To understand the avalanche/earthquake, it is not so much the precipitating event, but the stresses built up in the system being released at that point of circumstance.
The primary social, economic stress built up in the West, if not the entire world, is mistaking capitalism, rule by finance, for a market economy.
As I keep pointing, to little effect, in that as states function as social super organisms, government, executive and regulatory, is the nervous system, while money and banking are blood and the circulation system.
We have evolved enough to understand that as government has to serve the entire society, if only to prevent civil wars and revolutions, that it works best as a public utility. Much as our mind is referee of the desires and needs, government has to sort among all the factions and needs.
We haven’t yet come to understand the same principle applies to banking.
When the medium enabling markets is a player and not a utility, the rest are tenant farmers.
In a market economy, money is the medium. In a capitalist economy, money is the message. One is a tool, the other is a god.
As linear, goal oriented creatures in this cyclical, circular, reciprocal, feedback generated reality, people see money as signal to save and store, while markets need it to circulate. Consequently Econ 101 refers to money as both medium of exchange and store of value.
Roads are a medium, parking lots are a store. If we treated roads like we treat money, everything would be paved over, but we would still be fighting over who has the biggest lots.
In your body, blood is the medium, fat is the store. Mix them up and you are dead. Try telling a doctor that medium and store are interchangeable and he will look at you like you are really stupid, but to an economist, it would be common knowledge. Consequently the entire financial accounting system of society has been turned into a giant casino.
So rather than resources being allocated where they would have the greatest benefit, much is siphoned off to feed large egos, leaving the rest to fight over the scraps. It would be like the heart telling the hands and feet to go suck dirt, as it is keeping the blood for itself.
When greed is the primary motivating factor, strategy is basically bacteria racing across the petri dish. Infinite growth economics and moving onto Mars is not really a viable long term plan.
In fact, the advantage of multicellular organisms is being able to sense and navigate their surroundings.
So as a medium, you own money like you own the section of road you are on, or the air and water flowing through your body. It doesn't have your picture on it, you don't hold the copyrights and, most importantly, are not directly responsible for its value, like a personal check.
While we might think of it as a commodity to mine from the economy, like we mine gold from the ground, or bitcoin from computer processing, it functions as a contract, between the holder and the rest of society.
As a contract, storing the asset side of the ledger requires a debt on the other side, so much economic, social and political activity is designed to generate debt, to store the illusion of wealth. Such as indebting younger generations, rather than investing in them.
That the flunkies allowed in DC are best at running up debt and the financial sector needs this debt to grow metastatically is not coincidence. The secret sauce of capitalism is public debt backing private wealth.
“The real money is in bonds.”
The banks are having their, "Let them eat cake." moment.
We are seriously getting to the pitchforks and torches moment, as all the "divide and conquer" is starting to wear thin.
Here is interesting commentary on the state of play with "private equity," ie, asset stripping;
What a comment! You've written some highly quotable passages here, John, but this one stuck out to me the most:
"As a contract, storing the asset side of the ledger requires a debt on the other side, so much economic, social and political activity is designed to generate debt, to store the illusion of wealth. Such as indebting younger generations, rather than investing in them."
My inspiration to write this Substack came from being plunged into hopeless student loan debt. That experience has been highly instructive about the true nature of our economy!
I am of the generation when student debt was non-existent. The State of California and the university allowed me to go to Stanford University without burdening my parents-of course I had to work—scholarship boys had to be kept in their place!
And the system doesn't stop. I would imagine when they blow up the bond market, disaster capitalism will be the next step, as they buy up all those treasuries for pennies on the dollar and have their political flaks trade it for any and all remaining public resources.
Though it does seem Europe is likely getting close to the pitchforks and torches stage and our divided and conquered population will hopefully take the hint.
I'm right there with you, John: I also believe the bond market is going to be the epicenter as the US national debt goes exponential and the payments eat up more and more of our national budget. Thank you for these amazing comments!
Me too, well kind of… I missed out by a year or two of having a completely free university education in Australia. But still, my entire course was only about $12k aussie dollars at the time and I used a interest free loan from the government to cover it. I only had to start paying off this debt once my income crossed a certain threshold, and the payments were pretty small. I ended up paying it off in one big hit just because I hate the idea of being in debt.
When I worked in the US for a few years after 9/11 I had to have so many people explain to me about getting a credit rating. It made no sense to me at all. My housemate had just finished a law degree and she was well over $100k in debt before she had even started working. It just made no sense at all. It’s a ridiculously bad system for everyone except the elites.
