What Matters: The Gospel According To Charles Hugh Smith

The other day when I included a link to Tom Luongo's musings on Secession I had intended to include more commentary of my own. However, I was put off by my ignorance of economic matters. A day or so later I'm just as ignorant as before, but I still want to raise these issues to see what others--who may know more--have to say. 

One article on Secession that I came across while I was preparing the blog Recommended Reading For Christmas contended that Blue counties account for 70% of GDP and that Red counties are basically populated by losers who scuffle to get by and have little to offer the country as a whole. That seemed a pretty extreme assessment to me. I mean, I knew that the Blue counties don't actually produce much of anything--not energy, not food, not really too much in terms of consumer goods. Still I wasn't sure how to proceed.

Many of you, I'm guessing, have some familiarity with Charles Hugh Smith through republication of his blogs at Zerohedge. If so, you'll know that his big bugaboo is the "financialization" of our economy. As far as that goes, I've always been receptive to the idea that the decline and repeal of Glass Steagall is what got us to where we are now, with an economy that's top heavy in the financial sector and a population that keeps falling further behind. 

Obviously, to that extent I blame simple minded Libertarians for enabling the pass we've come to. Luongo, a self professed Libertarian, at least recognizes that the "American Myth" of Classical Liberalism has pretty much collapsed and doesn't have much to offer in terms of a way forward for the nation. Trump wanted to restructure the economy, away from financialization and towards productivity in the real world, and we're seeing the result--a Deep State hit and the collapse of our constitutional order. I think we all get that: While the top 5% of the population wasn't out there stuffing the ballot boxes--they had useful idiots to do that--they were the ones who dictated that Trump had to go, constitution be damned.

Now, I can't say that I read everything that Smith writes--actually, far from it. Still, I decided that one way to proceed would be to see if I could find a blog in which he explains his ideas, excerpt that, and see what other conservatives might think of his thesis. My reason for doing this is because, while I acknowledge my ignorance in this regard, it seems that any attempt to make sense of what's coming at us in the tunnel ahead will have to take financialization into account.

With that as my premise, I dug up this blog:

TUESDAY, JULY 28, 2020

The Nation Is Falling Into the Abyss Between Wall Street and Main Street

I know this runs counter to every dominant narrative, but a vaccine doesn't really matter, opening up doesn't really matter, and the size of the "free money" stimulus checks doesn't matter.

What matters is that the nation is falling into the abyss that's opened between Wall Street and Main Street, and nothing will stave off the collapse of the social order other than a fundamental re-ordering of the way we create and distribute money and political power, as money buys political influence.

The last economic tide with widespread benefits to Main Street was 30 years ago. Since then, the Federal Reserve and other central banks have incentivized globalization and financialization, two dynamics that favor mobile capital and financier skims and scams.

... Financialization has given those with access to central bank credit ways to skim great wealth from the system without creating any value whatsoever.

Financialization isn't a consequence of having capital: it's the consequence of having access to unlimited central bank credit, ...

Leveraging phantom collateral is another feature of financialization. ...

Financialization is not about investing in productive enterprises; it's all about skimming wealth while providing no value to the real economy or society.

The hidden toxin in financialization is the resulting concentration of wealth can buy concentrations of political power. ... Once the politicos are in your pocket, the regulators and judiciary fall into line or are marginalized by new statutes or gutted budgets.

...

One example is the student loan "industry," which prior to financialization did not exist. ...

That the exploited class of students have little to no income and no guarantee of income doesn't matter. What matters is a previously unexploited asset can be turned into debt that can be sold at an immense profit.

And so student loan debt has skyrocketed from near-zero to $1.6 trillion in less than a generation. ...

Globalization and financialization have been the two engines of soaring wealth inequality. ...

In other words, globalization is the result of those at the top of the wealth-power pyramid shifting borrowed capital around the world to exploit lower costs of labor, commodities, environmental regulations and taxes.

This manifests as offshoring of jobs, the stripmining of forests, minerals, etc., the degradation of local ecosystems, the decline of tax revenues derived from capital and the explosive rise in stock market valuations as wages stagnate or decline.

A key element in globalization is the transfer of risk from the owners of capital to the workers and public resources. ...

Alas, all good predations end when the prey has been dragged to the ground and consumed. ...

...

Main Street has been in slow-motion collapse for a generation, but this terminal decay was masked by hyper-financialization and debt-fueled spending by consumers who became accustomed to filling the widening gap between their income (stagnant) and the costs of their lifestyle (rising), as they chased the top 5% who benefited from globalization and financialization.

Debt creates the warm and fuzzy illusion of wealth, but at a cost: debt payments never disappear, but income and profits can slide effortlessly to zero.

...

 

To be continued, I think.