Home » Posts tagged 'financialization'

Tag Archives: financialization

The sands beneath what’s scarce and what’s over-abundant are shifting.

On a recent visit to the welding shop where my niece’s husband works, I asked him if they had enough welders for their workload. His answer surprised me: “If you asked every welding shop in the country if they have enough welders, the answer would be no.”

The reasons for this disparity between the economic need and the workforce’s skills aren’t that complicated. Many of the skilled welders are Baby Boomers who are retiring or nearing retirement, and there aren’t enough younger trained welders to meet the need.

Though there appears to be an uptick in the number of young people interested in apprenticing to construction trades, the cultural zeitgeist has largely disdained hands-on, real-world skills in favor of making videos, becoming social-media influencers, joining an investment bank to make bank, working for a tech startup to score a quick million or two in stock options or if no creative way to make it big presents itself, join the cushiest bureaucracy available with lifetime security, or seek out a non-profit doing some virtue-signaling projects to pad your resume.

As for hands-on skills, becoming a chef certainly topped becoming a crane operator, as attaining semi-celebrity has become a core ladder of social mobility. The desirable livelihoods are creative, virtue-signaling, semi-celebrity and perhaps most importantly, clean white-collar (mostly digital) work.

On top of this cultural disdain we can overlay the general surplus of labor globally and the relative scarcity of profitable homes for capital. As I have often mentioned, the twin drivers of wealth for the past 30 years (arguably even longer) have been financialization and globalization, both of which heavily favor capital over labor, with the exception of tech-managerial skills needed to maximize profits in financialized, globalized ventures.

…click on the above link to read the rest of the article…

You Are Now Leaving FantasyLand: The Losses Will Be Taken By Somebody

July 10, 2020

You Are Now Leaving FantasyLand: The Losses Will Be Taken By Somebody

As the inverted pyramid collapses, the effects will be non-linear.

Round about late March, we entered a Financial FantasyLand in which all the sins and excesses of rampant financialization were going to be painlessly washed away. Mever mind the entire U.S. economy is an inverted pyramid of balance-sheet “value” and debt resting on a shrinking foundation of collateral; everyone would be made whole in the Federal Reserve’s Financial FantasyLand.

You are now leaving FantasyLand: trillions of dollars of phantom value have already vanished, and these catastrophic losses will be taken by somebody. The question is: who will get the concrete overshoes? Whose balance sheets will collapse to negative numbers, erasing all their phantom wealth?

Everyone was delighted to suspend reality and entertain the fantasy that there was a cost-free way to bail out financialization’s greed-soaked sinners: The Fed will simply print as many trillions as needed to make everyone whole. Since it doesn’t cost the Fed anything to digitally print endless trillions, this “solution” is completely, totally free.

What an amazing moment of grace: all our sins washed away in a rising river of Fed-printed money. With endless trillions available, everyone can get bailed out forever. Collateral, actual earnings and profits, none of that matters. The Fed’s grace is godlike in its infinite expansion.

This escape from karma, consequence and divine retribution was as temporal as the ride through FantasyLand. The wheel of karma has turned, The Tao is reversing, the banquet of asymmetric, non-linear consequences has been served and the Fed’s godlike powers will be revealed to be as delusional as the “value” and “wealth” that’s piled up in the balance sheets of the top 0.1%.

For there actually is a cost to digitally printing trillions to bail out all the predatory parasites of financialization.

…click on the above link to read the rest of the article…

No, This Is Not Another 1929, 1973, 1987, 2000, or 2008

April 26, 2020

No, This Is Not Another 1929, 1973, 1987, 2000, or 2008

Basing one’s decisions on analogs from the past is entering a fool’s paradise of folly.

Like addicts who cannot control their cravings, financial analysts cannot stop themselves from seeking some analog situation in the past which will clarify the swirling chaos in their crystal balls. So we’ve been swamped with charts overlaying recent stock market action over 1929, 1987,2000 and 2008–though the closest analogy is actually the Oil Shock of 1973, an exogenous shock to a weakening, fragile economy.

But the reality is there is no analogous situation in the past to the present, and so all the predictions based on past performance will be misleading. The chartists and analysts claim that all markets act on the same patterns, which are reflections of human nature, and so seeking correlations of volatility and valuation that “worked” in the past will work in 2020.

Does anyone really believe the correlations of the past decade or two are high-probability predictors of the future as the entire brittle construct of fictional capital and extremes of globalization and financialization all unravel at once?