The system you described, Leon, sounds a lot better than my experience. I had $160k USD in student debt when I started repayment. I'm down to $50k at age 42. Though it's cost me dearly, I have never missed a payment!
But in a way, I'm grateful for the experience because I never would have met interesting folks (such as yourself) here on Substack!
Damn that’s crazy money. It blows my mind that a person can start out on their working career with that amount of debt It’s enough to buy a house and land out in the boondocks I imagine.
I remember reading a social worker? commenting about homeless people and saying most of us are just one or two mistakes from joining them. Get sick, miss work, miss repayments, lose your house, etc. And it seems the American way of life is geared in such a way that makes it so much easier for the unfortunate to happen to someone without any support safety net. It’s crazy.
(the Australian system has probably changed in that way too since I’ve left, it certainly helps to be born out of a privileged vagina. And by privileged I don’t mean wealthy, I just mean with a roof over their heads, a good income and parents that give a shit).
Figure we don't learn squat from the good times. Our cognitive abilities come from dealing with the problems. If it was all just hunky dory, we would still be little tadpoles swimming in our puddle.
Trial and error. Some is seed, the rest is fertilizer.
Economist Michael Hudson makes a clear distinction between industrial capitalism and financial capitalism. Finance capitalism lives off of predation and is parasitic while industrial capitalism produces that which people need. The latter was seen by Karl Marx as a logical precursor to socialism while finance capitalism is irredeemable.
Good thinking, except that "market economy" pretty much includes all human activity since the Neolithic Revolution. Some call China's mixed economy market socialism. No matter, 'finance capitalism' is much more sinister than a casino, although gambling is a definite part of it. Take Boeing. This was a stellar industry in the US until it was taken over by finance (I don't know how that happened, but similar takeovers have happened in almost every major American corporation). With a bean counter as CEO instead of an engineer, the company was stripped of R&D, safety procedures, worker training, and so on, all to provide funding for stock buybacks and stockholder dividends. We know what has happened to Boeing since. The highest goal of neoliberal finance capitalism is to live at ease on rent, land rent or financial rent, to make other people do your work, and essentially be a parasite, although these types have lots of philosophical (sophist) justifications for their way of life.
One reason that America fails and China thrives is the presence of parasitism in the one and the lack in the other.
Lol. The bean counters had destroyed McDonnell Douglas and so Boeing thought they would get a great deal by buying up the remains, but they got the culture too.
As I keep saying, to a market economy, money is the medium, to a capitalist economy, money is the message. Which goes much deeper into basic conceptual issues than our culture has quite processed. As I said above;
As linear, goal oriented creatures in this cyclical, circular, reciprocal, feedback generated reality, people see money as signal to save and store, while markets need it to circulate. Consequently Econ 101 refers to money as both medium of exchange and store of value.
Roads are a medium, parking lots are a store. If we treated roads like we treat money, everything would be paved over, but we would still be fighting over who has the biggest lots.
In your body, blood is the medium, fat is the store. Mix them up and you are dead. Try telling a doctor that medium and store are interchangeable and he will look at you like you are really stupid, but to an economist, it would be common knowledge.
The thing is, bone and muscle are stores as well, so when everything becomes fungible, it's like an economic Ebola virus, as everything dissolves into this pool of parasitic goo.
China experienced an epoch of war and destruction, The Warring States Period, over 2000 years ago. I figure she learned something and henceforth was a peaceful nation, only interrupted by the occasional revolutionary turmoil caused by, as Pearl Bucks wrote in THE GOOD EARTH, "When the rich get too rich." Of course, there were several invasions, but even then the invaders quickly became Chinese themselves.
However, it seems the Europeans failed to learn anything from these wars as they are still up to warmongering.
One of my favorite David Graeber quotes is on this very topic, Tedder:
We are used to thinking of such bureaucratic interventions—particularly the monopolies and regulations—as state restriction on “the market”—owing to the prevailing prejudice that sees markets as quasi-natural phenomena that emerge by themselves, and governments as having no role other than to squelch or siphon from them. I have repeatedly pointed out how mistaken this is, but China provides a particularly striking example. The Confucian state may have been the world’s greatest and most enduring bureaucracy, but it actively promoted markets, and as a result, commercial life in China soon became far more sophisticated, and markets more developed, than anywhere else in the world.
This despite the fact that Confucian orthodoxy was overtly hostile to merchants and even the profit motive itself. Commercial profit was seen as legitimate only as compensation for the labor that merchants expended in transporting goods from one place to another, but never as fruits of speculation. What this meant in practice was that they were pro-market but anti-capitalist.
Again, this seems bizarre, since we’re used to assuming that capitalism and markets are the same thing, but, as the great French historian Fernand Braudel pointed out, in many ways they could equally well be conceived as opposites. While markets are ways of exchanging goods through the medium of money—historically, ways for those with a surplus of grain to acquire candles and vice versa (in economic shorthand, C-M-C, for commodity-money-other commodity)—capitalism for Braudel is first and foremost the art of using money to get more money (M-C-M). Normally, the easiest way to do this is by establishing some kind of formal or de facto monopoly. For this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easier for them to do so. From this perspective, China was for most of its history the ultimate anti-capitalist market state. Unlike later European princes, Chinese rulers systematically refused to team up with would-be Chinese capitalists (who always existed). Instead, like their officials, they saw them as destructive parasites—though, unlike the usurers, ones whose fundamentally selfish and antisocial motivations could still be put to use in certain ways. In Confucian terms, merchants were like soldiers. Those drawn to a career in the military were assumed to be driven largely by a love of violence. As individuals, they were not good people, but they were also necessary to defend the frontiers. Similarly, merchants were driven by greed and basically immoral; yet if kept under careful administrative supervision, they could be made to serve the public good. Whatever one might think of the principles, the results are hard to deny. For most of its history, China maintained the highest standard of living in the world—even England only really overtook it in perhaps the 1820s, well past the time of the Industrial Revolution.
Very well explained, Mr Nathan. Even in India's caste system, merchants were at the bottom of the social status system. So, in China, merchants and then capitalists have always been a tolerated necessity. I recall that while Mao drove all the foreign capitalists—likely industrial as well as financial—out of China, he kept the national capitalists. Without being in the inner circles of government, we can assess the current CPC attitude by the treatment of Jack Ma when he got a little too ambitious with AllyPay as he was last seen repairing an AC unit on the roof of a skyscraper!
Haha that's very funny, Tedder! It is interesting to see how China actually disciplines and subordinates business interests, while here in America we are governed by them.
Nathan,
To understand the avalanche/earthquake, it is not so much the precipitating event, but the stresses built up in the system being released at that point of circumstance.
The primary social, economic stress built up in the West, if not the entire world, is mistaking capitalism, rule by finance, for a market economy.
As I keep pointing, to little effect, in that as states function as social super organisms, government, executive and regulatory, is the nervous system, while money and banking are blood and the circulation system.
We have evolved enough to understand that as government has to serve the entire society, if only to prevent civil wars and revolutions, that it works best as a public utility. Much as our mind is referee of the desires and needs, government has to sort among all the factions and needs.
We haven’t yet come to understand the same principle applies to banking.
When the medium enabling markets is a player and not a utility, the rest are tenant farmers.
In a market economy, money is the medium. In a capitalist economy, money is the message. One is a tool, the other is a god.
As linear, goal oriented creatures in this cyclical, circular, reciprocal, feedback generated reality, people see money as signal to save and store, while markets need it to circulate. Consequently Econ 101 refers to money as both medium of exchange and store of value.
Roads are a medium, parking lots are a store. If we treated roads like we treat money, everything would be paved over, but we would still be fighting over who has the biggest lots.
In your body, blood is the medium, fat is the store. Mix them up and you are dead. Try telling a doctor that medium and store are interchangeable and he will look at you like you are really stupid, but to an economist, it would be common knowledge. Consequently the entire financial accounting system of society has been turned into a giant casino.
So rather than resources being allocated where they would have the greatest benefit, much is siphoned off to feed large egos, leaving the rest to fight over the scraps. It would be like the heart telling the hands and feet to go suck dirt, as it is keeping the blood for itself.
When greed is the primary motivating factor, strategy is basically bacteria racing across the petri dish. Infinite growth economics and moving onto Mars is not really a viable long term plan.
In fact, the advantage of multicellular organisms is being able to sense and navigate their surroundings.
So as a medium, you own money like you own the section of road you are on, or the air and water flowing through your body. It doesn't have your picture on it, you don't hold the copyrights and, most importantly, are not directly responsible for its value, like a personal check.
While we might think of it as a commodity to mine from the economy, like we mine gold from the ground, or bitcoin from computer processing, it functions as a contract, between the holder and the rest of society.
As a contract, storing the asset side of the ledger requires a debt on the other side, so much economic, social and political activity is designed to generate debt, to store the illusion of wealth. Such as indebting younger generations, rather than investing in them.
That the flunkies allowed in DC are best at running up debt and the financial sector needs this debt to grow metastatically is not coincidence. The secret sauce of capitalism is public debt backing private wealth.
“The real money is in bonds.”
The banks are having their, "Let them eat cake." moment.
We are seriously getting to the pitchforks and torches moment, as all the "divide and conquer" is starting to wear thin.
Here is interesting commentary on the state of play with "private equity," ie, asset stripping;
https://mispricedassets.substack.com/p/the-smart-money-is-the-subprime-this
What a comment! You've written some highly quotable passages here, John, but this one stuck out to me the most:
"As a contract, storing the asset side of the ledger requires a debt on the other side, so much economic, social and political activity is designed to generate debt, to store the illusion of wealth. Such as indebting younger generations, rather than investing in them."
My inspiration to write this Substack came from being plunged into hopeless student loan debt. That experience has been highly instructive about the true nature of our economy!
I am of the generation when student debt was non-existent. The State of California and the university allowed me to go to Stanford University without burdening my parents-of course I had to work—scholarship boys had to be kept in their place!
Wow, the old ways now seem like a far-away fantasy, Tedder.
For many years, I blamed myself for blowing up my own life with student debt.
Our friend the venerable Dr. Hudson helped me see that the problem is systemic rather than individual.
And the system doesn't stop. I would imagine when they blow up the bond market, disaster capitalism will be the next step, as they buy up all those treasuries for pennies on the dollar and have their political flaks trade it for any and all remaining public resources.
Though it does seem Europe is likely getting close to the pitchforks and torches stage and our divided and conquered population will hopefully take the hint.
I'm right there with you, John: I also believe the bond market is going to be the epicenter as the US national debt goes exponential and the payments eat up more and more of our national budget. Thank you for these amazing comments!
Nathan,
Seems like it will be one more big domino in a line of quite large dominos.
Me too, well kind of… I missed out by a year or two of having a completely free university education in Australia. But still, my entire course was only about $12k aussie dollars at the time and I used a interest free loan from the government to cover it. I only had to start paying off this debt once my income crossed a certain threshold, and the payments were pretty small. I ended up paying it off in one big hit just because I hate the idea of being in debt.
When I worked in the US for a few years after 9/11 I had to have so many people explain to me about getting a credit rating. It made no sense to me at all. My housemate had just finished a law degree and she was well over $100k in debt before she had even started working. It just made no sense at all. It’s a ridiculously bad system for everyone except the elites.
The system you described, Leon, sounds a lot better than my experience. I had $160k USD in student debt when I started repayment. I'm down to $50k at age 42. Though it's cost me dearly, I have never missed a payment!
But in a way, I'm grateful for the experience because I never would have met interesting folks (such as yourself) here on Substack!
Damn that’s crazy money. It blows my mind that a person can start out on their working career with that amount of debt It’s enough to buy a house and land out in the boondocks I imagine.
I remember reading a social worker? commenting about homeless people and saying most of us are just one or two mistakes from joining them. Get sick, miss work, miss repayments, lose your house, etc. And it seems the American way of life is geared in such a way that makes it so much easier for the unfortunate to happen to someone without any support safety net. It’s crazy.
(the Australian system has probably changed in that way too since I’ve left, it certainly helps to be born out of a privileged vagina. And by privileged I don’t mean wealthy, I just mean with a roof over their heads, a good income and parents that give a shit).
All your essays explain why it is like it is !!
Nathan,
Figure we don't learn squat from the good times. Our cognitive abilities come from dealing with the problems. If it was all just hunky dory, we would still be little tadpoles swimming in our puddle.
Trial and error. Some is seed, the rest is fertilizer.
Economist Michael Hudson makes a clear distinction between industrial capitalism and financial capitalism. Finance capitalism lives off of predation and is parasitic while industrial capitalism produces that which people need. The latter was seen by Karl Marx as a logical precursor to socialism while finance capitalism is irredeemable.
I would use the term, "market economy."
While the correct term for finance capitalism is a casino.
Lots and lots of chips, whose only value is being bet against other piles of chips.
The tail is wagging the dog.
Good thinking, except that "market economy" pretty much includes all human activity since the Neolithic Revolution. Some call China's mixed economy market socialism. No matter, 'finance capitalism' is much more sinister than a casino, although gambling is a definite part of it. Take Boeing. This was a stellar industry in the US until it was taken over by finance (I don't know how that happened, but similar takeovers have happened in almost every major American corporation). With a bean counter as CEO instead of an engineer, the company was stripped of R&D, safety procedures, worker training, and so on, all to provide funding for stock buybacks and stockholder dividends. We know what has happened to Boeing since. The highest goal of neoliberal finance capitalism is to live at ease on rent, land rent or financial rent, to make other people do your work, and essentially be a parasite, although these types have lots of philosophical (sophist) justifications for their way of life.
One reason that America fails and China thrives is the presence of parasitism in the one and the lack in the other.
Lol. The bean counters had destroyed McDonnell Douglas and so Boeing thought they would get a great deal by buying up the remains, but they got the culture too.
As I keep saying, to a market economy, money is the medium, to a capitalist economy, money is the message. Which goes much deeper into basic conceptual issues than our culture has quite processed. As I said above;
As linear, goal oriented creatures in this cyclical, circular, reciprocal, feedback generated reality, people see money as signal to save and store, while markets need it to circulate. Consequently Econ 101 refers to money as both medium of exchange and store of value.
Roads are a medium, parking lots are a store. If we treated roads like we treat money, everything would be paved over, but we would still be fighting over who has the biggest lots.
In your body, blood is the medium, fat is the store. Mix them up and you are dead. Try telling a doctor that medium and store are interchangeable and he will look at you like you are really stupid, but to an economist, it would be common knowledge.
The thing is, bone and muscle are stores as well, so when everything becomes fungible, it's like an economic Ebola virus, as everything dissolves into this pool of parasitic goo.
China experienced an epoch of war and destruction, The Warring States Period, over 2000 years ago. I figure she learned something and henceforth was a peaceful nation, only interrupted by the occasional revolutionary turmoil caused by, as Pearl Bucks wrote in THE GOOD EARTH, "When the rich get too rich." Of course, there were several invasions, but even then the invaders quickly became Chinese themselves.
However, it seems the Europeans failed to learn anything from these wars as they are still up to warmongering.
One of my favorite David Graeber quotes is on this very topic, Tedder:
We are used to thinking of such bureaucratic interventions—particularly the monopolies and regulations—as state restriction on “the market”—owing to the prevailing prejudice that sees markets as quasi-natural phenomena that emerge by themselves, and governments as having no role other than to squelch or siphon from them. I have repeatedly pointed out how mistaken this is, but China provides a particularly striking example. The Confucian state may have been the world’s greatest and most enduring bureaucracy, but it actively promoted markets, and as a result, commercial life in China soon became far more sophisticated, and markets more developed, than anywhere else in the world.
This despite the fact that Confucian orthodoxy was overtly hostile to merchants and even the profit motive itself. Commercial profit was seen as legitimate only as compensation for the labor that merchants expended in transporting goods from one place to another, but never as fruits of speculation. What this meant in practice was that they were pro-market but anti-capitalist.
Again, this seems bizarre, since we’re used to assuming that capitalism and markets are the same thing, but, as the great French historian Fernand Braudel pointed out, in many ways they could equally well be conceived as opposites. While markets are ways of exchanging goods through the medium of money—historically, ways for those with a surplus of grain to acquire candles and vice versa (in economic shorthand, C-M-C, for commodity-money-other commodity)—capitalism for Braudel is first and foremost the art of using money to get more money (M-C-M). Normally, the easiest way to do this is by establishing some kind of formal or de facto monopoly. For this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easier for them to do so. From this perspective, China was for most of its history the ultimate anti-capitalist market state. Unlike later European princes, Chinese rulers systematically refused to team up with would-be Chinese capitalists (who always existed). Instead, like their officials, they saw them as destructive parasites—though, unlike the usurers, ones whose fundamentally selfish and antisocial motivations could still be put to use in certain ways. In Confucian terms, merchants were like soldiers. Those drawn to a career in the military were assumed to be driven largely by a love of violence. As individuals, they were not good people, but they were also necessary to defend the frontiers. Similarly, merchants were driven by greed and basically immoral; yet if kept under careful administrative supervision, they could be made to serve the public good. Whatever one might think of the principles, the results are hard to deny. For most of its history, China maintained the highest standard of living in the world—even England only really overtook it in perhaps the 1820s, well past the time of the Industrial Revolution.
Very well explained, Mr Nathan. Even in India's caste system, merchants were at the bottom of the social status system. So, in China, merchants and then capitalists have always been a tolerated necessity. I recall that while Mao drove all the foreign capitalists—likely industrial as well as financial—out of China, he kept the national capitalists. Without being in the inner circles of government, we can assess the current CPC attitude by the treatment of Jack Ma when he got a little too ambitious with AllyPay as he was last seen repairing an AC unit on the roof of a skyscraper!
Perhaps the repair gig was a promotion…
Haha that's very funny, Tedder! It is interesting to see how China actually disciplines and subordinates business interests, while here in America we are governed by them.