to do

Only a moron can’t look at those facts and know what to do.

Oh, and the 2008/9 bailouts made this situation far, far worse than it should have been. This endless printing of money is only to keep the useless rich afloat when they serve no useful, productive function. They are actually counterproductive, as they are actively stopping productive activity from happening.

Tax them. Stop propping them up and let incompetents die. Destroy, utterly, those members of the ruling class who are actively destructive, like Private Equity. Alter the rules so that productive activity is profitable, and while you’re doing all that, just have governments do the most important stuff themselves, with negative real interest rate loans.

None of this isn’t obvious to anyone who pays any attention.

Yet we don’t do it, because governments have been captured by failed rich people.

Normal. But not acceptable when the cost of inaction could be billions of dead people.

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Why We Need to End Banks and Shadow Banks

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On August 8, 2019

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Banks and various other financial companies have one important privilege: They can create money. When a bank lends you money, they don’t take it from another account and apply it to yours, they just put a number into a ledger, and voila, the money exists, created as debt.

Now, there are those who argue that creating all money as debt is stupid, but let’s move on from that and emphasize the important point:

Banks and other financial companies create money out of thin air.

Now, there are various caveats, and the amount they can create isn’t unlimited (though for practical purposes it’s close), but this is the bottom line.

They then get paid back by the people they loaned money to on money they created out of thin air.

It takes a special sort of genius to run a business which can actually create money, yet still lose money.

This chart gives an idea of how much genius:

I mean, you create the money out of nothing, and then you charge 17 percent returns (which underestimates the real rate of return, because of all the charges), and you still manage to cause a financial crisis because your liabilities wind up higher than your assets?

Wonderment aside, let’s circle back to the ability to create money.

Let’s say you’re Joe, guy who wants to start a business or buy a house. You go to a bank, and the bank decides whether you can do that.

Banks have the ability to create money in exchange for doing something: They decide who should get to do things. They give permission.

If a bank lends you 5o million, that’s the right to command 5o million dollars worth of other people’s labor: To hire them, or to buy the goods created by them. You get to choose what those people do.

Resources, especially people, aren’t infinite. Banks choose who gets to use them. The deal, spelled out is, “Give us the right to create money, and we’ll choose the people who do the most good with society’s resources to control those resources.”

And the banks have failed–over and over again they’ve failed. They don’t even actually make their returns (see 2007/8), let alone actually make good choices about how we should use our resources–with labour or other limited resources. I trust I don’t need to spell all of this out: Look at ecological collapse, climate change, and so on.

So banks, in their current form, shouldn’t have this incredible privilege, because they’ve repeatedly used it badly. This isn’t the first time, or even the second, or the tenth. Among others was the collapse of 1929 and the Great Depression, which effectively caused WWII. We thought we’d fixed the banking sector after that, and we were wrong, because rich people bought out government and undid all the fixes put in by FDR and the New Dealers.

So banks can’t be fixed, they do near apocalyptic damage, plus they suck at their actual job.

We need to find another way to give people permission to use scarce resources, including other people’s labor.

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Why the Economy Is Bad for Most People and How to Make It Better

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On June 10, 2019

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This is the second collation of articles on why our world is what it is, and how we can change it. Some of these articles are old, as I don’t write as much as I used to about economics, mostly because the decision points for avoiding a completely lousy economy are now in the past. The last decision points were passed by when Barack Obama announced his economics team and refused to try and get rid of, or bypass, Bernanke to enforce decent policy on the Federal Reserve.

However, this economy was decades in the making, and if we do not understand how it happened we will only wind up in a good economy through accident, and, having obtained a good economy, will not be able to keep it. These articles aren’t exhaustive; a better list would include almost five centuries of economic history, at least in summary, and certainly deal with the 19th century and early 20th centuries.

I was heartened that hundreds of people read the articles linked in my compendium on ideology and character so I dare hope that you will, again, read these pieces. If you do, you will walk away vastly better informed than almost anyone you know, including most formal economists, about why the economy is as it is.

The Decline and Fall of Post-war Liberalism

Pundits today natter on and on about income inequality, but the fundamental cause of income inequality is almost always determined by how society distributes power. As power goes, so goes income–and wealth. The last period of broad-based equality was the “Liberal Period,” which started with the Great Depression. You can locate the end of that era at various points from 1968 to 1980, but 1980 was the point at which turning back became vastly difficult. This was the moment when a new political order was born; an order conceived to crush those who were willing and able to fight effectively for their share of income and money.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

Why Elites Have Pushed “Free Trade”

Those who are middle-aged or beyond remember the relentless march of free trade agreements, the creation of the WTO, and the endless drumbeat of propaganda about how FREE trade was wonderful, inevitable, and going to make us all rich. It didn’t, and it was never intended to. Fully understanding why “free trade” has only enriched a few requires understanding the circumstances required for free trade to work, the incentives for free trade, and the power dynamics which make free trade perfect for elites who want to become rich (often by destroying the prosperity of their own countries). Free trade is about power, and power is about who gets how much.

