Financialization

One of the things that ails us in the modern age is we have yet to adjust our thinking to the modern economy. The great political-economic thinkers lived in a time when money was either gold, backed by gold or a fiat currency. The result is our political and economic debates are based in the logic of a world that no longer exists. The modern global economy is not based on fiat money or hard money. It is based on credit money, which has a unique set of characteristics.

For instance, the US government is no longer able to print up greenbacks and sprinkle them on the economy. Instead, when they expand the money supply, they expand lending, both domestic and global. It’s not just any sort of lending either. The central bank can buy up long term notes in order to drive down long term lending rates, thus expanding lending for capital goods. Alternatively, they can buy up short term debt and increase the amount retail lending. The Federal Reserve holds close to 2 trillion in mortgages, for example.

There’s no question that this new form of currency arrangement has had benefits to the West. Libertarians and goldbugs will spend hours arguing against this sort of currency manipulation, claiming it will lead to a financial collapse, but so far, the opposite has been true. The mortgage meltdown of 2008 did not result in a global depression. The worst you can say of it is the result has been a long, localized recession. The rulers look at current asset values and see a ringing endorsement of credit money and central banks.

Putting that debate to one side, there are longer term problems that come with credit money. One is the slow eating away of the middle class by eating away at small and mid-sized business. The most obvious example is the collapse of retail. The old joke was that Amazon turned big box stores into their showroom. Consumers would go to Best Buy to look at electronics, get free advice and then go on-line to buy them. This can only last for so long and the mass closure of retail stores we see this year suggests the end is near.

The libertarian argument is that the more efficient business has displaced the less efficient business, and that’s not completely wrong, but it ignores the salient aspects of this phenomenon. A world in which everyone either works for or buys from a global company run by a Bond villain is not a world most people want for themselves or their progeny. There’s also the question as to whether it is economically sustainable. Business needs customers and customers need jobs in order to have money to be customers.

There’s also the fact that Amazon would not exist without credit money. In a world of real money, Amazon would have gone bankrupt long ago. This is true of the social media companies that now control public debate. None of them would have made it past the hobby stage if not for the financial system’s ability to conjure credit money. In effect, we now live in a world where the rulers can make their money more valuable and your money worthless, simply by manipulating the amount of credit money.

There’s another way in which the financilization via credit money erodes social stability by undermining the middle-class. Take the example of industrial supplies. This has always been a middle-class, local business. The “value” added was the owners willingness to invest in their location and facility in order to meet the needs of their local customers in the commercial trades. They were almost always family businesses with the wife running the office and the husband running the shop.

The miracle of credit money has allowed investors to back the acquisition and consolidation of these mom and pop businesses. The way it works is investors back one business buying up other shops in the area. This allows the new owner to replace the previous owners with low cost salary men. It also allows for the consolidation of accounting, IT, human resources, etc.. This makes the over all business more efficient, giving libertarian economist a tingle in all the wrong places.

This increase in efficiency does not mean lower prices to consumers. It often means the opposite. In some areas, there’s no longer competition so prices rise. The economic gains from efficiency show up in the returns to the investors. The lack of community investment, like sponsoring local little leagues and social organizations, is also stripped out and returned to investors. This is great for a Bain Capital, but it is terrible for the local communities. Instead of communities, we now have areas populated by strangers.

Another useful example is education. Just a generation ago, a college diploma had real value that exceeded the purchase price. The financialization of college has not only decreased the initial value of the diploma, it has stripped away much of its long term value through the student loan rackets. The only people benefitting from college today are the people running the colleges and the money men financing it. The school makes millions staging mock combat with retarded black men and your kid gets saddled with the debt.

Credit money has unleashed financial pirates on the American middle class, turning every small town and family business into a Lindisfarne, in the eyes of our financial class. A big reason why the economic data looks good, but the the people are revolting is the social capital that held together the American middle has been financialized and moved to the balance sheets of global financiers. Increasingly, the relationship in the modern American economy is not between buyers and sellers, but between predators and prey.

At least when the Vikings raided a village, they did not demand that the locals celebrate their ruination. It was a raid and the local authorities tried to prevent it. That’s the other aspect of this that is eating away at our civic life. It used to be that government worked to reign in the financial tricksters, not because they cared about the suckers, but because it was bad for politics. Today, if the political class has anything to say about it at all, it is usually a celebration. The Danegeld has now become an institution.

When Alfred the Great faced off against the Great Heathen Army, he quickly learned that adherence to old customs and old ways was a liability. The world had changed. In fact, it changed so much that he nearly lost his crown before he could adjust to the new realities presented by the Viking raids. The Norse played by a different set of rules and they had no respect for the Anglo-Saxon ways. In fact, they sought to exploit those ways to their advantage. To survive, Alfred had to embrace new tactics and new methods.

Eventually, Alfred resorted to guerilla tactics, something previously seen as dishonorable by the Anglo-Saxons, to weaken the Danes and maneuver them into the decisive battle at Edington. The point here is that those old economic arguments from the libertarians, like those constitutional arguments from the Buckley Right, are no longer relevant. In fact, they are now hindrances. The modern pirates have figured out how to turn our virtues into vices. That means we will need new virtues and new tactics.

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james wilson
james wilson
3 years ago

Glad this did not wait for Monday.

anonymouse
anonymouse
3 years ago

Outstanding essay!!!

Ned2
Ned2
Member
3 years ago

Question is, “How far can this present bag of tricks take us?”

TWS
TWS
Reply to  thezman
3 years ago

Mormons have figured out how to get whites to reproduce, Amish too. Properly incentived whites will reproduce.

Our system now is deadly for productive working class whites. Our rulers desire the collapse of this class. Unless they provide a workable outlet it will end. Bread and circuses are just palliative care until we are gone.