Here are a few of the many consequential differences between all previous recessions and the current situation:

1. Households have never been so dependent on debt as a substitute for stagnating wages.

2. Real earnings (adjusted for inflation) have never been so stagnant for the bottom 90% for so long.

3. Corporations have never been so dependent on debt (selling bonds or taking on loans) to fund money-losing operations (see Netflix) or stock buybacks designed to saddle the company with debt service expenses to enrich insiders.

4. The stock market has never been so dependent on what amounts to fraud–stock buybacks–to push valuations higher.

…click on the above link to read the rest of the article…

London Gold Pool Collapse 2020s (VIDEO)

April 5, 2020

London Gold Pool Collapse 2020s (VIDEO)

To better understand where Gold is going, you have to know where it has been (gold price suppression history).

Especially in the context of our last 50+ full fiat currency regime years as only for a small single-digit percentage in that time was gold allowed to do its freaking premiere money job.

Given the ridiculous situation, central banks and fiat financialization has gotten us to in 2020, it’s only a brief time from now where the ultimate final bubble of this debt supercycle shows up in gold.

Here we dig through in detail how the City of London has often been at the center of rigging gold prices for the benefit of fiat financiers.

Such frauds and those who learned volatility injection from them (COMEX) are losing effect as the run on gold bullion have begun.

–

What you’re looking at in the chart above, is the inevitable free-market repricing higher, after pegging and suppressing the price of premiere money, gold bullion near $35 oz for some 35 years of time.

After the original multinational London Gold Pool price rigging operation collapsed in 1968, the fiat Federal Reserve note became the anchor to all fiat currencies everywhere (August 1971).

Last time London was at the center of politely rigging the gold price, France’s Charles de Gaulle decided to break up the price rigging party with his Exorbitant Privilege (1965) speech.

The then French President spoke, in a similar tone to how a modern Vladimir Putin or a perhaps a Chinese Nationalist might today.

As you can see in that 1970-1980s gold price chart above, the yellow precious metal went to work repricing some 24Xs higher following the conspiratorial price rigging collapse.

…click on the above link to read the rest of the article…

Ben Hunt: Prepare To Get Burned

September 21, 2019

Ben Hunt: Prepare To Get Burned

Society is pretending its actions don’t have consequences. It’s badly mistaken.

History teaches us that there is no free lunch, reminds Dr. Ben Hunt, publisher of EpsilonTheory.com.

And science informs us that even the most simple systems become nearly impossible to predict or control with 100% precision as time and variables change.

But our society today is ignoring these lessons. It’s betting that the increasingly excessive distortions required to keep the status quo continuing will succeed, and come at no cost.

That’s a losing bet, warns Hunt:

Society burns itself on a really hot stove every three or four generations.
I think we’re at that point where the Millennials coming of age who are having to wrestle with what the Baby Boomers have done to the world. They’re going to end up burning themselves on this hot stove. The hot stove of looking to government as the answer for everything that ails you. Of looking towards your political leaders as somehow able to provide never-ending exponential growth in comfort and standard of living.
And ultimately, they’ll burn themselves — there’s no such thing as a free lunch. You’ve got pay for these things in one way or another — in terms of resource extraction, in terms of taxation, in the form of sacrifice of individual liberties.
There’s a price to be paid, though. That’s the hot stove that I’m talking about. That hot stove can manifest itself in war. That’s certainly happened in the past. It could manifest itself in the subordination or forfeit of individual liberties. That’s certainly happened in the past.
There are any number of ways in which that burning on the hot stove could happen.

…click on the above link to read the rest of the article…

The Decline and Fall of the European Union

January 14, 2019

The Decline and Fall of the European Union

This exhaustion of the neocolonial-neofeudal model was inevitable, and as a result, so too is the decline and fall of the European integration/exploitation project.

That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro’s introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.

Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender of national sovereignty with renewed intensity.

The technocrat elite that holds power in the EU is attempting to marginalize critics as populists, nationalists or fascists, overlooking the untidy reality that the actual source of tyranny is arguably the unelected bureaucrats of the EU who have taken on extraordinary powers to strip the citizenry of member states of civil liberties (i.e. the right to dissent) and of meaningful political enfranchisement.

