Category Archives: Economics

The Story Of Hollywood

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If you make any effort to consume popular films and television shows, you will notice that much of the content is now locked away on streaming services. You will also notice that many films go straight to a streaming service, or they have a short run in theaters then get sent to a service. Everyone in the film business now has a streaming service and they need content. Like a great, gaping maw that must be fed, the services are sucking up everything they can find.

The funny thing about this shift is that the services are turning out to be a massive money loser for the industry. On the one hand, streaming robs from the theaters, especially small local theaters, by removing cheap content they would use to attract daytime audiences in the summer.  On the other hand, the public has not embraced the streaming service concept as expected. Every service, except Netflix, is a money loser at the moment and none of those are close to getting in the black.

The prime example of the streaming problem is Disney Plus, which loses money every month despite having the massive Disney catalogue. It has the most subscribers and it does generate a lot of monthly revenue, but it also generates massive amounts of expense that swallows up that cash. Much of this is due to the many flops Disney has produced recently, but the concept seems to be the problem. That and the costs make pirating films much more attractive.

The streaming story is a good example of how culture is too complicated to model with a green visor and excel spreadsheet. The bean counters just assumed streaming would follow the model of the rental market, which followed the pattern they saw in the secondary theater market. Low budget films, mediocre films and even terrible films made additional money in the secondary theater market. When take-home rentals came along, these films often got a second life in this market.

It has not worked that way with streaming. A film like the live action Snow White, which was torn apart by internet critics, was a massive flop at the theaters, but then had no life in the streaming market. In the old days, it would get rentals from people curious about it or for get-togethers with friends to have a good time laughing at a bad film. That is not the dynamic with streaming. People will watch nothing rather than sit down to watch a bad movie or something unknown to them.

What streaming failed to account for is the social aspect of films. In the old days, going to the theater for many people was like going to church. It was a thing you did every weekend, not because of the content but because of the social aspect. The theater was where men took their dates and the choice of film or how they selected the film to see was part of the courtship. Friends went to the theater, even if the films on offer were unknown or not good, because it was part of the social event.

Today, the theater is, at best, a sterile place to just see a film. In most cases, it means wading through diversity and tolerating people screaming at the screen, or shooting at it, in order to see a film that will be streaming in a few weeks. The theater is also an expensive proposition now. While this still works for big blockbuster films with good reviews, it is a deal killer for everything else. The theater is no longer a community experience, but a transactional one.

A similar dynamic held the rental market together. People in the suburbs stopped at the rental place to shop for videos. Usually, it was with friends or family, as it would be part of the social experience. Young people with little money could rent some bad films, buy a pizza, and make an evening of it. At the rental place people often talked about the films, which could result in a low-budget film becoming a hit in the rental market as word of mouth boosted its appeal.

That social aspect is gone with streaming. It is a solitary thing for many people because of the atomization of society. No one deliberately watches a bad film on their own because the best way to enjoy that content is with friends. Mystery Science Theater 3000 became a hit because everyone could relate to it. At the same time, people are less likely to try something unknown because why waste your leisure time on a film that you have never heard of, that might be terrible?

Of course, the dynamics of the American film market is why the studios now look to foreign markets for profit. This means more films high on big flashy effects and low on sensible dialogue and plot. They went all in comic book films at the same time they went all in on streaming for the same reason. The flashy stuff on screen works for non-English speakers abroad, so maybe it will work on them at home. Maybe it will also rope in the valuable white audience as well

The reason Hollywood is in trouble, and they are in serious trouble, is they detached themselves from the social aspects of their industry. No other country was able to produce a movie industry like America, because America was a unique place that needed a popular culture to hold it together. In the 20th century, film, television and sports were what everyone had in common. Hollywood was part of the national social capital that defined “American” for people.

As we see everywhere, Hollywood looked at the social capital and wondered how they could turn it into quick cash. They were not alone and maybe not the driving force behind this phenomenon. Mass migration played a role. The desire to harvest American social capital was also behind mass migration. Hollywood, however, needs a shared culture to work and now that the national social capital has been just about consumed, Hollywood is just another commodity.

Wherever the current crisis takes us, it is likely that the story of Hollywood tracks the story of the crisis. An industry that was integral to the people who made it possible is suffering the same fate as the culture it helped destroy. You cannot have a common culture containing people from every part of the globe. At best, it is a somewhat peaceful marketplace where people retreat into their private culture to get away from the cacophony of alien voices in the public square.

Hollywood was always a product of the public square. For it to be Hollywood and not just a film production center, it needed that vibrant American public square created by the people who created America. The people who made Hollywood could not have done it anywhere else. Now that the public square is collapsing and the people who made it are marginalized, Hollywood is dying. The oxpecker finally found a way to kill the host and as the host dies, it dies with it.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

Temporarily Successful Paupers

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Note: Behind the green door, there is a post about bugmen, a post about Kilmar Abrego Garcia, and the Sunday podcast. On the Substack side of the green door, there are now weekly videos. Subscribe here or here.

A basic rule of complex systems is that within them, you get more of what is rewarded by the rules of the system and less of what is not rewarded. In the case of human systems, this manifests as status. High status people will possess many of the qualities favored by the rules, and low status people will have fewer of those things. The stars of a sport are those who are either great at some aspects of the sport or very good at a wide range of favored skills in the sport.

Culture is the word we use for the complex system of rules and properties that define the societies in which we live. Like all systems, culture rewards some things and not others and punishes some things and not others. Status in the culture is determined by the overall quantity of these things. Some qualities are disqualifying, as the movie mogul Harvey Weinstein learned. He was very good at making profitable films, a highly prized quality, but he had habits that were eventually disqualifying.

This basic rule of systems can help explain why the United States finds itself in a crisis that, on the surface, seems easy to solve. The finances of the American empire are not so dire that they cannot be remedied. Some sacrifice would be needed, but with sound leadership, the fiscal house could be set right quickly. The same is true of the foreign policy challenges. The demographic and cultural issues are more complex, but the answers are known. It is a question of execution.