Karl Horst
Karl Horst
Reply to  TWS
3 years ago

I noticed it in the States, and it’s true here, that the less educated (all races) have the most number of children and seem to contribute the least to society. While the more educated, have few if any kids. Clearly, we all know who’s paying for who.

Coincidently, the majority of EU leaders (e.g. Merkle, Macron, May, Gentiloni, Lofven, Rutte and Junker) have no children. So it’s clear they have zero concern for the future of Europe, which explains a great deal about their positions on immigration.

karl hungus
karl hungus
Reply to  Karl Horst
3 years ago

check out the movie Idiocracy. then, whenever someone knocks on the door, shout “baitin!!”

TWS
TWS
Reply to  karl hungus
3 years ago

I love that movie. I am always buying new copies because people borrow it all the time.

A.B. Prosper
A.B. Prosper
Reply to  TWS
3 years ago

Mormon TFR is not that high and the bulk of Mormon growth is not in the USA . Its been around 14 million for decades enough to hold the line basically Now Utah does have above replacement fertility , its 2.3 or so which is roughly 1971 ,early post baby boom level. Its the best in the US, second maybe to Chechnya, and among the highest on the planet The next highest is in South Dakota which is around 2.2 or so last I checked. These are just a tiny bit above replacement Also Amish people aren’t part of modernity… Read more »

karl hungus
karl hungus
Reply to  A.B. Prosper
3 years ago

mormons are terribly inbred.

A.B. Prosper
A.B. Prosper
Reply to  karl hungus
3 years ago

Not really. Consanguineous marriage is very rare in the US among Whites.

The size of the mating pool and the Mormon obsession with genealogy prevents any kind of bad admixtures as well.

They are however quite tribal in the way Jews are and breed tightly , to type. You can with a little experience pick them out of a crowd pretty easily

In general quirks aside and outside a small amount of cuckery by Church leaders LDS do things mostly right

Giovanni Dannato
Reply to  A.B. Prosper
3 years ago

You make same great points backed up by stats. Upvote. You are correct to note that the masses are trained to be paranoid about government even though they’re just fine with the highway system, public schools, NASA, and the military. Minimum wage, as I see it, prevents a catastrophic race to the bottom. It’s something we need to have to compensate for an employer’s massively superior bargaining position over low-skill labor. It can’t be too high or else it starts to eliminate jobs and starts to have the college loan effect on the next tier of jobs, reducing them as… Read more »

Calsdad
Calsdad
Reply to  Giovanni Dannato
3 years ago

Bloody hell. I see constant references in these columns to how the “right” has sold out – and here I read yet another example. What ‘catastrophic race to the bottom’ ?? We have a race to the bottom going on right now. It’s a race fueled by FORCED higher and higher minimum wages – which make it more and more untenable to employ people who’s marginal value as workers is not supported by the wages that the employers are forced to pay them. So what do they do? They get rid of them – send the work overseas, replace them… Read more »

Giovanni Dannato
Reply to  Calsdad
3 years ago

This kind of panic just makes the situation worse. To avoid the mass immiseration you fear and hate so much, you have to bargain with, make rules for employers. Making infinite concessions doesn’t help. If you give them complete power, they’ll give you the barest amount of crumbs you need to keep breathing, less if there’s surplus population to replace you after you’re worked to death. Obviously a mandatory $15 an hour minimum wage is way too high and would kill business except perhaps in the very highest cost of living areas. If your concern is jobs being sent overseas,… Read more »

Rod Horner
Rod Horner
Reply to  TWS
3 years ago

The trouble with these examples is that they aren’t applicable to the broader white middle class. Mormons succeed and breed largely on the same account as Jews: they’re ruthlessly nepotistic atop being reasonably intelligent. Applying their system to a population group in the double digit percentages (both Mormons and Jews sit at 2%) would end up imploding as the rest of the population would quickly notice the left side of the Mormon bell curve was being rapidly promoted despite their inadequacy. (eg. Evan McMullin) The Amish are a better example, but to the elite who worship progress the Luddite variants… Read more »

Calsdad
Calsdad
Reply to  Rod Horner
3 years ago

It seems that Z-man likes to blame a lot of things on “libertarians” – but the libertarians I read – mostly on sites like LewRockwell – point out that the financialization that is the topic of this column – is there to support the state – which is a creature of the left. The reason why there is such a point put on the elimination of gold in the money system by libertarian leaning economists – is because it USED TO act as a form of forced honesty in the printed money system. Once that was removed – the leftist… Read more »

Epaminondas
Member
Reply to  thezman
3 years ago

“Since no one has figured out how to make a modern economy work without a white population, demographics would appear to be our rulers greatest long term threat.”

It would seem that Venezuela may be the model we are pursuing. If so, we would become easy targets for the Asians at some point later in this century. And they are capable of sustaining a civilization, just no the kind you or I would want to live in.

Reply to  thezman
3 years ago

Since no one has figured out how to make a modern economy work without a white population, demographics would appear to be our rulers greatest long term threat.

Well, maybe that’s how you view the situation, but it would appear that they don’t look at it that way, which is a large part of the problem.

Member
3 years ago

I’d love to hear some practical examples of what those new virtues and tactics would be (i.e., developing our own bartering system, no longer feeding the “beast,” etc.)

Can anyone lay out some clear things we can start doing today?

TWS
TWS
Reply to  hoboken411
3 years ago

My best thought is some kind of frontier, something to go to, challenge and produce. Idk maybe open up the federal land in the west to productive settlement. Only those willing and determined to work it could stay. Boiling off would allow a concentration of the frontier spirit, honor and pragmatism.

A.B. Prosper
A.B. Prosper
Reply to  TWS
3 years ago

The frontier is over, has been closed for nearly a century. You aren’t getting another one under nay plausible circumstances If people wanted something like one , right now Wyoming and the Dakotas would be far more developed as would the far north of California and Alaska These areas are only marginally habitable and men and especially women do not want to live there. Like it or not, the US is fully developed which means no frontier, no liber-tard opt out of social costs Vomiting up more tract homes isn’t a frontier either. The best option you have and you… Read more »

karl hungus
karl hungus
Reply to  A.B. Prosper
3 years ago

space

TWS
TWS
Reply to  karl hungus
3 years ago

I was promised space. Then a man called LBJ came along. He sold our patrimony for a mess of pottage.

A.B. Prosper
A.B. Prosper
Reply to  TWS
3 years ago

You underestimate the costs involved. Even if we has avoided the Vietnam war and the Great society costs , this would not have been enough for a sustainable space colony There is no positive ROI for such things do to lift costs , its a cash sink of unparalleled proportions We would have had a lunar base though or maybe a Mars base but the glorious space future wasn’t going to happen if you want to know where your patrimony went , you are using it. All our research and effort went into computers and all the geeks and techs… Read more »

A.B. Prosper
A.B. Prosper
Reply to  karl hungus
3 years ago

It would be much much simpler to colonize the Gobi or Siberia than Mars or the moon. Both are nearly empty Bruce Sterling the SF Author I’ll believe in people settling Mars at about the same time I see people settling the Gobi Desert. The Gobi Desert is about a thousand times as hospitable as Mars and five hundred times cheaper and easier to reach. Nobody ever writes “Gobi Desert Opera” because, well, it’s just kind of plonkingly obvious that there’s no good reason to go there and live. Space colonies are so expensive that no society can afford it,… Read more »

TWS
TWS
Reply to  A.B. Prosper
3 years ago

I wasn’t expecting moon or mars colonies with thousands of people. And of course they would have strict safety rules but you wouldn’t need a police state anymore than you do on the Apollo missions. Because you wouldn’t bring people that need policing. Most of a police officer’s job is frequent customers. Most people never get anything worse than a traffic ticket. The achievement is enough all by itself. And they’ve already written fiction of an entirely settled world including the Gobi. They’ve written fiction about deep sea colonies, living on Antarctica and man made islands. Yes, most of our… Read more »

TWS
TWS
Reply to  A.B. Prosper
3 years ago

The feds have millions of acres. Some of it is marginal done of it is great. We need to return to our pre-1965 pop in composition and numbers. When I was a kid there were fewer than two hundred million Americans. We can get back to reasonable numbers. Most won’t want frontier land anyway. The point isn’t to change society but give those who need a purpose greater than a cubical or a call center some options. And an incentive for those too weak to leave. I have no illusions about what it was like. I was raised by my… Read more »

Alzaebo
Alzaebo
Reply to  TWS
3 years ago

Space, eventually- the whites almost escaped.
The oceans. Aquaculture, mining.
The western states- big honking canals bringing meltwater from Canada.

Abelard Lindsey
Abelard Lindsey
Reply to  TWS
3 years ago

All non-pioneering human cultures are inherently pathological and, thus, contemptible.

Doug
Doug
Reply to  hoboken411
3 years ago

One example may be as simple sounding as prepare for quiet revolution, develop guerrilla tactics and insurgent methods of an underground economy. All most of us can directly effect is on our very local level. Something more attainable in rural like areas, small communities and enclaves. Where I live in WV there is a natural underground economy, and over the last few years it is increasingly embraced out of necessity because of the loss of the coal mining economy. The interesting part of how it functions is based on an economy of living as mind set. Do with less, repurpose… Read more »

notsothoreau
notsothoreau
Reply to  Doug
3 years ago

I wonder if we will see more folks step away from new technologies. The internet is becoming a marginal benefit, in a lot of ways. Blogs are disappearing and what’s left is worthless social media. We seem to love our cell phones but what benefits do we really get from them?

Countrymouse
Countrymouse
3 years ago

I can suggest one tactic. We should pass a law that every public company must pay at least 1/3 of all employee compensation in voting, dividend-paying, common stock.

Next, we should pass a law that all private companies above a certain size (say, $50MM annual revenues) should do the same thing.

That way you have many owners, spread out in the hinterlands, with real voting power.

Allan
Allan
Reply to  Countrymouse
3 years ago

Or we could just repeal all laws of incorporation and its associated features of limited liability, artificial personality, and perpetual lifespan. (As I recall, general partnerships also, in Louisiana, have one or more of these features.) Afterward, every business would be organized as a sole proprietorship or a partnership. This would cripple giant enterprises, for they are utterly reliant upon the incorporation trick (i) to protect their many untrusting owners from each other and (ii) to provide the irresponsible owners (who are generally strangers to each other) with the easy liquidity that undermines attachment to any community. After abolition, the… Read more »

merrell denison
merrell denison
Reply to  Allan
3 years ago

“No ass to kick, no soul to damn…that is the corporation.”
Mike Mansfield – Montana Senator

Sam J.
Sam J.
Reply to  Countrymouse
3 years ago

“…pass a law that every public company must pay at least 1/3 of all employee compensation in voting, dividend-paying, common stock…”

That’s a good idea.

We could also take the Supreme courts own rulings to their logical extension. They said corporations are people and that they can spend unlimited money in elections then we should treat them like people and if the corporation commits crimes we should put all the officers, the board and all high officials in jail. They should be treated like people with liability.

Drake
Drake
Reply to  Countrymouse
3 years ago

GAAP rule changes destroyed the whole stock-option for employees game a decade ago. Now it’s no longer worth offering options to anyone except Executives on a contract.

Alzaebo
Alzaebo
Reply to  Countrymouse
3 years ago

Plus shares of everything government.
We paid for every brick, wire, pipe, vehicle, and square foot of carpet of government assets.
We Own It- not the other way around.

