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May 11, 2024 14:05
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- FUCK COREY PERRY
- Apr 19, 2008
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Well, they encourage your complete cooperation
Send you roses when they think you need to smile
I can't control myself because I don't know how
And they love me for it, honestly, I'll be here for a while
So give them blood, blood, gallons of the stuff
Give them all that they can drink, and it will never be enough
So give them blood, blood, blood
Grab a glass because there's going to be a flood
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Mar 13, 2023 12:54
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- FUCK COREY PERRY
- Apr 19, 2008
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the way to understand what’s happening right now is not at all what orthodox economics wants to tell you. this is sort of an effort post.
I’m completely simple terms - this is the consequence of Obama and Geithners policy in 2008. when the banks blew up back then, we had a choice - do we as a society protect the creditor or protect the debtor? the answer came clearly down to protecting the creditor - the banks.
the main reason for that is that is because we were in the midst of a revolution - the free trade agreements and de-industrialization policies of Clinton staring with NAFTA and the admittance of China to the WTO in 2001 were turbocharging the equity and bond market.
with labor being squeezed and eventually collapsing by moving overseas, the main enemy of neoliberalism was conquered. unions fell apart and factories shut down, but because of the rise in technology coinciding with dirt cheap foreign labor costs, productivity went through the roof. around the same time, business schools were churning out MBAs that based their framework around finance instead of industrial engineering - older schools like GMI in Flint (now Kettering University) which trained executives to think in terms of industry were giving way to Stanford and Harvard MBAs who prioritized the CFO led model of prioritizing the stockholder.
these coinciding factors led to executives gutting their companies to shutter factories, move them overseas, and largely focus on financial engineering to boost their share price. a characteristic of finance that separates it from a real economy is that financial returns compound while a real economy looks like an S curve - a financial economy simply grows unbounded.
that’s because finance is debt based. banks create debt and make claims on assets. their source comes from thin air - when you apply for a mortgage, they simply push a button and come up with a the money. in theory, they are required to keep a reserve to cover deposits - with deregulation, it has given them less and less to cover on hand, to now virtually guaranteed risk-free government backed bailouts.
i also think it’s important to understand what exactly a bank does. let’s say you deposit some money into one. from a banks balance sheet perspective, your deposit is a liability in an accounting sense. this means that they package the liability, your deposit, into an asset via an exchange on the market.
because a banks primary product is making claims on real assets, they naturally are rent seeking institutions. in order for them to grow and make money, they need 2 things - an ever larger pool of assets to lay claims on and a source of easy credit to lever their claims on to increase their rate of return. the first part is done via privatization - by moving assets from the public domain, such as land or healthcare or education, to the private one, they force the entire population to take on loans, which gives the banks their pool of assets to lay claims on.
the second piece comes from the availability of a Bank themselves to get short term loans. a bank is a special institution under financial capitalism that can enter a repo market with its central bank, the fed. they can collateralize and obtain credit from the central bank and can use that same credit to cover their liabilities (aka deposits) or go into the financial markets and buy stocks, bonds and products.
banks pre 2008 were making extremely risky bets by tapping into the largest debt pool of all - mortgages. because everyone has a mortgage, which pays interest, investment banks began committing outright fraud by packaging garbage loans and making it appear golden and the commercial banks lended loans to anyone with a pulse. this skyrocketed returns across the board as the combination of derivatives and interest bearing loans compounded and grew far beyond the growth of the real economy. in 2008 when it finally collapsed, Obama decided that he would protect the creditors and the only way to do this was to re-inflate the prices of both real estate and the stock market.
this is where the regime of 0 interest rate credit came into play. as money became basically free, banks gave the government all of their toxic bonds and derivatives and in return got free money from the federal reserve to chase returns again. stock buybacks, VC money, institutional housing buybacks, healthcare, insurance, and arbitraging were all turbocharged with QE. this led to an equity and bond market boom as the federal reserve gave the banks enough loans to spread throughout the system to make sure all the distressed houses they had on the balance sheet were not only propped up again, but would eventually far outpace the book value of the homes itself.
as the rally grew, and the economy became more polarized, the creditors and financial class inflated the stock market to obscene levels, but needed more and more assets to lay their credit claims on. this only further impoverished the rest of us, as housing, education and healthcare costs spiraled out of control. rather than see these as the driving costs for what we now call “inflation”, the fed simply doubled down on this regime and left it at near 0 well after the initial recession ended. the small financial class enjoyed unparalleled wealth that had never really been seen before in american history.
what eventually burst this bubble was covid. since we deinsturalized, we faced sudden shortages that caused massive supply/demand imbalances. these causes prices for some goods to spiral, cars for example. in response, the fed dropped another 9 trillion QE regime in which the main intent was to inflate the stock and bond market. this led to the absolutely asinine situation of a soaring stock market amidst collapsing employment.
as covid ended and labor had new gained power to negotiate wages in 2022, the idea of inflation started to really become a mainstream topic in financial news. inflation is really a euphemism for rising wages and employment, but an overall increase of wages would sharply threaten financial returns for all the now CFO led companies and startups. to curb this, the fed decided to raise interest rates.