The most vexing problem of the current crisis for most people is why nothing gets done to address the known issues when the solutions are fairly obvious. On the one hand, there is an industry that exists to explain why the politics of each issue is such that the right answer can never be considered. On the other hand, there is libertarianism and conservatism that offer escape from the reality of the problem. These are the people who start every sentence with “all we need to do is…”

The corruption and escapism surrounding the question of why the issues that plague the country are never addressed are not explanations. They are part of the set of things that are caused by the core issue. We have gotten a hint of this in the first months of Trump’s second attempt at the wheel. He simply did things, like void longstanding executive orders on affirmative action. Suddenly, a man with the will to act was acting on a problem of politics, and the problem stopped being a problem.

What the first months of the new Trump term show is that leaders can simply act, and their actions can change the rules of the system. The racial rackets are suddenly in crisis because one man signed his name on some paper. We are seeing the same thing with immigration, where the political center is now speeding so quickly in the direction of the patriotic position that people are struggling to keep pace. It is as if there is a revolution going on in elite opinion.

This returns us to the question of why the same thing has not been done with regard to the main issues of the current crisis. The reason is systemic. The system rewards certain types of men and not others. That means our elites are high in the qualities that are rewarded and low in the qualities that are needed to solve the problem. The fact that Trump is universally hated in Washington speaks to the fact that he is high in qualities that the political system abhors.

An example of how this works is Mark Cuban, the billionaire who used to own the Dallas Mavericks and now agitates people on social media. He is a billionaire and therefore a member of the elite. The difference between Mark Cuban and the people in the stands at an NBA game wearing a team jersey is only about money. In fact, Cuban was one of those people as the owner of the team. He was not just the owner. He was the number one superfan of the team.

John Steinbeck coined the phrase “temporarily embarrassed millionaires” to describe the attitude of the typical American. The American Dream says that through hard work and determination, you can become wealthy. There is also the sense that serendipity plays a role in getting rich. You increase your odds of getting that winning ticket to the upper classes if you work hard. In this regard, Mark Cuban is the manifestation of this concept, as he got rich through hard work and serendipity.

There is a flip side to this that is clear with Cuban. Our elites think of themselves as temporarily successful paupers. The same turn of fortune’s wheel that made them rich could easily make them poor again. This is why American elites are so desperate to imitate the ways of the lower classes. It is as if they feel they must be penitent in order to prevent the hand of fate from sending them down the economic ladder. This is why rich celebrities are so fond of playing the victim.

Of course, it is not merely dumb luck that explains success. Hard work and determination play a major role, but the main driver is the relative quality of those things rewarded by the culture. America is a materialist society that rewards those who are good at our peculiar form of economics. Mark Cuban got rich because he was able to fob off onto tech billionaires a company that turned out to be worthless, but at the time looked like a goldmine.

Elon Musk became the world’s richest man by flattering the political class that his businesses were holy crusades. If they invested public money in those enterprises, they would not only bring salvation to society but also be seen as virtuous. Without hundreds of billions in public money, Musk is just an eccentric weirdo. His love for Donald Trump now looks like opportunism. It was a chance to run the same game on the MAGA movement that he ran on the left for so long.

The recent public feud between Trump and Musk is useful in understanding something else about our elites. Musk feels like Trump used him, but he should not be shocked, as to be an elite means being a tool. Success in economic endeavors is never about higher values or transcendent beliefs. It is about making the mechanics of the economic system work in your favor. At every level, the people involved are nothing more than tools to be used by those above them.

This makes the people at the top the most successful tools in the system. They are the tools the system uses to exploit the rest of the tools. It is no wonder then that the political elites use the economic elites as tools for their success. Trump’s relationship with Musk shows that Trump has learned how to be good at politics by using members of the economic elite like Musk as tools in his new trade. In a society of tools, everyone is eventually used and then discarded, even the elite tools.

This brings us back to those vexing problems of the current crisis. The solution is clear, but the execution requires men with the will to do it. Such men are never mere tools of the system, but men with a sense of nobility. They are men who understand why old men plant fruit trees. They have a higher purpose than the mere collection of things, and they do not see themselves as temporarily successful paupers. Their nobility is independent of their utility.

The American system does not produce such men because it does not reward the qualities that such men must possess. In fact, having a higher purpose is disqualifying in most areas of life. The businessman who sees his company as part of the social fabric will be ruined by those who can think only in money. The politician who speaks of sacrifice will lose to one promising free money. Materialism demands that you live in the present, so you can never transcend the present.

It was not always so for America. It is the transformation that occurred in the twentieth century that resulted in a system that produces our current elites. It is the failure of those elites that will bring about the end of the system that created them. Perhaps what comes next will once again reflect the essential American character, but this assumes there will be enough of those essential Americans to make it possible. That is the great question at the heart of the current crisis.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

Blackrockistan

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Note: Tonight at 8:15 EDT, I will be on with Paul Kersey, Peter Brimelow and Harrison Smith from Infowars to talk about remigration. I may also announce, with a great flourish, that I am officially off the Trump Train. Tune in here.

A question that is never asked in official circles, or even much in unofficial ones, is why Western leaders seem so desperate for war? For the last three-plus years, they have been scheming to start a direct war with Russia. The rhetoric has been so crazed it suggests they have a death wish. It is not just Russia. They want war with China and Iran, which would mean a regional war in the Middle East. The one thing the West seems sure about is the need for a big war.

Of course, given the increasing separation between official narratives and reality, many are sure they are at war. The current Prime Minister of Britain is telling his party that the country is now at war and must mobilize the country. Emmanuel Macron has spent the last year flitting about the continent as if he is leading Europe in a war against Russia, despite the fact the official position of his government, and NATO, is they have no direct role in the Ukraine war.