Al from da Nort
Al from da Nort
3 years ago

Serious Question: What’s the critical difference between computerized fiat money and credit money_?

I get it that fiat money doesn’t act like hard money, both for good and for ill, but isn’t the Fed just using computers rather than actual printing presses to flood the economic zone with non-physical fiat money_?

Al from da Nort
Al from da Nort
Reply to  thezman
3 years ago

So, credit money enables transnational elite predation on the actual assets of any country but does not cause it, then. IOW, elite fraudsters being able to buy their way out of financial consequences (e.g. ‘too big to fail’) plus financial indiscipline by the masses who seek to emulate them in their apparent immunity from financial consequences is the real driving factor for the subinfeudation we’re seeing. So, it is a *political* solution that is needed. Consequently, Pres. Trump just might be able to bring off restoring US jobs by tilting the financial playing field against transnational elite predators. No wonder… Read more »

Reply to  thezman
3 years ago

In time, the Romans started to mix in cheaper metals. This seemed like great idea as the state could buy more stuff with less money. Soon enough, people got wise and prices rose. I’d guess that maybe some people actually assayed their coins, but the problem of inflation would happen even if they didn’t. The point of reducing the silver content of the denarius is that then you can take a given amount of old coins, melt them down, and then issue a larger number of coins of lesser silver and greater copper content. (Of course, there is also the… Read more »

Member
Reply to  thezman
3 years ago

Try here.

Sam J.
Sam J.
Reply to  Al from da Nort
3 years ago

“…What’s the critical difference between computerized fiat money and credit money…” Nothing except only the central banks can create money from nothing. If the Treasury wants money from the FED they give them a bond promising to pay the principle plus so much interest. The FED then “allows” the Treasury to print up the agreed amount of money. The FED produces NOTHING. ALL money is created this way in the US. So all this talk about lowering the debt is impossible as ALL money is created with debt. You may think I’m mad but that’s the way it is. It… Read more »

James LePore
Member
Reply to  Sam J.
3 years ago

I agree with your analysis but your solution is never going to happen. Credit money is what keeps politicians in power. They use it to buy votes and big donors use it to buy them. Why would they vote against their interests, assuming donors would allow them to, which they won’t? It’s bread and circuses as far as the eye can see. Who the new barbarians will be that overrun us is anybody’s guess.

Al from da Nort
Al from da Nort
Reply to  Sam J.
3 years ago

Based on this extended discussion, don’t think the basics have changed all that much. Only the hype and speed are amped up. IOW, I agree with you in the sense that ‘savings’ are an enforceable call option on future production. If it weren’t enforceable, who would save_? The savings/calls are re-loaned by intermediaries/bankers to others willing to pay for the privilege of consuming in the current year the current production the saver is willing to forgo. Thus a debt is created and interest must be payed thereon for that privilege. Money of whatever kind is used to facilitate these transactions… Read more »

Sam J.
Sam J.
Reply to  Sam J.
3 years ago

I’m not necessarily disagreeing with any of your points. One of the great virtues of non-debt based money is if the politicians screw up the money supply it comes much faster. Everyone knows much faster. In a debt based system the party can go on much longer and be much more damaging.

Al from da Nort
Al from da Nort
Reply to  Sam J.
3 years ago

Yeah, I guess I was unclear. The point I intended to make was that wildly unconstrained fractional reserve* banking/money-lending is the culprit at bottom. The FED has made it worse by obscuring how out-of-whack the situation actually is but didn’t actually cause it (at least intentionally) at first. So I’d say boosting lending standards and reserve requirements is the better political point of attack. Privatizing profits and socializing risks/costs has been the goal of money lenders for, probably, all of human history. And they are incredibly creative, always working away at that. But, except for sovereigns, this feat was impossible… Read more »

Karl Horst
Karl Horst
3 years ago

During my recent US road trip, I had the pleasure of talking with all kinds of people across the Midwest and was amazed how much debt the average person actually admitted owing. I’m not just talking about home mortgages or student loans, but all the “stuff” they’ve bought on credit – boats, jet-skis, RV’s and some were paying off holidays. When I asked how they could afford all this, they openly admitted they got it on credit and some borrowed against the value of the homes or just racked up credit card debt. How is this even possible? And when… Read more »

Mark_Taylor
Member
Reply to  Karl Horst
3 years ago

People have different priorities for their money. Kind of like how people will say they can’t afford to eat at a five star restaurant but they can all afford cars that cost more than the meal. They are saying they don’t think it’s worth the asking price.

Karl Horst
Karl Horst
Reply to  thezman
3 years ago

@ thezman – I would believe those statistics. There’s been a shift over the years of more and more Germans buying on credit, specifically high end cars (e.g. Audi, BMW, Mercedes) which is a relatively new trend. Typically in the past, the house was the largest expense and most people drove modest cars (e.g. VW Golf, Audi A3’s or the cheaper Renaults or Peugeots). Now, with easier access to credit, you will see more expensive cars on the road and people are also getting into the habit of putting holidays on credit as well. Not a good sign!

Sam J.
Sam J.
Reply to  Karl Horst
3 years ago

People should be allowed to declare bankruptcy for all debt. Student loans, credit cards, or whatever. Then the lenders would be more careful lending it out.