the problem is that they have flooded the market, since 2008, with low interest rate credit. as companies became flush with cash, especially the tech sector, they parked their money into treasury bonds. most banks barely pay any interest on savings or CDs, something like less than .05%, so wealth individuals and cash plush companies would rather invest in long term t-bonds which were only interrupted after labor suddenly had some negotiation power due to covid.
this whole situation is a consequence of gutting the country of industry and focusing on finance as the primary growth driver. the problem is that now, we have so much credit that has been used to indebt the rest of us, and nearly every bank has underwater bonds as they invested in “safe” treasury bonds, that the system has nowhere to go. the individual actions of banks, such as bailouts, are less of a moral hazard than the overall structure of the economy basically resembling the Soviet Union, but financially rather than via fake production quotas. as the Soviet Union was obsessed with production to to point of it becoming farcical, so we are with finance to the point of it now it being largely fiction as we cannot QE as that would counter act the rate hikes, and we cannot continue the rate hikes as that would collapse more banks. we have to come to the conclusion that banks and creditors ARE the problem, and let them collapse and bring back a goods and consumer spending based economy rather than a fictitious debt based one.
Now That's What I Call Posting
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Mar 16, 2023 13:18
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- FUCK COREY PERRY
- Apr 19, 2008
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this is a genuinely great question. phrased another way - why are losses happening at blue chip companies, which are supposedly the same class of people the fed is supposed to help? and how is that contributing to the erosion of employment?
to answer this, we have to first differentiate between industrial capitalism and finance capitalism.
industrial capitalism was genuinely revolutionary - reading some of the classical economists like Ricardo and Smith, you get a clear takeaway: the feudal class must go. their ability to monopolize key sectors of the economy, namely land, was causing a bottleneck that capitalists saw as hindering growth. they argued that feudalism, primarily the ability for a hereditary class to inherit unearned income, was choking the economy as it indebted the population and made them debt slaves to creditors. looking back to ancient times, even those in the palace would periodically wage war on the aristocracy as labor that had been indebted by creditors meant that they couldn't be used as labor by the king.
in a similar way, capitalists saw the feudal class as a non-rational and non-liberal part of society. as the physiocrats, the proto-capitalists, first started developing their opposition in France, it eventually led to the French Revolution in which liberals rebelled and massacred the feudal class.
historically, the industrial capitalists have opposed the financial capitalists. this is because finance capitalism is very similar to feudalism - it is designed to indebt the population by using their assets as claims of debt. industrial capitalists do not want this - they want low cost of living as it is how they can compete with other countries and societies. a country that has high healthcare costs means that they have to pay higher wages; if a government subsidizes it instead, it means that a company has to pay less wages, leading to more profit.
the situation we're in now is that finance capitalism has completely taken over and pushed out the industrialists. what marx railed against, namely the exploitation of workers, almost seems quaint - we are effectively in a neo-feudal age in which the vast majority of americans are heavily indebted and are debtors, between morgages, education loans, healthcare, auto, credit cards, etc.
within this distinction, we can now answer your question. inflation is ASSET PRICE INFLATION. this is fundamentally different from CPI inflation, so-called consumer price index. we are NOT in danger of hyperinflation, I don't know where this narrative is coming from. what has happened is that asset prices, namely housing and stocks, have been artificially inflated due to the 15 year QE campaign by the fed. last year, when millions died due to covid and there were severe shortages in restaurants, factories, warehouses, etc, labor suddenly had additional power to demand higher wages.
this demand threatened both industry AND finance. however, industrial capitalists have largely transformed into finance capitalists - the biggest example of this is silicon valley in which VCs are seen as the movers and shakers. in the past, VCs were treated with contempt - even within SVB, they were a completely separate arm until the head of VC took over SVB.
what no one expected was a literal plague killing off millions of potential workers worldwide and changing the ability of labor to demand more. as we all began realizing, we could jump from job to job and make more than we used to - restaurants were chronically understaffed and computer touchers were saying the refused to come into the office. suddenly, industrial capitalsim reared its head and allowed workers to demand higher wages in compensation. this is unacceptable, as now suddenly these high wages hit the already high (relatively speaking) wages of america - employers have to pay for healthcare, compensate cost of living, etc.
this threatened the growth of the country, literally. company owners were NOT affected by this cost of living increase - they are the creditors, not the ones being indebted. the losses they suffered from the feds rate hike increase was OFFSET BY WAGE DECREASES. this is because stocks, bonds, and housing, their main source of wealth, continued to increase despite the squeeze labor was feeling.
this is why there is no contradiction - the layoffs are part of this squeeze and labor is in a feudal relationship with its creditors. executives in key sectors will offset their losses in rate hikes by squeezing labor. this is why something like Apple stock continues to increase amongst this volatility.
 
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Mar 17, 2023 13:07
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Mar 13, 2023 01:01