There is a Little Rascals quality to Europe at the moment. None of these countries have an army capable of fighting beyond their borders and many could not defend themselves against a well-armed militia. Europe has relied on the American military for so long most have forgotten how to fight. Instead, like the old television program, they dress up like big boys and girls and put on a show. Watching the girl bosses of the EU make threats is as absurd as the old television show.

That does explain one reason for the rhetoric. To be a European head of state is to be powerless, other than the power to put on a show. France, for example, relies on the EU to control its economy, trade policy and immigration policy. NATO decides what France can do with its shrinking military capability. The typical American governor has more sovereign authority than the head of France. While not entirely ceremonial, this is the direction for the “leaders” of Europe.

If you are allowed to do only one thing after reaching the highest office in your country’s political system, that is the thing you will do, and with gusto. Keir Starmer, for example, understands that the Bank of England overthrew the Tory government and put Labour in charge of parliament with a minority of public support. Every EU leader knows the EU rigs elections and overthrows governments. Every European “leader” knows he is an actor hired to play a role, so they play the role.

That gets to who is doing the hiring. Starmer is in office because the Bank of England saw him as a suitably complaint puppet. Macron remains in power, despite losing the last election, because Blackrock wants him in power. Germany’s new puppet is in charge for the same reason. BlackRock is the world’s largest asset manager controlling more than nine trillion dollars. That means it has real power, the power to pick who wins elections and who controls public policy.

Blackrock invested billions in Ukraine prior to the war, because it believed Ukraine would fall into the Western orbit, which would mean Blackrock would control trillions in natural resources. The reason the Republicans were suddenly desperate to get sixty billion in new money to Ukraine after the 2022 midterm victory was to get Blackrock and others some of their money out of Ukraine. The proxy war with Russia was sold to the bankers as an opportunity to loot Eurasia again.

Now that the war has turned against the West, the rhetoric has become shriller for political reasons, but also as a way to sell arms. Blackrock and other massive private asset holders have large stakes in companies like Raytheon, Lockheed, Rheinmetall and many other arms makers. Another reason the political class of Europe is carrying on as if Genghis Khan is about to cross the Dnieper is they think it builds popular support for rebuilding their militaries.

There is another element to this. The Western oligarchy is based on the assumption that the United States is the global bank and the global mint. It performs this dual role by controlling the global reserve currency, which is made possible by controlling the most important global assets. To this point, that was made possible by controlling oil via the petrodollar agreement with OPEC. If energy must be priced in dollars, the demand for dollars can never be challenged.

The technological revolution, which is largely responsible for creating this new oligarchical class, has also undermined this arrangement. There are now other things in great demand to meet the needs of technology. Simply skimming from the oil trade is no longer enough. America needs computing power and that means energy production, which means a massive increase in energy consumption, along with the consumption of other natural resources needed for big computing.

The trillions in natural resources underneath the Donbas were seen as a quick and easy answer to the Western hunger for natural resources. Of course, it was just the first domino in the eventual exploitation of the rest of Eurasia. The technological revolution has turned the West, particularly America, into a ravenous beast that must find new sources of food to maintain itself. Big Tech and Big Finance have created a vampire economy that is always looking for a new neck.

They say all wars are banker’s wars and this has been true since the spread of popular government in the 18th century. Once who controls the assets is divorced from how those assets are used, there is no longer any control over how those assets are used by the political system. We see that in the modern West. The people vote, politicians are picked to fill the offices, but policy is made by those who own the assets because the Golden Rule states, the men with the gold make the rules.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

Happy Campers

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Note: Behind the green door, there is a post about the classic film, The Maltese Falcon, a post about my trip to the Old Glory Club, and no Sunday podcast. I got back too late on Sunday to do a show, but I will post something extra this week about the conference or maybe a second video. On the Substack side of the green door, there are now weekly videos. Subscribe here or here.

One of the realities of the late managerial age is that the sorts of numbers managers love and therefore produce in volume, are increasingly unreliable and often manufactured to fit an agenda. Good data is usually too late to be actionable or is simply the accurate version of the previously reported fake data. Economic data is the most obvious example of this trend. It used to be central to the news cycle but has now become so corrupt the media will ignore it.

In the Biden years, much like the Obama years, it became popular with the reporting agencies to produce fake economic numbers and then come back at a later date to “revise” the previous data so they could pretend they were being accurate. It was always a cycle where new data contained information about how the previous data was revised in a way negative to the administration, but often made the new data look like the administration was doing a great job.

Peak managerial mendacity was Covid. The CDC stopped reporting deaths as a real-time number so they could report fictionalized accounts of bodies in the streets, always somewhere not where you live, which explained why you did not see the bodies in the streets, but they were somewhere! Old metrics that relied on hard data, like dead people showing up in morgues, were massaged to the point where you could no longer get the number of actual dead people.

We are getting a version of this now that Trump is back. His tariff plan has kicked off a new genre of managerial horror stories. These come in the form of economic reports that, like the bodies in the streets phenomenon, always focus on a part of the country where you do not live. Somewhere there are empty Walmart shelves due to the trade war with China. There are people you do not know who are shocked by the rise in prices, even though your prices have declined.

The cycle for management is always the same. First, they produce reliable numbers from trusted sources to measure their performance. Then they create models from those numbers to justify their continued employment. This is when they begin to reimagine how the old data is collected and before long, we have theories about how best to manage information, which always underscores the need for management to keep a tight control on the narratives.

Bankruptcy usually follows that last phase, or at least an economic crisis great enough to warrant restructuring. That is because reality is indifferent to the model makers and will eventually break every model. We are living through a version of this process in the twilight of managerialism. Since the Obama, years the choice has been between your lying eyes and the model of reality presented by management. Enough people picked the former and we are now undergoing a change in management.

For example, during the Biden years we were told that the economy was going great and those grumbling about egg prices were ingrates. Now that Trump is in power, the media say we are in a depression. Go on the roads right now and you will be confronted with miles of RV’s and campers. This week, which leads to Memorial Day weekend, the nation’s highways will be full of the things. So much so that massive traffic jams will be a feature of the weekend.