Mark_Taylor
Member
Reply to  Sam J.
3 years ago

In general loans have become detached from their consequences. I’ve read enough analyses of the housing boom and crash to hear every excuse possible. The normal process of a bank loaning money out based only on its chances to recover that money with a profit has been disrupted. Anything and everything that disrupted the consequences for the buyer or the bank is the problem. We wouldn’t have to worry about banks giving out bad loans if the consequence was they didn’t get paid because it would have bit them in the ass in short order. The buyer after losing their… Read more »

Member
Reply to  Sam J.
3 years ago

The lenders scarcely care. They package the debt as bonds or CDOs as quickly as their algorithms let them. Then they sell them to investors. Often, the investors are government pension funds desperately looking for something, anything that will give them a high enough rate of return to stay solvent. The “lenders” are just skimming their fees off the transactions. The risk is all transferred to someone else. “Privatize profits, socialize risk” should be translated into Latin and inscribed on the coat of arms of the Cloud People.

Sam J.
Sam J.
Reply to  Sam J.
3 years ago

You say,”… In general loans have become detached from their consequences. I’ve read enough analyses of the housing boom and crash to hear every excuse possible…” Then,”…I don’t see how your plan would accomplish anything besides making loans impossible.” Which s it? I see other entities that are able to discharge loans. Why should student loans or credit cards be different? Besides they paid the legislatures to not make them dischargeable. I think people should be able to go bankrupt if they are. A lot of people look on this as some deep inner sin but the banks don’t have… Read more »

Russtovich
Russtovich
3 years ago

“The Norse played by a different set of rules and they had no respect for the Anglo-Saxon ways. In fact, they sought to exploit those ways to their advantage.”

So… the equivalent of modern day Muslims then.

TWS
TWS
Reply to  Russtovich
3 years ago

No. Because vikings are cooler than Muslims.

Ace Rimmer
Ace Rimmer
Reply to  TWS
3 years ago

Not just cooler. Way cooler.

Karl Horst
Karl Horst
Reply to  Ace Rimmer
3 years ago

@ Ace Rimmer – I suspect the surviving English monks at St Cuthbert would have disagree with you! 🙂

Steve Evets
Steve Evets
3 years ago

“There’s no question that this new form of currency arrangement has had benefits to the West. Libertarians and goldbugs will spend hours arguing against this sort of currency manipulation, claiming it will lead to a financial collapse, but so far, the opposite has been true. The mortgage meltdown of 2008 did not result in a global depression. The worst you can say of it is the result has been a long, localized recession. The rulers look at current asset values and see a ringing endorsement of credit money and central banks.” This bit speaks to the basic difference between the… Read more »

Rod Horner
Rod Horner
Reply to  Steve Evets
3 years ago

I agree with much of what you said; however, i will say that the current credit dollar is, at bedrock, a sort of specie. The petro-dollar is the glue that holds the credit-expansion machine together. Endless expansion of credit is made possible by the hegemonic dollar-oil converter and as-such one could expect even a gold-backed currency to eventually turn itself into a similar bedrock-of-hegemonic-credit system too. Personally, I don’t think the economics-as-first-mover argument against credit or fiat is wrong, but I think we’d be wrong to miss the observation that credit bubble systems are indicative of over-extended empires already eating… Read more »

TWS
TWS
Reply to  Steve Evets
3 years ago

Have you read wolf and iron?

An interesting book of America during and post an economic correction.

RT Rider
RT Rider
3 years ago

By credit money, I assume you mean credit unbacked by savings. We know from history that excessive credit is vey unstable, leading to financial crisis on a regular basis. In my lifetime, I’ve witnessed this at least 3 times. The current arrangement depends on a cycle of asset inflation to (at the minimum) maintain asset prices, but optimally, increase them for collateral against new credit. As well, nominal income needs to increase to provide service for ever expanding debt. Currently, asset prices are at historical highs and nominal income is either stalling, or stalled. This is happening during a period… Read more »

Doug
Doug
3 years ago

Creating fiat out of nothing then washing it through a spoils system, breaking the debt created to wash the unbiased fiat through that system, down into derivative parts, and then selling that as something with value after most of the value has been skimmed off doesn’t strike me as exactly healthy or can be sustained. And what of those who actually create something tangible with their labor? Aren’t they the only part of this spoils system that actually originate, create tangible hard value and worth?

UKer
UKer
3 years ago

I would say that most money today exists in movement. Settled money — that is, when it sits in banks — has a limited value to an economy. The churn of money, or rather keeping it ‘liquid’ with credit, continues the illusion that we in the west at least are rich. But the practicalities of everyone being equally rich are frightening. On this, I recall some lefty desperately urging a poverty-stricken tribe not to accept jobs in some newly open factory in because, he said, he only wanted them ‘to keep smiling and remain happy.’ In his view. earning a… Read more »

TomA
TomA
3 years ago

An excellent analysis, but I would add one very important dimension that underlies this phenomenon. Governments (and large globalist companies) have evolved into the functional equivalents of addicts. Their appetite is boundless, and they will gorge until there is nothing left to consume or the drug itself brings them to the brink of death. They cannot change this behavior unless circumstances cause them to hit bottom, and the they will take everyone around them down with them. Enablers will do everything in the their power to avoid confronting the truth of this addiction and no one will see the end… Read more »

Countrymouse
Countrymouse
Reply to  TomA
3 years ago

But we already see the end coming … and it may be too late right now!

TomA
TomA
Reply to  Countrymouse
3 years ago

It’s not that it may already be too late. It’s that, for an addict, it’s inevitable.

And as far as seeing it now, that is just anxiety your feeling, not the actual appearance of hitting bottom. When it happens for real, there will be no ambiguity.