As I have patiently explained since 2012, the underlying structure of the EU is neocolonialism, specifically, neocolonial-financialization. Stripped of artifice, the financial institutions of the EU core have colonized the EU periphery via the euro and the EU and imposed a modernized system of extractive serfdom on the citizenry of the core and periphery alike.

To understand the neocolonial-financialization model, we must revisit the classic model of colonialism. In the old model of Colonialism, the colonizing power conquered or co-opted the Power Elites of the region, and proceeded to exploit the new colony’s resources and labor to enrich the core or center, i.e. the Imperial nation and its ruling elites.

…click on the above link to read the rest of the article…

We Are All Hostages of Corporate Profits

July 7, 2018

We Are All Hostages of Corporate Profits

We’re in the endgame of financialization and globalization, and it won’t be pretty for all the hostages of corporate profits.

Though you won’t read about it in the mainstream corporate media, the nation is now hostage to outsized corporate profits.

The economy and society at large are now totally dependent on soaring corporate profits and the speculative bubbles they fuel, and this renders us all hostages: “Make a move to limit corporate profits or speculative bubbles, and your pension fund gets a bullet in the head.”

Not just pension funds, of course; tax revenues will also be taken out and shotas most of the state and federal income taxes are paid by high-earners and those skimming capital gains from stock options and stock-based compensation packages.

Political and financial authorities have caved in to the implicit threat, lest their share of the corporate swag be tossed in the ditch. To appease public anger, various bureaucratic thickets have been created, but as you can easily see, corporate profits have not been affected.

The global downturn resulting from China’s tightening of credit in 2016 caused a remarkably under-reported panic in central banks, which pulled out all the stops to keep corporate profits high.

Subsidies, tax breaks and exclusions keep the profits flowing not just to corporate managers and owners but politicos, lobbyists and the entire food chain that serves the top of the wealth-power pyramid in America.

Notice the difference between normal and abnormal profits? The enormous speculative boom of the dot-com era doubled corporate profits in a mere decade, but those gains pale compared to the tripling in profits since the 2002 downturn:

…click on the above link to read the rest of the article…

Our Economy Is Failing Our Society

May 21, 2018

Our Economy Is Failing Our Society

If we want to extend the opportunities for positive social roles to everyone, we have to change the way money is created and distributed in our economy.

One of the most unrecognized dynamics of our era is the structural dependence of our society on our economy. One set of pundits, politicos and academics wring their hands over the fragmenting of civil society (the rise of disintegrative, divisive forces and the decay of integrative forces) and decry the rising inequality that is our economy’s dominant feature, while another set of pundits and academics celebrate the economy’s remarkable adaptability or focus solely on reading financial tea leaves (interest rates, Fed policy tweaks, unemployment rates, etc.)

Those few analysts who escape their respective silos/academic ghettos rarely get past generalities such as the erosion of social mobility, a dynamic that is clearly economic and social. But the precise mechanisms behind the secular erosion of social mobility are lost in platitudes about how A.I. and robots will free us all to be poets or consumers of a vast and endlessly enjoyable leisure.

The key understanding that’s lacking is that economic structures organize and limit the social structures underpinning civil society. To understand why civil society is disintegrating on so many fronts (public health, civil discourse, etc.), we must understand how our economy has failed to support the social structures required for an integrative, inclusive civil society.

Our economy is transforming/adapting as a result of powerful secular trends:the 4th Industrial Revolution (a.k.a. the digital-networked-AI-Big-Data revolution), globalization, the commoditization of ordinary capital and labor, the financial and political dominance of quasi-monopolies and cartels, and perhaps the most unrecognized dynamic, the devaluation of ordinary capital and labor in favor of scarce and often rarified forms of capital and labor in the fields of technology, entrepreneurship and finance.

…click on the above link to read the rest of the article…

For Economic Truth Turn To Michael Hudson

May 10, 2018

For Economic Truth Turn To Michael Hudson

Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

…click on the above link to read the rest of the article…

Were Trade Wars Inevitable?

April 9, 2018

Were Trade Wars Inevitable?

Trade in which mobile capital is the comparative advantage is a system of Neocolonial exploitation of developing-world nations.

Were trade wars inevitable? The answer is yes, due to the imbalances and distortions generated by financialization and central bank stimulus. Gordon Long and I peel the trade-war onion in a new video program, Were Trade Wars Inevitable? (27:48)

Let’s stipulate right off the bat that trade is not necessarily win-win–the winners (corporations, financiers and the financial sector) have skimmed the majority of the gains, leaving the losers with a few pennies of dubious value.