Why does this matter? RV’s and campers have long been a useful metric for the economy and the public perception of the economy. The more people hitting the roads for campgrounds and parks, the better the economy. In 2023, the industry went into a deep recession to the point where many companies shut down production. Then it started to slowly bounce back in 2024. Now it is undergoing a boom with the highways now flooded with happy campers.

This used to be a metric discussed in public, but like so many of these things, it fell out of favor in the Obama years. Management and its marketing department, what we call the media, decided that the customers really did not know best, so they scrapped those numbers in favor of metrics that flattered management. The reason they are in the jam that they currently find themselves is they started to believe their models of reality instead of facing reality. Now there is a hostile takeover underway.

A cruder and more hilarious version of this process is the recent reporting of Joe Biden’s health and fitness. The data in this case was our eyes. Everyone not blinded by their own models of reality saw a frail, doddering old man. Management’s model, however, showed that he was a model of fitness and virility. Now that model is being revised to show he was actually suffering from dementia and has aggressive cancer. The new model is now converging with reality.

The Biden story is a version of the basis trade, which pits models of a point in the future and the models are continuously updated until the point is reached. It is a way for the model makers to think they can control the future, so it makes sense that the people running America Inc. would think in these terms. They just forgot about the part that says in the end, reality always wins. That is what you see on the road. America is happy with the state of things, so they are going camping.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

Under New Management

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President Trump has wrapped up his trip to Saudi Arabia and the Western media is trying hard to ignore it. The main reason is they hate Trump, of course, but a secondary reason is they do not understand the importance of the trip. To them, it just looks like another foreign trip by a president. In reality it is a glimpse of how the large share owners of America Inc. are restructuring the company. The deals signed in Saudi Arabia are the first step in that restructuring.

For fifty years, the United States and Saudi Arabia had an agreement primarily centered around oil trade and the use of the U.S. dollar. The formal part of the agreement committed the Saudis to investing their profits from energy into U.S. Treasuries in exchange for American military commitments. The result was the Saudis priced everything in dollars, which led all other OPEC members to work in dollars, thus establishing the petrodollar concept.

The reason the dollar is the world’s reserve currency is it is backed with energy, the one thing everyone needs. The gold bugs like to say the dollar is “fiat currency” and is just colorful bits of paper, but that was always false. The dollar, like all real money, represents power. From the 1970’s to the present, the dollar represented the power of the United States and the power of hydrocarbons. Instead of money backed by shiny bits of metal, the dollar was backed by energy.

Another consequence of this arrangement is it provided an unlimited demand for dollar-denominated debt, especially treasuries. Because that debt is created within the American banking system, it made the United States the global bank. In effect, the petrodollar arrangement made the United States the world mint and the world’s banker, with the oil producing countries as the miners. With only one mint, it meant that the United States also controlled the mines.

This system has been under great pressure of late for a few reasons. One is the abuse of the system by the neocons in their foreign policy schemes. No one cared that much about using the financial system against small, nuisance countries like North Korea, but when the system was turned against big countries like Russia, one of the important mints, then people did care. The rise of BRICS as an off-dollar trading system was a response to the abuse of the system.

Another reason for the faltering dollar scheme is the Saudis decided to let the fifty-year-old agreement lapse. One reason for this is the abuse of the system by the neocons during the Biden years. The neocons were deliberately trying to destabilize the region in their war against Russia. This is not what the Saudis want. The other reason is the world is changing, and the Saudis need to adapt. They cannot continue to be a gas station in the desert. They need to diversify.

The biggest reason for the pressure on the petrodollar system is it hollowed out the American economy. It is not just the decline in manufacturing, which gets most of the attention, but also the decline in the nation’s infrastructure. This is becoming acute as the demand for electricity climbs. Artificial Intelligence may be oversold, but it is a real thing that will spike demand for electricity. Without trillions in new investments, the United States will not keep up with the world.

That last bit is the what the Saudi deal addresses. The Saudis are not going to plow their profits into treasuries, but into direct investments in the United States, while the United States provides support for Saudi Defense and infrastructure. This means the Saudis will be investing in American companies that are doing work inside the United States to build factories and infrastructure. The Saudis are not just a mint serving the American bank, but an investor in America Inc.

That is another thing easily missed about this trip. In the past, presidents went to Saudi Arabia to talk about military cooperation and the local politics. Business was delegated to Treasury and Commerce. The Treasury Secretary might make a trip to the region and meet his counterparts to discuss money. When a president visited these countries, money was not on the agenda. It was politics and the military situation in the places where America had stationed soldiers.

Notice on this trip that Scott Bessent was on the trip. Notice also that Bessent turns up in all of these foreign policy events. He led the charge on the so-called mineral deal with the Ukrainians. For the first time in a long time the bankers are now part of the foreign policy discussion. In fact, Bessent is involved in everything. He is part of the effort to root out some of the massive waste in government. What we are seeing is the return of political – economy to America Inc.

For several decades, at least, the managerial class has separated economics from politics, leaving the latter to the elected officials. Economics was too important to let the politicians get involved, so it was handled by experts. The result has been the perversion of economic policy. Instead of economic policy that benefits the people of the nation, we got policy that satisfied the theorists and the tiny minority that was able to arbitrage their access to the experts.

What this trip to Saudi Arabis represents is the return of political-economy where political decisions, including foreign policy, is measured against the standard of the national interests. Trump made that clear in his speech. He declared that foreign policy would no longer be about nation wrecking but about making deals that benefit the American people. Much as economics is being dragged from the abstract to the practical, foreign policy is being brought back to reality.

This trip also symbolizes the return of American Inc. The United States has never been a country in the traditional sense. It was always a business, something like a conglomerate containing many regional companies. The post-Cold War years were a monopoly phase, where managers stopped worrying about profits and focused on pet projects and social schemes. That time is done, and the company needs to be radically reformed to become competitive again.

