Nihilism Embodied: Our Lawless Financial System (an updated review)
My predictive article from 2020 is scarily accurate (with updated comments from 2023)
I wrote this article as the first part in a five part series on the present and future economy for OfTwoMinds.com entitled: When the World Market Itself Is Fake, Economic "Value" Loses Any Real Meaning.”. (You can read the full article here.) It was an extension, update, and development of the analysis I made in my 2013 book, Transforming Economy: From Corrupted Capitalism to Connected Communities.
The more things change, the more they serve the top economic layers of society. In this September, 2023 update, will take some selections from this August 29, 2020 article to demonstrate both just how eerily accurate my “predictions” were and where this leaves us. These initial prognostications weren’t really predictions, but just logical outcomes of a corrupt system intent on concentrating wealth and owning everything. Re-reading it myself, I am a little shocked at how fast the plundering of middle class wealth has proceeded. I will pull out and discuss the most consequential excerpts:
I wrote this predictive observation in the January 28, 2011 Of Two Minds post entitled, Abused Fundamentals and Fake Markets: How They Play Out (later published and updated in 2013 in my book: Transforming Economy: From Corrupted Capitalism to Connected Communities):
So we have a lawless system. What does this mean for citizens and investors? In the near term it means that the fundamentals will not apply. Anything that maintains or augments elite wealth and increases elite options will be supported, and anything that consumes or converts common people's wealth and labor and restricts their choices will be pursued.
Anything that reinforces accountability, rational response, or cause and effect will be actively suppressed. Forget reversion to the mean. One only has to observe where the respective value/wealth of each party resides and where it gets channeled to know what the market will do and where policy will go. When the stock market should crash, it won't... until some time frame far longer than even the most generous fundamentals would dictate...
Analyses that try to predict near term market moves based on Laffer curves, Elliot Waves, and historical cycles will almost definitely fail. We don't have a 'new era', but we definitely have unprecedented coordinated global intervention dedicated almost solely to the fortunes of the top 1%. That is the new rule that will govern until there is a serious breakdown.
Bingo. Bingo. Bingo. CARES acts, Iraq/Afghanistan wars, massive borrowing and money printing of U.S. dollars, all created the greatest upward transfer of wealth in 2020 which is being leveraged by huge multi-trillion controlling asset companies like BlackRock and Blackstone to buy up real estate from families and communities.
I pretty much nailed this trend in this statement from the 2020 article:
In brief, here is how I believe this latest round of audaciously escalating fraud will play out. Given that "too big to fail, too big to jail" is now established worldwide policy, the logical next move for the billionaire class will be buy up everything of hard value with unlimited free unbacked money and massive debt. Think private equity firms, but on a colossal scale: Extract and savage this wealth from every known stored value, and leave the mess for someone to clean up. This is a project now supported by every major central bank and it involves monopoly ownership of every avenue of value assignment and measurement by a handful of people and companies.
When assets are purchased with endless money printing funneled to the billionaire individuals and trillionaire companies…
Therefore, I expect the U.S. Dollar to remain strong, gold to hold its value, as a stable foundation and exchange medium for wealth extraction. Bitcoin will also hold its value and be dominated by the big players in order to control the gateway to democratized value exchange (and they can do so by borrowing unlimited 0% interest U.S. dollars to buy up as much Bitcoin as they want).
The move toward central bank digital currencies (CBDCs) shows the resistance of Bitcoin to some of the same kind of corporate mega-company buy-up, but more than that it represents a real effort on the part of the ostensible ruling class to dispossess Bitcoin perhaps the strongest established gateway to democratized money. How are they going to monitor YOUR purchases without their own rules and their own money?
What basic precursors do you need to stampede wealth toward the few?
Combine this zero-interest, unlimited, frictionless money with allowing unlimited stock buybacks, and the value of stocks no longer has to even be connected with earnings! Tesla's price to earnings (PE) ratio is at the time of this writing over 1,100! PE's of 30 or 40 used to be considered irrational exuberance. What would you call this? Is there any longer even a theoretical limit?
How much have billionaires made since the collapse of the market in March 2020? They have made 637 billion dollars according to an August 3, 2020 Business Insider article, which also notes that this separation and concentration of wealth is only accelerated by government bailouts that go overwhelmingly (some 90%) to a wealthy hyper-minority (with tax loopholes and shelters that allow them to keep those ill-gotten gains).