Consumers’ got a nickel in savings and a disastrous decline in quality, while corporations reaped 95 cents of additional profits:

As I explained in Forget “Free Trade”–It’s All About Capital Flows (March 9, 2018), the comparative advantage into today’s global economy is mobile capital: i.e. access to low-cost credit in nearly unlimited sums.

Those with low-cost credit created by central banks issuing reserve currencies in nearly unlimited sums can outbid everyone else for productive assets.

In effect, trade in which mobile capital is the comparative advantage is a system of Neocolonial exploitation of developing-world nations which don’t have reserve currencies they can create out of thin air. Trade is exploitation via cheap credit.

The winners are the few at the top of the wealth-power pyramids in both exporting and importing nations. I discussed this recently in There is No “Free Trade”–There Is Only the Darwinian Game of Trade (March 12, 2018).

Central bank policies don’t just distort domestic economies, they distort global trade, which parallels domestic distributions of winners (a few at the top) and losers (everyone else).

Trade is intertwined with currencies. China has used its currency peg to the USD to avoid being exploited; China has followed a “Goldilocks” strategy that keeps its currency, the yuan/RMB, in a narrow range: not too costly, not too cheap.

…click on the above link to read the rest of the article…

It’s Time to Retire “Capitalism”

January 19, 2018

It’s Time to Retire “Capitalism”

Our current socio-economic system is nothing but the application of force on the many to enforce the skims, scams and privileges of the self-serving few.

I’ve placed the word capitalism in quotation marks to reflect the reality that this word now covers a wide spectrum of economic activities, very little of which is actually capitalism as classically defined. As I have explained here for over a decade, the U.S. economy is dominated by cartels and quasi-monopolies that are enforced by the Central State, a state-cartel system of financialized rentier skims that has no overlap with Adam Smith’s free market, free enterprise concept,i.e. classical capitalism.

This is what passes for “capitalism” in modern-day America: the super-rich get super-richer, a thin slice of technocrats, speculators and entrepreneurs advance their wealth and the vast majority lose ground or stagnate:

Here’s another snapshot of state-financier “capitalism” in modern-day America: the centralized organs of the state (the quasi-public Federal Reserve) creates trillions of dollars and hands the nearly free money to financiers, insiders and speculators, all of whom benefit immensely as this flood of cash pushes stocks into the stratosphere:

There are other versions of “capitalism” that are equally rapacious, all of which are iterations of crony-capitalism: gangster-capitalism, theocratic-capitalism, colonial-capitalism, and so on.

The key feature of these forms of organized pillage that mask their predatory nature by claiming to be “capitalist” is they ruthlessly suppress the three core dynamics of classical capitalism:

1. Competition

2. Open/free markets

3. Free flow of capital in all its forms (financial, social, intellectual, etc.)

The only way the few can pillage the many is if the many are denied access to competition, open markets and freely flowing capital.

…click on the above link to read the rest of the article…

The Endgame of Financialization: Stealth Nationalization

October 14, 2017

The Endgame of Financialization: Stealth Nationalization

This is the new model of nationalization: central banks control the valuation of private-sector assets without actually having to own them lock, stock and barrel.

As you no doubt know, central banks don’t actually print money and toss it out of helicopters; they create a digital liability and use this new currency to buy assets such as bonds and stocks. Central banks have found that they can take control of the stock and bond markets by buying up as much as these markets as is necessary to force price and yield to do the central banks’ bidding.

Central Banks Have Purchased $2 Trillion In Assets In 2017. This increases their combined asset purchases above $15 trillion. A trillion here, a trillion there, and pretty soon you’re talking real money–especially if you add in assets purchased by sovereign wealth funds, dark pools acting on behalf of monetary authorities, etc.

Gordon Long and I discuss this stealth nationalization in our latest video program, The Results of Financialization: “Nationalization” (35 min):

In the old model of nationalization, governments expropriated/seized privately owned assets lock, stock and barrel. When a central state nationalized an enterprise, it took total ownership of the asset.

In today’s globalized financial world, such crude expropriation is avoided for two reasons:

1. The entire point of the dominant neoliberal / neofeudal /neocolonial model is to maintain private ownership as a means of transferring the wealth to the New Aristocracy, i.e. the financier class. Government ownership certainly conveys benefits to the some are more equal than others functionaries atop the state’s wealth-power pyramid, but it doesn’t transfer the assets’ income streams to private hands.