Like all corporate restructurings, this one will fall far short of the dreams of the reformers, but whatever the result, it must be better than the alternative because the alternative is bankruptcy. In the case of empires, bankruptcy usually ends with the shareholders swinging from trees. The oligarchs of American seem to get this, which is why they are backing Trump and his turnaround team. Time will tell if American Inc. re-emerges as a strong company or a failed experiment.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

Is It Too Late?

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Note: Behind the green door, there is a post about Russell Brand and what his case suggests about the state of the law, a post about using AI as an editorial team for the posts on this site, and the Sunday podcast. Subscribe here or here.

One of the questions rarely asked regarding the ongoing American crisis is whether we have passed the point where reform is possible. Few want to consider that possibility for obvious reasons. If reform through the regular political process is no longer possible, then only unpleasant alternatives remain. One of those alternatives is some form of collapse. Like Gorbachev’s Soviet Union, America may be headed over the cliff with nothing to prevent it.

Last week, we caught a possible glimpse of the answer. Trump rolled out his tariff regime, and the stock markets went wild. It was not just a global selloff; volatility was off the charts, which is worse than the decline itself. A steady selloff occurs during a correction when markets are overbought. A chaotic, erratic decline signals panic setting in among the algorithms. It means their code cannot interpret the conditions they are programmed to use for trading.

Just as things began to stabilize, the bond market started to “get the yips”, as Trump noted on Thursday. No one in the mass media understands this, so they kept claiming the bond market crashed, which is far from accurate. The issue was that market players were dumping treasuries. It is unclear why, for instance, the Japanese central bank was selling treasuries. This uncertainty is just as worrisome as the actual dumping, so everyone was spooked.

Typically, the reason for dumping treasuries is a liquidity issue, either in the system as a whole or in a segment of it. In this case, the consensus is that hedge funds were raising cash due to the market decline. That could be true, but it is also possible the basis trade was unraveling. This is when hedge funds bet on tiny changes in treasury yields—a major way they generate profits within the system.

Here is how it works: Imagine you believe the value of an asset like a treasury will decline over the next six months. You hold this asset, but it is collateral for another transaction. You cannot sell it now, so you agree to sell it in the future at the current price rather than the market price at that time. If the price surges, you lose potential profits when the contract expires, but if the price drops as expected, you are protected from those losses.

There is much more to it, but that is the gist, and this happens across markets for everything, even treasuries, which have been very stable. Even earning a tiny percentage on these transactions can net millions for a fund handling tens of billions in trades. In fact, the financial system relies on clever quants coding models to exploit these small discrepancies between current and future prices to generate wealth.

When Trump’s tariffs caused this system to go haywire, triggering a panicked demand for cash, he had no choice but to back off. It was not that the bond market revolted due to a philosophical disagreement with the policy. Rather, this massive system is a house of cards that cannot tolerate even minor disruptions. Trump’s tariff regime should not have caused chaos, but the fact that it did suggests even small changes are no longer viable.

That is not the end of it. The central bank could mitigate this by injecting enough cash to resolve the liquidity issue. In fact, it can inject enough to counter deliberate revolts. You cannot beat the Fed. This should have happened last week, but Jerome Powell either refused to act or was too inept to grasp the situation. He has been the worst Fed chair since Arthur Burns, so incompetence is a strong possibility.

That said, the Fed held an emergency meeting just before Trump announced his tariff plan last week, likely in response to it. Given the Federal Reserve’s composition and its attitudes toward the American public, it is possible they intended to undermine the process. The Bank of England toppled Liz Truss’s Tory government, so it is not unthinkable. The head of the Bank of England at the time was Mark Carney, who is now the dictator of Canada.

This would imply that normalizing the American economy is no longer possible, at least not through standard political processes, because the entrenched interests profiting from the system will not allow it. That is what we will discover in the next ninety days as the Trump team navigates this challenge. Bessent has suggested they will use this time to strike individual deals with countries rather than unilaterally imposing a tariff schedule.

Of course, they could also have Jerome Powell killed, thus sending a message to the parasite class that they must fall in line or else. They never take no for an answer, so this approach never works. The Russians had to execute a lot of oligarchs before the rest finally fell in line with the new program. Falling in line usually meant fleeing the country with their cash. Maybe it does not have to come to that with the bankers, but last week was not a positive sign.

What the events of last week show is that normalizing American economic policy is not going to be easy within the current process. It also suggests it may not be possible without radical approaches to implementation. We may have reached the point where even with enough coercion, the system cannot be reformed. We may have blown past the point of no return as far as the political and economic order, so what lies ahead is chaos no matter what is done.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

Back To Work

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Warren Buffet famously said, “Only when the tide goes out do you discover who’s been swimming naked.” The point of this metaphor is that in economic downturns you learn who has been taking excessive risks. Another way of putting it is that in easy times, everyone can be a hero or a genius. This has been the case for the American financial system for over thirty years. As long as credit money kept expanding, everyone had a chance to look like a financial genius.

This explains the prevalence of people in the financial media who somehow get everything wrong but maintain their status as experts. The most notable of this sort is Jim Cramer who has made a career out of being outlandishly wrong. Paul Krugman wrote a column for years about the economy, despite never being right about it. These are two famous examples, but the commentariat is littered with these types. As long as the arrow kept going up, being wrong was good money.

The trouble is that the entire financial industry is built on this premise. Being wrong comes with no penalty, because wrongness rarely comes with a cost. Sure, the MegaBrain Capital Fund might not perform as well as random guessing, but because the arrow always goes up, even the bad bets pay off. This also means anyone spouting random gibberish can present himself as an expert. Tens of thousands of mortgage payments, maybe hundreds of thousands, rest on this assumption.

The main reason for this, of course, is the United States has been both the global mint and the global bank since the 1980’s. You can see it in the markets. From 1985 to the present, the DJIA has increased by about nine percent per year. That includes the many busts that were backstopped by the global bank. From 1965 to 1985 the markets suffered a long bear market, after the long twenty-year bull market that kicked off after the end of the Second World War.

Another way to think about it is the American stock market boomed by about ten percent per year when the rest of the world was in rubble. Europe was literally in rubble after the war. Much of it was controlled by communists. China was a feudal, agrarian society trying to implement Marxist-Leninism. Japan only stopped glowing after that long bull market ended. In other words, the American economy and the equities markets had a great run when there was no global competition.

Somehow, as if by magic, equities had a run like the post war decades, despite the hollowing out of the economy. The run has also been longer. The twenty-year post-war boom ran out of steam even though Asia was not online yet, just because Europe was starting to recover. We have experienced a forty-year run while at the same time the American economy transitioned from inventing things and making them to driving each other around in Ubers.

It turns out that if the mint can make as much money as it likes, being the only mint on earth anyone values, and they give what they mint to the only banking system anyone values, the people in this system can do no wrong. For decades it has been like being at a casino with an endless line of credit. Not only that, but the dealers would also occasionally give you some insider information on the decks. It is not hard to look like a genius when you are playing with house money.

That world is coming to an end. The shock therapy we are seeing is not just a bluff to get better tariff deals. It is in anticipation of the fact that the world is shifting from where the dollar dominates all global trade to one where local currency arrangements will often be preferred over the dollar. If you want to buy from China, it will mean doing so in their currency, not dollars. The same is true for other major trading countries. The Russians have been the proof of concept for this approach.

This does not mean the dollar collapses or people revert to carrying sacks of gold while riding to town on their donkey. The primitive use of shiny bits of metal as currency only comes back if we enter a dark age. What is happening instead is a change in how the world views dollars and more importantly, dollar denominated debt. That means the days of unlimited credit money is coming to a close. The dollar and dollar denominated debt will reconnect with the American economy.

This is all bad news for the flim-flam men who dominate the financial services industry as it means being wrong once again comes with risk. The bad bets from MegaBrain Capital Fund no longer just mean a lower return. Those bad bets now put the firm in jeopardy and get the smart guys fired for making those bad bets. Swimming naked will now come with the risk of the tide going out and staying out. Like the fox in the hen house, risk is returning to the money game.

What is about to happen to the financial sector is like what we see happening with the government sector. The tens of thousands of people who do not do anything necessary will be let go, and that includes the experts in the media. In a world where risk is real, no one will tolerate a television clown dispensing bad advice, unless he is in a fright wig and wearing floppy red shoes. The clowns will back in the circus while the serious men do the serious work.

This is the end of America’s long holiday from reality. Playing make believe in government, finance or the media is no longer possible. Making money will not be about finding clever ways to get that sweet sweet credit money, but about inventing things, improving things and making things. That will not leave a lot of room for diversity experts or chattering skulls. Those people can be put to work in the new factories and repair shops, perhaps sweeping the floors.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

The Bell Ringing At The Top

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In the fullness of time, we may look at the sale of the NBA franchise, the Boston Celtics, as the bell that rang at the peak of the financialized economy. The team sold for a record-breaking $6.1 billion to a group led by billionaire William Chisholm, the managing partner of Symphony Technology Group. That firm has nothing to do with music or technology. It is a private equity firm. The deal still must be approved by the league and must go through the usual legal process.

The team is one of the crown jewels of the league, so it makes some sense that it commands the highest value. Since the beginning of the NBA, the Boston Celtics have been something like the New York Yankees—winning numerous titles and featuring some of the game’s greatest players. Wyc Grousbeck, whose family leads the ownership group that bought the team in 2002 for $360 million, made, on average, thirteen percent per year on his investment in the franchise.

By comparison, the Dow Jones Industrial Average rose about six percent a year on average, accounting for several crashes along the way. Median home prices in the United States have increased at about the same rate over that time. Some areas, like the Washington, D.C. area, have seen even larger jumps. Given that official inflation numbers are roughly half that figure, it shows that assets, even common ones like houses and equities, have experienced a steady increase.

Now, a golden rule of life is that a thing is worth what someone will pay for it, but value is supposed to be linked to reality. The value of a business, for example, is tied to the value of its assets, its cash flow, and future profitability. A buyer expects to recoup his investment over a specific period, which means the business either has profits or assets that can be sold for a profit. The Boston Celtics are a business, so does that mean the business is worth $6 billion?

The answer is no, not in the conventional sense. Most sports franchises are break-even businesses, with many losing money. They often have negative cash flow due to player salaries, which means they carry a lot of debt. The NBA is experiencing a sharp downturn in its popularity, with television ratings down 60% from the peak. The Celtics do not own their arena, so they lack that asset to supplement their business. Most likely, the franchise is a money-loser by conventional standards.

Of course, the new owners do not care about the business side. They are billionaires who want to be in the billionaire club. It is as much about status as it is about business, but the business side still matters. They no doubt look at the massive inflation in franchise values and think they will have no trouble flipping this property for a nice profit once they get bored with it. In other words, they assume the asset inflation we have seen since the 1980s will continue.

This makes sense in the context of the current American economic model, the one Donald Trump is determined to replace with a new model. The economy that emerged in the 1980s is based on unlimited, cheap credit money that gets plowed into assets like equities, startups, and frivolous things like modern art and sports franchises. William Chisholm is a billionaire, despite never having invented or built anything, because he is highly skilled in the legerdemain of modern finance.

Another aspect of the new economy explains why certain assets, like sports franchises and some tech sectors, have outperformed houses and stocks. The NBA is financed, in large part, by taxes it levies on every household. These taxes come in the form of cable and television bills. If you have a television service, you are paying for all those games you don’t watch. Channels like ESPN are bundled into the bill, and they are a significant part of it. That money subsidizes the NBA.

If, tomorrow, everyone could simply pay for what they watch, like software as a service, sports channels like ESPN would go bankrupt within a month. Right behind them would be all the sports leagues. The reason? Sports networks would lose about 80% of their revenue. That means ESPN could not spend billions on live sports content, and without that revenue, the leagues would collapse. That $6 billion sale of the Celtics would look like the worst bet in history.

