Back in April, I wrote This Is Water.
There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says “Morning, boys. How’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes “What the hell is water?”David Foster Wallace (2005)
It’s a note about financialization … the zombiefication of our economy and the oligarchification of our society.
Financialization is profit margin growth without labor productivity growth.
Financialization is the zero-sum game aspect of capitalism, where profit margin growth is both pulled forward from future real growth and pulled away from current economic risk-taking.
Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction. It is a profoundly repressive political equilibrium that masks itself in the common knowledge of “Yay, capitalism!”.
What does Wall Street get out of financialization? A valuation story to sell.
What does management get out of financialization? Stock-based compensation.
What does the Fed get out of financialization? A (very) grateful Wall Street.
What does the White House get out of financialization? Re-election.
What do YOU get out of financialization?
You get to hold up a card that says “Yay, capitalism!”.
So anyway, there I was yesterday, minding my own business, and I saw a tweet about Texas Instruments (TXN) and how they were getting slammed after a difficult earnings call. Sometimes I can’t help myself, so I wrote this:
What is financialization? This.
Profit margin growth without labor productivity growth, driven by artificially low price of money. Corporate mgmt and uber-rich cash in … 99.9% can suck it.
And yes, this is why the world is burning.
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