Sam J.
Sam J.
3 years ago

The people that gain the most from fiat money have been the Jews. They control the creation of money by controlling the central banks which create money from nothing. It’s worth noting that all other groups have to create their money by debt. Every last penny in the US economy has an equal debt higher than it’s value. All money created is created with debt, except for money the central bankers create for themselves. The Jews using group preferences use this money creation to take over businesses. Remember the 80’s big takeovers? Most were done by the Jews. As long… Read more »

MSJ
MSJ
Reply to  Sam J.
3 years ago

If I may paraphrase, you are saying that all of the world’s (8,000,000,000+ people) financial problems are caused by “the Jews” (including all the Jews of modest means and those who live hand to mouth, people you have never seen because you haven’t tried to find them). How convenient! All of the Christian, Muslim, Hindu, atheist, Chinese, Japanese etc millionaires and billionaires are entirely innocent of this crime against humanity. Convenient indeed!

RabbiHighComma
RabbiHighComma
Reply to  MSJ
3 years ago

A shanda fur de goyim.

Sam J.
Sam J.
Reply to  MSJ
3 years ago

“If I may paraphrase, you are saying that all of the world’s (8,000,000,000+ people) financial problems are caused by “the Jews”…” Your paraphrasing to the point that the meaning has changed but I would be glad to add that they are responsible for all the ills of the world in the exact same proportion as Whites are by the Jew saying.”The white race is the cancer of human history … “. In that vein I would agree. And I’ll add I don’t don’t give a damn about starving Jews. They don’t care for me I don’t care for them. If… Read more »

MSJ
MSJ
Member
Reply to  Sam J.
3 years ago

You have a good day, too!

bilejones
Member
3 years ago

I used to run the NYC derivatives desk for the world’s largest Privare Bank.
The financialization of the economy has achieved exactly what it was supposed to: the concentration of wealth into fewer and fewer hands.

We’ve now had thirty years of Ashkenazi Jews heading the Fed. And the main beneficiaries are?

Member
Reply to  thezman
3 years ago

Fascinating. Sick how fake it was (and still is, probably even worse). How long can that charade last? So many inter-connected pieces – I’m sure that “bubble burst” talk will come true. How soon is the concern.

Member
Reply to  thezman
3 years ago

The problem with cui bono analysis, especially in today’s informationalized (stole that word from the Chicoms) world, is that the person or group that ultimately benefits from from the change may not be the person who thought he was going to benefit from the change. The person who initiated the change may be too embedded in old information, financial, trust, etc. networks to benefit while a newcomer or outsider may have the ability to rapidly take advantage of the new conditions. Xerox invented CSMA (ethernet). IBM commercialized the desktop computer. Others came to take the lion’s share of the surplus… Read more »

fred z
Member
3 years ago

“we now live in a world where the rulers can make their money more valuable and your money worthless, simply by manipulating the amount of credit money.” So, don’t own money, own land, businesses, productive assets. My own view is that for too long “savers” have been over rewarded at the expense of risk takers. What is so wonderful about the mere act of not spending that it deserves a huge reward? I’m also bitter about all the wailing about the disembowelment of the middle class. I’m middle class, doing OK. So are most of my middle class friends and… Read more »

TWS
TWS
Reply to  fred z
3 years ago

You want to blame the victims? Great, when I was eleven my grandfather got cancer and asbestosis. We lost our ranch. We had to move five hundred miles and live in a trailer where an old busted up cowboy could still find work. I ran cattle for neighbor ranches, trapped in winter, fixed a irrigation systems, cut firewood for a dollar fifty a cord. I was big for an eleven year old so I could drive the truck and operate the chain saw. I had to split and stack it by muscle power though. We lost that finally. Here was… Read more »

notsothoreau
notsothoreau
Reply to  TWS
3 years ago

Back when I was working on my Novell CNE, I took a class with a guy that had been a tractor mechanic. He was getting up there in years and felt that his field was probably not going to be needing many workers. So they retrained him. I guess someone asked him if he liked computers because they signed him up for all 7 classes, back to back and put him up in a hotel for a month to take them. It was clear, first class, that he was in over his head. I have seen this time and again,… Read more »

Sam J.
Sam J.
Reply to  TWS
3 years ago

“…They get rich off the left half mostly through control of the government, monopolies, rentier practices and shady credit creation where they can ride the bubbles. They can at least acknowledge the damage they’ve done…”

Exactly. Most people who go bankrupt I’ve read do so for medial reasons.

Calsdad
Calsdad
Reply to  fred z
3 years ago

LOL.
Since when have savers been “rewarded” in our lifetimes?

Being against saving is to be against capitalism and being root principles of conservatism.

Doug
Doug
3 years ago

Funny how this great country got along just fine until the federal reserve, (which is neither, but an amalgam of banking cartels), and federal income tax was imposed upon American’s.
Guess where all that income tax is washed through?
The tail that wags the dog, that returns to its vomit?

trackback
3 years ago

[…] Financialization (The ZMan, The ZBlog) […]

William Nohmor
William Nohmor
3 years ago

This is a rely good essay. It pulls back the curtain on less visible macro financial trends ruining our society. I would love to share it with my financially clueless friends and family except that the line about retarded men would unnecessarily spoil the main message for them.

karl hungus
karl hungus
Reply to  thezman
3 years ago

those friends and family may be retarded themselves, you might want to get them checked.

William Nohmor
William Nohmor
Reply to  thezman
3 years ago

I should move on? You made the point that we we need new virtues and tactics and another commenter made a point about birth rates not keeping up. How is reaching a larger middle class audience a bad thing? Do you really expect a thin group of high IQ middle managers to do anything more than go along?