The reason regular people feel so much economic angst, despite the appearance of material prosperity, is that we have reached the end of the line for this model, where costs are socialized but profits are privatized. The NBA is one example where the quality of the product has been disconnected from its financial success. In a true market economy, the owners of the Celtics would struggle to give it away, because the NBA, as an entertainment product, is in steep decline.

If you look closely, you will see this dynamic everywhere. The offset to those cheap products at big-box stores is the collapse of American manufacturing, and the social capital that came with it. The offset to cheap labor via immigration has been stagnant wages and emergency rooms that resemble Tijuana bus stops. The offset to a rising stock market is endless financial insecurity. The hidden costs have accumulated to the point where they can no longer be ignored.

The reason Trump is trying to usher in a new economic model is that the old one, the financialized economy, is running out of places to hide the costs of endless credit creation and the auctioning off of social capital. It is not just that we cannot borrow more money. It is that we cannot continue to socialize the costs of creating more credit money. Just as critically, we can no longer tolerate an oligarchy built on privatizing the profits of this system.

That is why the sale of the Celtics may be the bell ringing at the peak of the massive asset bubble that is the American economy. The absurdity of it should offend even the most zealous believer in the transactional economy. In a country with serious problems that require elite investment, watching rich parasites plow billions into a human flea circus brings revolutionary thoughts to mind. It may be the last grotesque gesture of an economic model that has run its course.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

The Great Transition

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Note: Behind the green door, there is a post about an old post I did on Vladimir Putin as the antidote to Peter the Great, a post about the Amazon series The Bondsman, and the Sunday podcast. Subscribe here or here.

Last week, Trump stunned the world by following through on what he has been promising since he came down the escalator in 2015. He imposed across-the-board tariffs on every country in the world—except Russia. The reason Russia was excluded is that they are already sanctioned to the maximum. The tariff knob does not go past one hundred, so they were not on the list. Every other country was hit with a tariff, even Israel, which should cause some people to rethink things.

This set off the Great Trump Stock Market Crash, which promises to continue this week as the rest of the world responds to the new world order. The old trading models no longer work, so the default fallback in these conditions is cash. The quants were working feverishly last week to update their models in order to find the bargains that will inevitably be sitting there, waiting for the lucky. The smart money thinks the floor is a twenty percent correction, followed by stability.

The yesterday men and the crazies are sure this is the Great Depression, because their history of the world starts in the 1930s. It is a stylized history, such that every modern event can be jammed into the 1930s, the 1960s, or the 1980s. Since they are sure Trump is secretly Hitler, this must be the 1930s—even though we have witnessed many stock market corrections in the last thirty years. The COVID crash, the mortgage bubble, and the dot-com bubble are easy examples.

In reality, what we are seeing is the long-overdue return to normalcy, where American economic policy is aimed at benefiting the American people, rather than abstract concepts from economics departments. If Canada has tariffs on American goods, then the United States should have tariffs on Canadian goods—unless it can be shown that the American people benefit in some way from the imbalance. The same is true for every other country in the world.

One of the weird things about decades of American trade policy is that it has created the same sense of entitlement as government racial policy. Just as nonwhites think they are entitled to be near white people without conditions, the world thinks it has a right to access the American market without conditions. This is most obvious in Europe, which has taken this lopsided arrangement for granted. They have also assumed they are entitled to American defense, while doing nothing in return.

The logic behind this arrangement has always been nonsense—but people love to believe in nonsense, especially their own. We see this with the free trade crowd, who are claiming tariffs will only harm the American people. If that were true, then the rest of the world should have been miserable for the last thirty years. Further, if that were true, then the rest of the world now has a chance to usher in a golden age for their people by eliminating their tariffs instead of raising them.

The truth of the matter is that all economic policy is about trade-offs—especially in global trade. This is why it is called trade, rather than “free.” Having a tariff-free relationship with Canada could make sense if the Canadian government could be trusted, as the American and Canadian economies are so similar. The same is not true for Mexico or Bangladesh. Trade is never just about money—it is also about culture and the national interests of the trading countries.

Of course, what we are seeing is not really about trade so much as it is about getting the American financial house in order. Scott Bessent, the Treasury Secretary and architect of the Trump economic policy, has made this clear. Normalizing American trade relations is just one arrow. Another is the mass reorganization of government that kicked off in January. For the first time in the life of anyone reading this, the size and scope of government will be reduced.

Another arrow is the changes in the tax code that are slowly working their way through both houses of Congress. The Senate passed its version of spending and tax cuts, so now it is on to the House. What is shaping up is a two-pronged approach: one is to put into law the cuts made by the DOGE boys, and the other is a radical revamping of the tax code to reflect the new economic approach. Removing taxes on tips and overtime, for example, is part of the Senate model.

What we are seeing is the most radical alteration to the American economic model since the 1980s. The reason for it is that the old model is unsustainable. As Bessent pointed out, there is a limit to borrowing. For a long time, the American model relied on creating unlimited credit money in the banking system and massive federal borrowing. We have reached the limits of this model. Now, that model threatens the integrity of the American economy, so changes must be made.

More important are the changes in how we think and talk about the economy. For the longest time, the economy has been treated as a god. Americans were expected to tolerate anything to please it. If the economy demanded Haitian cannibals in your town, you had to accept it. If the economy demanded that the quality of your hand tools decline, you just lived with it. If the economy required you to work two jobs to make ends meet, then you did it. The economy was a remorseless god.

This sort of thinking makes sense to an alien overclass that sees the United States as an opportunity to be exploited. It does not make sense if the ruling elite feels a connection and obligation to the people. Shifting from the old transactional model of economics to a nationalistic model requires a new language. Simply pointing at a graph that trends upward is no longer enough. The political class will now have to possess some economic literacy.

