Amerika

People Are Finally Noticing That Our Economy Is A Circular Ponzi Scheme

When you make society about what is popular, you separate reality from social reality, and people stick with social reality because they mostly interface with the world through people. As soon as this happens, reality becomes persecuted and illusion enthroned, and then insanity takes over.

As part of this process of decay, demand-based economics becomes part of our society. This theory holds that if consumers want to buy something, and that makes our currency valuable enough that international markets want to use it, we have “added value” to the economy. Sort of like advertising, it seems to work for as long as the belief does, then collapses.

In the pursuit of demand-based economics we have created a circular Ponzi scheme in our economy that taxes productive people in order to dump money on the unproductive so that those people buy tons of consumer junk which enables us to generate demand for our currency and then use that to borrow money from the international community so that we can dump more on the unproductive and then sell them more junk so that we can tax the profits and then keep the cycle going.

As anyone with a working brain can ascertain, this will crash at some point, which is why no one in government worries too much about debt. They know that at some point the socialism-consumerism bubble will explode, and then we will all be poor, but in the meantime they will have taken their money out of our system and invested it in something that will have value after the crash, like gold, weapons, farms, real estate, transportation, energy, and medicine.

Some are noticing that a variant of this scheme has cropped up in private industry where investors splash money around an industry to pump up its value, then use that to promote their own companies as being worth more as participants in this industry, then cash out of the rest of the industry shortly before it crashes. This circular Ponzi scheme also works by raising demand for something and then assigning it a higher advertising-like value as a result.

Recently, one investor called out Big Tech for its latest dot-com snake oil scheme:

In a letter from Social Capital, Palihapitiya notes that “over the past decade, a subtle and sophisticated game has emerged between VCs, LPs, founders, and employees”, and someone has to foot the bill for it as VCs are “smart enough to transfer the risk”.

They “habitually invest in on another’s companies during later rounds, bidding up rounds to valuations that allow for generous markups on their funds’ performance”. Then, like health insurance companies, that makes it easier for them to generate even larger funds, and nice management fees.

Footing the bill are employees and early-stage limited partners, or future limited partners—the ones who get stuck paying for the hefty management fees.

In any other industry, this would be recognized as collusion. A small circle of investors decide to invest in each other, effectively becoming chairmen of a virtual corporation dedicated to manipulating the market; that drives up the value of their investments, and rewards each of them by driving up the value of his firm, at which point any losses from their investments are dwarfed by the increase in stock price.

Not only can then they bail out by selling the stock and reinvesting that money in actual industries, but along the way they siphon off cash by charging management fees, taking salaries, and giving presentations about the brilliance of Silicon Valley and the (now aged) internet “revolution.”

Few criticize them because most hope to get rich off of these stocks, knowing that they are playing “musical chairs” in that whoever is left standing — owning stock in the industry — when it next crashes gets wrecked. This was the rule in the first dot-com boom (and kaboom) which blew up and left the economy in ruins, in collaboration with a government-engineered housing crisis.

Almost no one will mention however that the economic theory that these parasites are using comes straight out of the demand-side playbook — which includes Keynesianism, or “pump priming,” which is essentially what they are doing to their own industry — and that their actions and the consequences of those reflect a broader failing of Leftist economics which create the boom-bust cycle with which we are familiar:

If money is defined as a debt, it artificially places an unnecessary burden of debt on the whole of society. It turns the positive real net worth of all we produce into a financial negative instead of positive. In effect, it artificially places financial claims on all of our achievements and progress, thus denying us full benefit and enjoyment of all we create.

While most money in the U.S. mis-designed system is really debt, put into circulation by banks when they make loans, it is a huge error to then define the “nature” of money as debt.

…In reality, money has value because of what it can buy, we want it for many things, e.g., to buy food (paying taxes is much lower on the list), and sellers usually decide its “value” as such. What enables that value to be created in the first place is people living together in a supportive legal and social structure creating values for living, such as education, science, medicine, technology, the arts, etc.

Supply-side economics affirms their last sentence: “What enables that value to be created in the first place is people living together in a supportive legal and social structure creating values for living.” When we produce things of value to human existence itself, that creates actual value; when we base value on human demand, which is conjectural and infinite, we devalue money but make it circulate faster, which others confuse for an increase in actual value.

Every time we go into demand-based economic thinking, we experience a huge boom as all of this speculative wealth is created; then, about a decade or so later, we ride straight into a massive recession as the economy must adjust to having less value than it thought, which means that people flee investments and go to tangibles, because the last man standing with speculative investments finds herself out of luck.

If the West were able to stick with supply-based economic thinking, it would not experience sudden bursts of growth and tax revenue, which would doom our socialist-style welfare/entitlements/benefits programs which have been grafted onto capitalism in emulation of post-WW1 economic systems like National Socialism, all of which eventually go bankrupt because distributing money reduces its actual value because it makes it easier to acquire. Go figure: that which is rare is more valuable, and that which is common is, well, not of much value.

We know that our future involves a big bust, no matter what President Trump does, mainly because we have the Obama and Clinton years worth of false value to absorb. Trump seems intent on making America self-sufficient, at which point a crash will result in an excess of production more than a collapse of value, and we will be able to keep the fires burning. Whether he will make that active in time by beating back our dependency on Chinese manufacturing and regulation-created jobs remains yet to be seen.

Tags: , , , , , ,

|
Share on FacebookShare on RedditTweet about this on TwitterShare on LinkedIn

Recommended Reading