5 ms·

Very interesting article. I think what a lot of these articles lack is a discussion of the role that monetary policy plays in the financialization of the Ameri

by Qasaur 7y ago

Very interesting article. I think what a lot of these articles lack is a discussion of the role that monetary policy plays in the financialization of the American (and, indeed, global) economy. While I agree that there are other factors that lead to the rise of shareholder primacy, I think the most important one is the distortion of relative capital proportions in the economy largely caused through the mechanism of monetary inflation. I find it odd how there is so little literature on this apart from books and papers from the relatively fringe (but no less accurate) Austrian school of economics. Inflation is not something that happens everywhere in the economy at the same time (the Cantillon effect). Inflationary central banking policies benefit those who are closest (relatively) to the money printer, and in modern Western economies this is almost always financial firms and those who marshal capital. Large inflows of money (inflows that have vastly increaed sinced 2008 after the advent of extensive quantitative easing) allow those close to the central bank to have a larger purchasing power than the rest of the economy as inflation has not "trickled down" yet. This allows said financial firms to purchase assets, invest in companies, and capture value in ways they would otherwise not be able to do and in scales that are completely unnatural. And yes, this includes venture capital firms (for many of us who work in startups, we are among those who are relatively closer to central banks, hence the ridiculous salaries). As there is much more money flowing in the system but less "real" wealth, much of this money heads to equity markets to chase returns, and the result is what is described in the article. This distortion of the capital base allows financial firms to hold and direct more capital than they otherwise would, so it is no wonder that the financialisation of the American economy and increases in general economic inequality globally largely began after the gold standard was abolished in 1971 and central bank printing presses were set free. Indeed, I would go so far to say that the real fix to this problem is to abolish inflation targeting (and by consequence the central planning of the money supply through central banks).

solotronics 7y ago
I think the firehose we have now of unconstrined fiat currency will go down in the history books as an aberration in the history of money. Money and the economy are part of the bedrock of modern society and the human interactions that happen on a macro and micro level. When you get down to it fiat currencies like the USD became uncoupled from reality when it went off being pegged to a physical amount of gold/silver. I always see a lot of hand waving when I bring this up. I am betting that our current system of fiat is smoke and mirrors and we will return to money based on something concrete.
- Qasaur 7y ago
  Not only in the history of money, but in the history of humanity. Think of all the lost prosperity that has been siphoned off since 1971 and the collective rise in living standards people could have afforded. We are very comfortable as technologists and other high-paying (read: inflationary) professionals, but there is a large class of people who are getting thoroughly shafted by these monetary policies and they are your Uber drivers, the people who work at the coffee store, the factory workers in the midwest, and the homeless. The exponential rise in rents in cities are not a natural consequence of the capitalist marketplace, rather its a consequence of loose monetary policy whereby money has entered real estate markets to gain returns by exploiting ridiculous rents. https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/ Again, no coincidence that productivity and wage increases started to diverge significantly after the gold standard was abandoned. Our modern loose monetary policy and inflation targeting is probably the greatest regressionary redistributional scheme in the history of mankind, and will go down in history as such.
  - TheOtherHobbes 7y ago
    It's not even the descent into poverty by the former middle classes - although that in itself is barbaric. The deeper problem is the opportunity cost - the small businesses that were never started, and the inventions, innovations, and other developments that never happened because financialised markets were more interested in speculation, wealth capture, scamming, and gambling than in fringe high-risk speculative R&D. In fact the financialisation and corporatisation of the research that does happen has distorted the research process and made it far less effective. Without it we might have had game-changing advances in fundamental physics, AI, medicine, aerospace, robotics, bioengineering, and even arts and culture that were decades ahead of where we are now.
    - Spooky23 7y ago
      You hit it. My younger cousins were a lot more well off than my side of the family, went to private or high competitive schools from kindergarten on, and are super smart. I used to hang out with them and their friends from time to time, and it struck me how uniform their aspirations all were. Investment Banking, Consulting or medicine. Maybe a few wanted to be lawyers. It struck me then and now as an incredible waste of talent.
rolltiide 7y ago
Expand supply of money with money that didn't previously exist. Recipients gain access to the new money mostly from borrowing, and pay back the money with previously existing money. When recipients fail to reach previously existing money due to limitations of the size of the market, new debt is no longer available, and the recipient's remaining resources are taken instead. Expand, contract. I think it is a great way for the state-sanctioned stewards of the economy to understanding the size of the market and the current limits of global resource distribution by having so much data. I wish there were entertaining videos on this concept that weren't also trying to "wake people up" to something "bad". Where is the "here is the effect of the business cycle", "here are the tools to play this game more effectively".
TheBobinator 7y ago
You are woefully incorrect. The real cuplerate is that when a bank creates a loan it creates a loan check, and through a confluence of politics and leverage, businesses are motivated to use other people's money to make investments and pay only the interest. As the sum of the interest on accumulated loan checks build, you end up reducing the velocity of capital (people's willingness to spend money) because eveything becomes too expensive due to price reflecting the businesses load of interest, until, eventually, you end up with a liquidity problem; too many loan checks and promises, to little returns, and cash evaporates. Everything becomes too expensive when resold through the bank a dozen times. Governments have tried every system known to man kind to constrain this including war and genocide. The Privately-owned federal reserve has in their corporate charter a requirement to keep steady interest rates and they refuse to maintain them; The 2% yearly inflation is artificially caused by the continuous expansion of credit and prices never correct or deflate because they always capture the correction by printing or lending ever larger sums of money they never intend to collect. They disregard their charter and do whatever they want because they have the money to do so. By having this monetary policy, you enable equity pirates, often led and initially funded by foreign countries who harbor the viewpoint that enslaving and killing your population is no big deal, to expend vast sums of capital asset stripping everything; businesses, machinery, people, equipment. Fertility rates are down to 1.7 today in the US; when the USSR collapsed they were down to 1.2. 2.1 is replacement. You have 60-100 million men who will never have kids or get married if GAO Retirement security studies are to be believed; they break out demograhics in some of those studies and there's a double digit and growing demographic of men who cannot make enough money by the age of 45 to have a family. Over 50% of female Latino immigrants (illegal or otherwise) do not have kids. Some of that is 3rd wave feminism (half of men with an 80th percentile income or higher never procreate, and a lot of that is, when you have money, girls throw themselves at you, and you lose respect for all women due to that). CDC had a statistic SJW's forced them to take down in 2011; quarter of women with bachleors degree's don't have kids (her school debts become a dowry most men can't pay), but a heck of a lot of it is profit motive. Turning people into products for corporate executives also turns them into trash once you've consumed them; you take from them the concept of self respect and dignity, and as we've found with C-PTSD research, once the structure of the brain has changed due to trauma, it takes a large investment of time and energy to get it back to normal. Historically, People who do not have those concepts don't know how to engineer a society with those values which is how you get the pattern of the french revolution and subsequent reign of terror repeating thoughout history so often. There's 2 ways you constrain this. The first is bankruptcy. You shred the loan checks and let the rot fall out of the system. The second is by limiting the revenue of private companies through income tax like we did in the 60's; you make more than 250k a year congrats you've won the game, every dollar you make more is going to be taxed. Now. Go do something nice for society. You also require public companies to have 66% or more their stock owned by employee's. Doesn't have to be voting stock, but total stock and allocation of revenue. We figured out in the 30's when you pay people a "keep what you catch" wage, they work really hard and efficiently and when the downturn comes, they stick with the company and survive it well then on the upswing, they invest. If constrains who goes bankrupt during the boom\bust cycle. Getting there, however, means putting a lot of executives and rich people in jail (for fraud, so they can't keep comitting fraud or spending their money to interfere with the process), and pruning a lot of large companies. It also means widespread rehabilitiation and family education and planning resources. We are well over the point where all of that can snowball into a violent political revolution; the consequences of that is are all bad.

by Qasaur 7y ago

solotronics 7y ago

I think the firehose we have now of unconstrined fiat currency will go down in the history books as an aberration in the history of money. Money and the economy are part of the bedrock of modern society and the human interactions that happen on a macro and micro level. When you get down to it fiat currencies like the USD became uncoupled from reality when it went off being pegged to a physical amount of gold/silver. I always see a lot of hand waving when I bring this up. I am betting that our current system of fiat is smoke and mirrors and we will return to money based on something concrete.

Qasaur 7y ago
Not only in the history of money, but in the history of humanity. Think of all the lost prosperity that has been siphoned off since 1971 and the collective rise in living standards people could have afforded. We are very comfortable as technologists and other high-paying (read: inflationary) professionals, but there is a large class of people who are getting thoroughly shafted by these monetary policies and they are your Uber drivers, the people who work at the coffee store, the factory workers in the midwest, and the homeless. The exponential rise in rents in cities are not a natural consequence of the capitalist marketplace, rather its a consequence of loose monetary policy whereby money has entered real estate markets to gain returns by exploiting ridiculous rents. https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/ Again, no coincidence that productivity and wage increases started to diverge significantly after the gold standard was abandoned. Our modern loose monetary policy and inflation targeting is probably the greatest regressionary redistributional scheme in the history of mankind, and will go down in history as such.
- TheOtherHobbes 7y ago
  It's not even the descent into poverty by the former middle classes - although that in itself is barbaric. The deeper problem is the opportunity cost - the small businesses that were never started, and the inventions, innovations, and other developments that never happened because financialised markets were more interested in speculation, wealth capture, scamming, and gambling than in fringe high-risk speculative R&D. In fact the financialisation and corporatisation of the research that does happen has distorted the research process and made it far less effective. Without it we might have had game-changing advances in fundamental physics, AI, medicine, aerospace, robotics, bioengineering, and even arts and culture that were decades ahead of where we are now.
  - Spooky23 7y ago
    You hit it. My younger cousins were a lot more well off than my side of the family, went to private or high competitive schools from kindergarten on, and are super smart. I used to hang out with them and their friends from time to time, and it struck me how uniform their aspirations all were. Investment Banking, Consulting or medicine. Maybe a few wanted to be lawyers. It struck me then and now as an incredible waste of talent.