SWRichmond
SWRichmond
3 years ago

Libertarian economics is based on a simple principle: only the market can accurately transmit true economic information in the form of prices. Any attempt to manipulate prices introduces distortions which move through the rest of the system, making it impossible to know what anything is truly worth. This leads businessmen to using inaccurate information to make business decisions. Money has two prices, one called “interest rates” and the other “exchange rates”. Since all other goods are priced in money units, libertarians can easily imagine the extent of economic distortion which can be introduced by giving someone the ability to manipulate… Read more »

Calsdad
Calsdad
Reply to  SWRichmond
3 years ago

Excellent reply. RE: Landscapers buying $400,000 homes. When the housing market imploded – even the local liberal Boston Globe was forced to run articles about how insane the housing market had become. They tried to put a ” theses people were taken advantage of ” slant on their stories – but the whole thing was so ridiculous that even that didn’t work. The one that stands out in my mind – was a story about a woman who was an immigrant from some South American country – and worked cleaning offices. She got approved for a mortgage for something around… Read more »

Libertymike
Member
Reply to  SWRichmond
3 years ago

SWR, before I up-voted your post, you had a -1. What does that say about the economic literacy of this joint?

karl hungus
karl hungus
Reply to  Libertymike
3 years ago

it says you’re an odious douche nozzle.

Bruno the Arrogant
Bruno the Arrogant
Reply to  Libertymike
3 years ago

As much as this may astonish you, a large number of us here are former libertarians. You aren’t really telling us anything new. In fact neo-reaction began as a critique of libertarianism by former libertarians. It seems they became former libertarians when they recognized that libertarian ideas weren’t working out as well in reality as they did on the drawing board. Rather than assuming the ignorance of everyone who disagrees with you, it may pay you to shut up and try to learn something from people who have already examined your ideas a lot more thoroughly than you have, and… Read more »

Abelard Lindsey
Abelard Lindsey
Reply to  Bruno the Arrogant
3 years ago

Many of us are “Heinleinian” libertarians, which means, among other things, that most people do not value liberty as much as we do. I lived in East and South East Asia for 10 years and am well aware that most others do not value liberty as much as I do. Hence, I have come up with something I call “libertarian transhumanism in one tribe”. Far from being a part of the problem, technology, particularly bio-engineering and automation, is key part of the solution. It will allow for various factions of humanity (including the alt-right) to “go their own way” by… Read more »

SWRichmond
SWRichmond
Reply to  thezman
3 years ago

Ah, now we understand the new found antipathy toward libertarians:

http://www.zerohedge.com/news/2017-05-22/pope-francis-lashes-out-grave-risks-libertarianism

Allan
Allan
Reply to  SWRichmond
3 years ago

SWRichmond: “This brand new, effortlessly and electronically created ‘money’ is then sprinkled on the economy as ‘deficit spending’.”

And now the money questions, all rhetorical of course: Who is near the front of the line to receive that new money? How much must those recipients kick back to politicians, party hacks, and shills like Center for American Progress in gratitude and prepayments for future favors?

That stated, Z is right to pour some scorn on libertarians from time to time. Most of them are shrinking violets or slippery apologists for capitalist racketeers. But I sense that this situation is changing.

SWRichmond
SWRichmond
Reply to  thezman
3 years ago

Note to Liberty Community: Z Man defends Federal Reserve Bank.

Offers only threats of violence and no refutation in response to internet dressing-down. IOW, loses argument.

Did you drink the koolaid, or was it shoved down your throat?

Sam J.
Sam J.
Reply to  thezman
3 years ago

HAHAHA

karl hungus
karl hungus
Reply to  SWRichmond
3 years ago

hey SWR, you sound like a complete and utter pansy. and a dipshit. i can just see you writing in a pink journal “today i won an argument on the internet..AGAIN. Excelsior!”

Allan
Allan
Reply to  thezman
3 years ago

Yes, money creation is more like a high pressure flow from a firehose. Imo, one of the most aggravating things that libertarians do when discussing money and banking is to claim that the FRS prints money, which is a silly description for at least two reasons: (i) The FRS buys its notes from the Bureau of Engraving and Printing, and (ii) their simpleminded figure of speech wrongly implies that most money supply expansion is in the form of paper. However, just a little research on-line at the FRS and BEP gets you all the detail you need about FR Notes… Read more »

anotherguy
anotherguy
Reply to  thezman
3 years ago

The hyperinflation hasn’t occurred yet because the public sector has stepped in ever since 1980ish to support the dollar whenever the private sector bailed. The $ is and has been hyperinflated. The chickens have just not come home to roost yet. For the last few years, private sector has been piling into the $ bomb shelter. When they start fleeing at the next real downturn/crash, I highly highly doubt any public sector will jump in and support our $ (buy treasuries) . China has peaked and started declining their amount of T’s and they were the ones to take over… Read more »

anotherguy
anotherguy
Reply to  anotherguy
3 years ago

“This is where all those “excess reserves held at the Fed” become very dangerous. You see, those are monetary base reserves, not credit money. They may not be physical cash yet, but they are contractual obligations of the Fed to print actual cash. And if velocity picks up in a panic, that’s exactly what the Fed will have to do in order to keep the banking system from collapsing. Deflationists think this is a choice the Fed will have to make, but it is not.”

http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post.html

Sam J.
Sam J.
Reply to  SWRichmond
3 years ago

I’m not so sure why SWRichmond was ranting at the zman but this statement below really pisses me off. I heard that it was $29 Trillion and maybe more though form analyzing financial records. I have no inside information but I bet that what they did with this money is buy the whole entire economy. Companies who are actually producing stuff which today is as close to hard money as you can get. One the reasons why the stock market at such ridiculous price levels. I bet they own EVERYTHING and no matter what happens they’ll be able to make… Read more »

Member
3 years ago

The government itself is captive to this financialization. We found out during the Ted Cruz debt ceiling thing that the financial power is greater than Congressional power.

Also, almost every state has massive pension shortfalls even at today’s high asset price valuations. And they are basing their expectation of growth at above 7% (the very long term stock growth rate) so their accounting understates their losses.

james wilson
james wilson
Reply to  fondatorey
3 years ago

Pensions, those which were not designed to deceive in the first place, have shortfalls not because of stock prices, which are very high, but because historical interest rate returns have been deformed to suit the financial and government rulers. Five hundred billion dollars a year, if not more, are stolen from traditional savers.

Guest
Guest
3 years ago

“For instance, the US government is no longer able to print up greenbacks and sprinkle them on the economy. Instead, when they expand the money supply, they expand lending, both domestic and global. It’s not just any sort of lending either. The central bank can buy up long term notes in order to drive down long term lending rates, thus expanding lending for capital goods. Alternatively, they can buy up short term debt and increase the amount retail lending. The Federal Reserve holds close to 2 trillion in mortgages, for example.” One could argue that consistently running a national debt… Read more »

Drake
Drake
3 years ago

I console myself by looking at the Fortune 500 from decades past. The list from 50 years ago is full of companies that don’t exist any longer – because small upstart companies destroyed them – with plenty of help from their own bureaucracies and short-sighted management.

Amazon will eventually be destroyed, stagnate into obscurity, or be sold off in pieces like AT&T, RCA, BorgWarner, and so many others.

Dutch
Dutch
3 years ago

Everything that we look at today on the subject is based on the concept that money is now an entry on a computer screen or a spreadsheet. Money is no longer a tangible thing.

Because money is an idea, not a thing, people are comfortable running through it when it is available.

Karl Horst
Karl Horst
Reply to  Dutch
3 years ago

@ Dutch – I think that’s going to be a real issue for the Millenians who have no concept of value of money since they rarely actually touch it. I grew up being given cash in hand for work, then later a paycheck I deposited into a bank. Today, it’s all direct deposit, no one hands you a pay envelope. These young people today never see their money come in, nor do they see it go out. Swipe a card, or scan a smart-phone, and it’s all digital. The day is coming when we are 100% cashless. The young already… Read more »

sub vexillario
sub vexillario
3 years ago

Yes, we will need new virtues, and new tactics. This I believe is the meaning of Trump — the people sensing this, and casting about for some new means to fight what is destroying them. The comments below provide some interesting ideas on options for developing and implementing these virtues and tactics. At bottom, though, we can either ride the train as it now exists to the point it goes over the cliff, or we do what is needed to stop it before it goes over. And what we have to do is neither easy or pleasant, nor is it… Read more »

karl hungus
karl hungus
Reply to  sub vexillario
3 years ago

or you can get off the doomed train, and wait for the next one to come along.

sub vexillario
sub vexillario
Reply to  karl hungus
3 years ago

I don’t think this thing we call the left is that forgiving, or foolish enough to allow us to survive, if they push us past the point where we can fight back effectively. For us, there will be no more trains.

Allan
Allan
Reply to  sub vexillario
3 years ago

sub vexillario, rolling back leftists and secularists won’t happen without a religious awakening that disdains errors like theocracy, materialism, presentism, and the cult of willpower shared by both theocracy and secularism. Christianity, a palpably secular religion which fetishizes the body, has been discredited. There is no going back, and much of our contemporary problem is rooted also in a very vulgar and primitive craving for sensual indulgence—to which both Christianity and Islam pander with their doctrine of bodily resurrection. The Constitution, too, misleads us. No sane people would insist, as does the C with the phrase “We the people”, that… Read more »

soapweed
soapweed
Reply to  sub vexillario
3 years ago

Shunning the inevitable thought of “violence” is seemingly a form of political correctness. The dreaded V-word and it’s physical application is a correct potential solution during times when the BS factor becomes untenable to moral humans. The thought of such does not make one a leper…..soapweed

sub vexillario
sub vexillario
Reply to  soapweed
3 years ago

In my post above, I’m not “shunning” violence. I’m saying that my comments aren’t the ravings of some guy dreaming of cracking though the thin barrier that holds the jungle away from this …. civilization, or better world …. we’ve created. I’m just not embracing it. We will likely get there soon enough. When we do, it will be a horror. At present, though, we don’t even have the basics of a plan to deal with the threat destroying our nation, our culture, our history, our mythology, our civilization. We need to get into place a basic structure and functional… Read more »

Teapartydoc
Member
3 years ago

Health care. Same thing. Universities taking it over with their foundations and banks helping. Your family doc used to be a Mom and Pop business, too. I started out that way. Finished residency, hired a girl who knew how to bill and code, and the wife and I went to a business course offered by the AMA and learned double entry bookkeeping and some business law.
Now the AMA just teaches new grads how to sell their souls.

Libertymike
Member
Reply to  Teapartydoc
3 years ago

Doc, I abhor the AMA as much as I loathe the ABA.

Alzaebo
Alzaebo
3 years ago

Man, does this need an ‘Essential Knowledge’ page. Perhaps then I could understand what Zerohedge is talking about.

My concern is the Unacknowledged Economy, the stratosphere economy of the Nomenklatura.

Above borders, above laws.
Increasingly un- and in-humane.
Like dark matter, it warps the visible economy out of true.

Most ‘economics’ memes are marketing to cover the various flavors of carnage, consequences of
Liberal mafias (extortion, patronage, theft)
Conservative war (foreign and domestic)
Libertarian surrender

Abelard Lindsey
Abelard Lindsey
3 years ago
R Daneel
R Daneel
3 years ago

“The Danegeld has now become an institution.”

Just brilliant!

Member
3 years ago

“Libertarians and goldbugs will spend hours arguing against this sort of currency manipulation, claiming it will lead to a financial collapse, but so far, the opposite has been true.” How is that statement accurate? “Credit-money” is really a form of fiat currency, and it has led to cycles of boom and bust in every society that has used it. The US economy stumbles from one financial collapse to another, forever shouting the mantra that “recovery is right around the corner.” We keep having collapses, and the dollar keeps losing its value, and real people keep losing their hard-earned savings. But… Read more »