The Isolation of Elites and the Madness of the Crowd

All societies change and face new challenges. What matters is how they deal with new circumstances. The US, in specific, and most of the developed world, in general, is in decline because of simple broken feedback loops. Put simply, ordinary people live in a world of propaganda and lies, while the rich and the powerful live in a bubble, isolated from the consequences their decisions have on the majority of the population, or on the future.

The Bailouts Caused the Lousy “Recovery”

This may be the hardest thing to explain to anyone with a connection to power or money: The bailouts are WHY the world has a lousy economy, not why it isn’t even worse. If people cannot understand why this is so, if they cannot understand that other options were, and are, available, other than making the people who destroyed the world economy even richer and more powerful, we will never see a good economy, ever again.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

The Rapid Destruction of Countries

You may have noticed, you probably have noticed, that most countries are becoming basketcases faster and faster. Some are destroyed by war and revolution, others by forced austerity. However it happens, the end of anything resembling a good economy through austerity in places like Greece, the Ukraine, Italy, or Ireland, or through war, in places like Lybia and Syria, is sure. Understand this: What is done to those countries, is being done to yours if you live in the developed world, just at a slower pace–and one day, you, too, will be more valuable dead than alive.

Why Countries Can’t Resist Austerity

Many of you will realize that much of the answer to this is related to the article on free trade. Weakness, national weakness, is built into the world economic system, and done so deliberately. The austerity of the past six years is simply the deliberate impoverishment of ordinary people, for the profit of elites, on steroids. But it is worth examining, in detail, why countries can’t or won’t stop it, and what is required for a country to be able to do so.

Why Public Opinion Doesn’t Matter

We live in the remnants of a mass society, but we aren’t in one any more (though we think we are). In a mass-mobilization society with relatively evenly distributed wealth and income, and something approaching competitive markets, public opinion mattered. If it was not a King, well, it was at least a Duke. Today it matters only at the margins, on decisions where the elites do not have consensus. Understand this, and understand why, or all your efforts to resist will be for nothing.

The Golden Rule

Money, my friends, is Permission, as Stirling Newberry once explained to me. It is how we determine who gets to do what. He who can create money, rules. This is more subtle than it seems, so read and weep.

It’s Not How Much Money, It’s Who We Give It to and Why

We have almost no significant problems in the world today which we could either not have fixed had we acted soon enough, or that we could not fix or mitigate today, were we to act. We don’t act because we misallocate, on a scale which would put Pyramid-building Pharoahs to shame, our social efforts.

Higher Profits Produce a Worse Society

No one ever told you that, I’m sure. Read and learn.

The Fall of the USSR

The USSR fell in large part because of constant and radical misallocation of resources. This misallocation occurred because those running the economy did not receive accurate feedback. Despite the triumphal cries of the West and the managerial class who pretend to be capitalists, a version of this exact problem is at the root of our current decline, and it would serve us well to understand how and why the USSR fell.

What Privatization Does

Of all the ideological bugaboos of our current age, one of the strongest is the idea that private enterprise is always more efficient and better. It’s not, but that belief is a very profitable to our elites, and understanding how the engine of privatization works is essential to understanding both our current economic collapse and how the fakely-bright economies of the neoliberal era–especially the early neoliberal period of Thatcher and Reagan–were generated.

What Prosperity Is and Isn’t

It is, perhaps, odd to put this article so far down the list, but it’s wonky and important and not very dramatic. Simply enough, what we define as prosperity is not prosperity, which is why we are sick, fat, and unhappy with rates of depression and mental illness and chronic disease which dwarf those of our forbears despite having so much more stuff. Fix everything else, but if we insist on continuing to produce that which makes us sick and unhappy, what we have will not be what we need or want, nor will it be, truly, prosperity worth having.

The Four Principles of Prosperity

Prosperity, at its heart, is an ethical phenomenon, as much as it is anything else. Without the right ethics, the right spirit, it will not last, nor be widespread. If we want a lasting prosperity, which is actually good for us, we will start by reforming our public ethics.

How to Create a Good Internet Economy

The internet is wonderful, but despite all the cries of “Progress, progress!” it has mostly made a few people rich, created a prosperous class of software engineers who often lose their jobs in their 50s, and has simultaneously overseen the decline of the prosperity for most people in the developed world. It has not produced the prosperity we hoped it would. Here’s why and how to fix it.

Concluding Remarks

The above is so far from comprehensive as to make me cry, but it’s a start. I do hope that you will read it and come away with a far better idea of why the economy sucks for most people, and a clearer understanding of the fact that it is intended to suck, why it is intended to suck, and how the old, better economy was lost.

(Author’s Note: This was originally published October 6, 2014. I’m putting it back up top, as I have gained many new readers since then.)

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