rolltiide 7y ago

Expand supply of money with money that didn't previously exist. Recipients gain access to the new money mostly from borrowing, and pay back the money with previously existing money. When recipients fail to reach previously existing money due to limitations of the size of the market, new debt is no longer available, and the recipient's remaining resources are taken instead. Expand, contract. I think it is a great way for the state-sanctioned stewards of the economy to understanding the size of the market and the current limits of global resource distribution by having so much data. I wish there were entertaining videos on this concept that weren't also trying to "wake people up" to something "bad". Where is the "here is the effect of the business cycle", "here are the tools to play this game more effectively".

TheBobinator 7y ago

You are woefully incorrect. The real cuplerate is that when a bank creates a loan it creates a loan check, and through a confluence of politics and leverage, businesses are motivated to use other people's money to make investments and pay only the interest. As the sum of the interest on accumulated loan checks build, you end up reducing the velocity of capital (people's willingness to spend money) because eveything becomes too expensive due to price reflecting the businesses load of interest, until, eventually, you end up with a liquidity problem; too many loan checks and promises, to little returns, and cash evaporates. Everything becomes too expensive when resold through the bank a dozen times. Governments have tried every system known to man kind to constrain this including war and genocide. The Privately-owned federal reserve has in their corporate charter a requirement to keep steady interest rates and they refuse to maintain them; The 2% yearly inflation is artificially caused by the continuous expansion of credit and prices never correct or deflate because they always capture the correction by printing or lending ever larger sums of money they never intend to collect. They disregard their charter and do whatever they want because they have the money to do so. By having this monetary policy, you enable equity pirates, often led and initially funded by foreign countries who harbor the viewpoint that enslaving and killing your population is no big deal, to expend vast sums of capital asset stripping everything; businesses, machinery, people, equipment. Fertility rates are down to 1.7 today in the US; when the USSR collapsed they were down to 1.2. 2.1 is replacement. You have 60-100 million men who will never have kids or get married if GAO Retirement security studies are to be believed; they break out demograhics in some of those studies and there's a double digit and growing demographic of men who cannot make enough money by the age of 45 to have a family. Over 50% of female Latino immigrants (illegal or otherwise) do not have kids. Some of that is 3rd wave feminism (half of men with an 80th percentile income or higher never procreate, and a lot of that is, when you have money, girls throw themselves at you, and you lose respect for all women due to that). CDC had a statistic SJW's forced them to take down in 2011; quarter of women with bachleors degree's don't have kids (her school debts become a dowry most men can't pay), but a heck of a lot of it is profit motive. Turning people into products for corporate executives also turns them into trash once you've consumed them; you take from them the concept of self respect and dignity, and as we've found with C-PTSD research, once the structure of the brain has changed due to trauma, it takes a large investment of time and energy to get it back to normal. Historically, People who do not have those concepts don't know how to engineer a society with those values which is how you get the pattern of the french revolution and subsequent reign of terror repeating thoughout history so often. There's 2 ways you constrain this. The first is bankruptcy. You shred the loan checks and let the rot fall out of the system. The second is by limiting the revenue of private companies through income tax like we did in the 60's; you make more than 250k a year congrats you've won the game, every dollar you make more is going to be taxed. Now. Go do something nice for society. You also require public companies to have 66% or more their stock owned by employee's. Doesn't have to be voting stock, but total stock and allocation of revenue. We figured out in the 30's when you pay people a "keep what you catch" wage, they work really hard and efficiently and when the downturn comes, they stick with the company and survive it well then on the upswing, they invest. If constrains who goes bankrupt during the boom\bust cycle. Getting there, however, means putting a lot of executives and rich people in jail (for fraud, so they can't keep comitting fraud or spending their money to interfere with the process), and pruning a lot of large companies. It also means widespread rehabilitiation and family education and planning resources. We are well over the point where all of that can snowball into a violent political revolution; the consequences of that is are all bad.