…click on the above link to read the rest of the article…

The Financialization of America… and Its Discontents

September 30, 2017

The Financialization of America… and Its Discontents

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization.

The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed widely, if not fairly.

This chart shows that labor’s declining share of the national income is not a recent problem, but a 45-year trend: despite occasional counter-trend blips, labor (earnings from labor/ employment) has seen its share of the economy plummet regardless of the political or economic environment.

Down, Down, Down

Given the gravity of the consequences of this trend, mainstream economists have been struggling to explain it, as a means of eventually reversing it.

The explanations include automation, globalization/offshoring, the high cost of housing, a decline of corporate competition (i.e. the dominance of cartels and quasi-monopolies), a failure of our educational complex to keep pace, stagnating gains in productivity, and so on.

Each of these dynamics may well exacerbate the trend, but they all dodge the dominant driver of wage stagnation and rise income-wealth inequality: our economy is optimized for financialization, not labor/earned income.

What does our economy is optimized for financialization mean?

It means that capital and profits flow to the scarcities created by asymmetric access to information, leverage and cheap credit — the engines of financialization.

Financialization funnels the economy’s rewards to those with access to opaque financial processes and information flows, cheap central bank credit and private banking leverage.

…click on the above link to read the rest of the article…

Financialization and The Destruction of the Real Economy

September 20, 2017

Financialization and The Destruction of the Real Economy

Strip an economy of capital, productive incentives, talent and yes, ethics, and what are we left with? An economy spiraling toward an inevitable collapse.

Financialization is destroying the real economy, but few in power seem to notice or care. The reason why is painfully obvious: those in power are reaping vast fortunes from the engines of financialization–for example, former President Obama:Obama Goes From White House to Wall Street in Less Than One Year.

This is not to single out President Obama as a special case; politicos across the spectrum depend on the engines of financialization to fund their campaigns and make them multi-millionaires, and corporate managers and financiers have skimmed billions of dollars in gains not from producing new, better and more affordable goods and services but by playing financialization games such as borrowing billions to buy back stocks, leveraged buyouts, and so on–all of which have reaped the insiders gargantuan fortunes while hollowing out the real economy.

Financialization necessarily hollows out the real economy, as Gordon Long and I detail in this new video program: The Results of Financialization – Part I (34 minutes)

The key dynamic is that financialization creates irresistible incentives to ramp up debt and leverage at the expense of the real economy. Those who fail to exploit financialization will underperform the market and be fired.

As Gordon explains, if a CEO refuses to load a company up with debt, a private-equity financier with access to cheap Federal Reserve credit will scoop up the company in a private buyout, fire the management, extract immense profits by loading the company with debt, then take the hollowed-out shell public again, reaping another windfall of financialized gains.

…click on the above link to read the rest of the article…

The Real Reason Wages Have Stagnated: Our Economy is Optimized for Financialization

September 8, 2017

The Real Reason Wages Have Stagnated: Our Economy is Optimized for Financialization

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization.

The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed widely, if not fairly.

This chart shows that labor’s declining share of the national income is not a recent problem, but a 45-year trend: despite occasional counter-trend blips, labor (that is, earnings from labor/ employment) has seen its share of the economy plummet regardless of the political or economic environment.

Given the gravity of the consequences of this trend, mainstream economists have been struggling to explain it, as a means of eventually reversing it. The explanations include automation, globalization/ offshoring, the high cost of housing, a decline of corporate competition (i.e. the dominance of cartels and quasi-monopolies), a failure of our educational complex to keep pace, stagnating gains in productivity, and so on.

Each of these dynamics may well exacerbate the trend, but they all dodge the dominant driver of wage stagnation and rise income-wealth inequality: our economy is optimized for financialization, not labor/earned income.

What does our economy is optimized for financialization mean? It means that capital and profits flow to the scarcities created by asymmetric access to information, leverage and cheap credit–the engines of financialization.

Optimization is a complex overlay of dynamically linked systems: the central bank optimizes the flow of cheap credit to the banking/financial sector, the central state tacitly approves the consolidation of cartels and quasi-monopolies, and gives monstrous tax breaks to corporations even as it jacks up taxes and fees on wage earners and small business.

…click on the above link to read the rest of the article…

Tag Archives: financialization

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts