A Sweet Deal Gets Sweeter (for some)
As we saw in Part 1 America created Magic Money after closing the gold window in 1971: the ability to create money in a computer and buy anything in the world with it because oil sales are denominated in dollars.
All those dollars sloshing around the planet in a process called exporting inflation. The US creates extra dollars which sit in overseas bank accounts or are invested in US companies or come back to the US banks to be lent out again…
And here’s the rub: making money from money has lower risk than starting productive businesses.
The cornerstone of the so-called “service economy” is the Finance Insurance and Real Estate complex, though now it’s being supplanted by the so-called FANGs: Facebook, Apple, Netflix and Google. All four of whom could go tits up tomorrow with the world not missing a beat.
FIRE and the FANGs merely illustrate the principle that what is made matters far less than how it’s sold. After all, we can ship factories overseas, pay some Vietnamese schlub $2 a day to make $150 shoes with the majority of the money going to marketers and pitchmen! If Americans don’t earn enough to buy them, we can lend them the money!
Or we can make student loans non-dischargeable in bankruptcy and flood the market with seemingly cheap government backed college loans? Put the risk on the taxpayers and inflate the price of college to the point where 18 years olds have to take on $30,000 in debt to get a degree in an economically-worthless field? As a bonus we can hire the otherwise unemployable to skim off any excess dollars as various college administrators!
Or do the same in medicine by setting up byzantine insurance systems to skim money while providing NO VALUE WHATSOEVER. Not only that, what idiot would buy insurance against something that’s guaranteed to happen like checkups and routine illnesses? We’ll tell them that it’s a benefit to overpay and they’ll believe it because their out of pocket cost for substandard care will be so low! HA HA HA!
And here’s another idea- let’s con people with body dysphoria that they can change their sex through the magic of hormone therapy and surgery!
and if it turns out that defying nature doesn’t work out so well? We are all getting paid, so screw it!
So this is where we are in 2020: riding an economy that makes little of value in favor of skimming operations and activities that are so disconnected from reality. Productive enterprise is largely shipped overseas to take advantage of lower-cost labor so the managers and celebrities get a bigger skim. Then any residual profits profits (or even borrowed money if not enough profit is available) is plowed into share buybacks so the senior management gets paid more from their bonuses and stock options.
All fueled by magic. Illusion.
But that’s about to change, hopefully for the better.