Meanwhile, 30+ million ordinary people lose their jobs, and as many as half of small businesses may be closing their doors, while multi-billion dollar hedge funds are showered with "small business" cash because they have less than 50 employees.
As Ryan Detrick said in a tweet on April 30th, 2020.
(Y)ou (also) need austerity and disaster capitalism for the little guy so you can force them to sell off their assets at rock-bottom prices. You also need controlled political systems run by technocrats and bureaucrats that don't mind exploiting and abusing the little guy as long as they get a slice of the pie to maintain their own lifestyles. And it doesn't hurt to have bloviating nationalist dictators, and various "deep state" conspiracy theories to arouse the emotions of the public and direct these emotions to anything (anger at immigrants, and black and brown people, abortion, feminists) but not at the very entities anger should be directed toward-- corrupt capitalists, lawless corporations, and predatory oligarchs.
The one thing we can say right now, unless something drastically changes, is that there are no upper level champions for the ordinary citizen. Donald Trump has already proven to be an alarmingly agile lackey for the power elite, dumping trillions into their coffers, hiring them as advisors, and getting rid of any kind of financial or environmental regulation. Joe Biden's advisors are touting "austerity" for the little guy, while promising Big Oil that they will not have their subsidies cut (despite Biden's platform promise to cut subsidies), and promising Big Finance that they will remain unchecked.
Will we have another flash crash, and fear and want, resulting in consolidation of poverty for the many and material ownership for the few? Will people drastically downsize, suffer through austerity policies, while Big Everything (Oil, Pharma, Finance, etc.) continues to get bailed out and get multi-billion dollar subsidies even when they bring in record profits?
It appears the answer is YES! Even when the “big guys” screw the pooch by leaving many millions in Silicon Valley Bank, for instance, BEYOND the FDIC insured amount of 250,000, they still get the special treatment when it collapsed, getting every dollar back, even though it was not insured. I guarantee the same deal would not apply to you or me.
According to Time Magazine: “The (Fed rescue) move backstops the $175 billion that was held at the (Silicon Valley)
bank—about 85% of which was uninsured”. But don’t worry! “Authorities added that taxpayers will not bear any costs for losses associated with unwinding the bank.” Yes, it will just be printed out of thin air, spiking inflation, to be paid by citizens and taxpayers in lower purchasing power. Kinda like shell companies, but, in this case, shell POLICY of the three-card Monty type.
In this article, I asked the question:
Will we have a massive collapse of commercial and residential real estate, because of people moving in together and millions of small businesses closing, which will allow private equity firms to sweep in and buy properties up in collusion with corrupt banks for pennies on the dollars?
Seems in 2023 as if the commercial real estate, at least, is teetering on collapse in places like San Francisco whose vacancies are skyrocketing and prices are falling like a stone. “The (Capital Economics) research firm forecasted that San Francisco properties will decline in value by 40-45% between 2023 and 2025, edging out Seattle as the hardest-hit city in the study.”
The big banks don't have to worry, because their assets will be backstopped. However, will small banks and credit unions who rely on lending be forced into bankruptcy, where they can be swallowed as well? This is where we are heading if "we the people" do not stand up to this multi-headed hydra.
Swallow indeed, with Fitch analyst Chris Wolfe predicting that “(h)alf the country’s banks will likely be swallowed by competitors in the next decade”.
But let’s not get down and depressed. This hubris, unfairness, and overreach may yet inspire a critical revolt by the working and middle classes across ideological lines. I know that I have begun to find common cause on these issues with people I might normally expected to compete with and disagree with.
Times are achangin’ , and if the wealthy few want to wage a class war, I think it is high time we largely drop our cultural antagonisms and focus on the real challenges that move and shape our world.
Excerpts copyright 2020 Zeus Yiamouyiannis, commentary 2023
This is part of series entitled When the World Market Itself Is Fake, Economic "Value" Loses Any Real Meaning.
Parts 2 and 3 of this series will explore where we are right now and what to look for in the tough times ahead.
Parts 4 and 5 will discuss healthy, pro-democratic, creative alternatives to the current rigged system.