It is too soon to know if these changes can make it through Congress. The winners under the old exploitative model will not go quietly. No one knows if the American public will tolerate the pain that must come with the transition. It is not all bad news, though, so the pain may be limited. Energy costs are falling—crude is under sixty dollars a barrel. This could tame inflation enough for the Fed to cut rates. Low taxes and cheap energy will go a long way toward cushioning the transition.

In the end, Bessent is correct. America cannot continue to create credit in the financial system and borrow trillions to hire government workers. We either have an orderly transition back to a normal economy, or we have a disorderly transition. The name for that is collapse—and that is vastly worse than a stock market correction. This is the reason the economic elites are backing this move. They know that the people who suffer the most from failure are the elites.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!

The Electric Kool-Aid Acid Car

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Last week the Chinese announced what could be a great leap forward in electric car technology when the Chinese firm BYD announced a five-minute charger. They claim their new technology, it is not just a charger but a battery system as well, will allow a driver to get a 250-mile charge in just five minutes. No one knows if this is true, as Chinese companies are almost as dishonest as American media. Even if it is an exaggeration, it could still be a big deal.

The reason this is viewed as a potential game changer is that it is assumed that the main obstacle to widespread adoption of EV’s is the long recharge. It is unreasonable to expect people to take an hour to recharge when on a road trip. Even a thirty-minute recharge time is unappealing. Decades of needing just a few minutes to fill the tank have conditioned people to expect it. Getting EV technology to this point, therefore, is assumed to be the final boss in the game.

That is not true, but the faithful believe it. The main problem with EV’s is that they do not solve a problem. They are a solution in search of problem and so far, the problems they claim to solve have proven to be either nonsense or grotesque boondoggles executed by the worst people in society. Making the weather potato happy is not motivating anyone to buy an electric car, especially when the total cost of ownership remains significantly higher than conventional vehicles.

The electric car is a lot like the electric book in that the engineering challenges somehow blind the proponents to the central problem. Technology is not an end in itself, but a means to an end. Electronic messaging has displaced written letters because the former is better, cheaper, and faster than the latter. If email came with a small risk of electrocution, we would still be writing letters. If every email cost a dollar to send, there would be no such thing as email.

That was the problem with eBooks. They were not better in any way that mattered to people, and they were not cheaper. There were some advantages, like speed of acquisition and the availability of obscure texts. You could also load up on out of copyright material at a pittance. The trouble is not many people need ready access to Summa Theologica, so these advantages made little difference. It is why the old-fashioned book remains dominant.

The same problem plagues the electric car. For ninety percent of drivers, the car is a practical way to move humans from one place to another. Current technology does that as well as anyone could need. Therefore, the new technology is simply trying to match what the old technology does. Outside of enthusiast and technologists, the electric car will always be pointless. Add in the expense and it becomes an expensive solution to a cheaply solved problem.

There are other reasons why the electric car will remain a niche item. The biggest is the cost, which can never be overcome. The cost of powering an electric car is about three times that of powering a normal car. This is despite the fact that we subsidize electricity in America, and we artificially increase the price of gas and diesel. Strip away the policy choices and electric cars have no market. Natural gas-powered cars would have far more promise as an alternative.

Then there is the cost of production and disposal. For generations old cars have been sent to the scrap yard to be stripped for parts and recycled. We have become amazingly good at recycling our cars. Electric vehicles require special handling due to the batteries. Of course, the cost of production is much higher, even with government subsidies all along the way. Then there is the added cost to the power grid that comes in once adoption reaches a certain point.

Enthusiasts insist that all of this is wrong or can be addressed, but the point here is that the charge time is the least of their worries. If the EV was better, faster, and cheaper than regular cars, the charge time would be ignored. The truth is they are not better in any important ways, they are certainly not cheaper. The electric car is certainly faster, but outside the enthusiast niche, this does not matter and what we see is that it does not matter to the sports car enthusiast either.

Now, of course, there is a new problem. The electric car is not cool. It was never really a cool car, but the beautiful people embraced the idea, so that provided the necessary social proof for upper-middle-class white people. The trend setters are now vandalizing Tesla’s, so the cool factor is gone. In fairness, the novelty was wearing off before the kooks took aim at Elon Musk, but now the coolness is gone. The ridiculous looking cyber truck did not help either.

The bigger issue may be a social one. Cars in general, but electric cars, in particular, make the “owner” into a serf. Fixing your own car is now an expensive proposition, meaning you need to depend on the repair system. This is deliberate. Car dealerships make more profit from the repair of cars than the sale of them, so the game is to make the owner dependent on the dealer. Electric cars are the worst for this as they are terrifyingly dangerous to repair.

The most terrifying part is you may not even own the car. You pay for it and have the title, but features are increasingly dependent on the manufacture agreeing with your lifestyle and political choices. Tesla can disable your car remotely. Other car makers are going down this same path. Soon, features like heated seats will be software as a service, meaning you must get permission to use them. The electric car is the face of this dystopian future of man and machine.

None of this means the electric car is dead. There is a place for the technology, just as there is a niche for eBooks. The developers churning out corporate housing projects could install fast charging stations for the soulless automatons who move into these God-forsaken eyesores. Urban areas could be a good use for electric microcars that only go short distances. Young people could also benefit from cars that can be speed limited and tracked at all times.

In the end, the electric car is going to follow the path of other clever engineering projects in that its primary benefit is secondary. The quest for the electric car has made batteries much better. The hunt for new features to justify the cost premium has led to better electronics, information displays and safety features. The dangers of disposal have been a good lesson in reality. The cars themselves may be niche items, but the industry will have benefitted from the exercise.

If you like my work and wish to donate, you can buy me a beer. You can sign up for a SubscribeStar or a Substack subscription and get some extra content. You can donate via PayPal. My crypto addresses are here for those who prefer that option. You can send gold bars through the postal service to: Z Media LLC P.O. Box 1047 Berkeley Springs, WV 25411-3047. Thank you for your support!