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Monday, February 18, 2008

The Fourth Horseman of the Macropocalypse

What do Zimbabwe, the UK, and the USA have in common?

As it turns out, quite a bit - at least when it comes to broken DNA.

In Zimbabwe, it looks like this: a cadre of government thugs, eating what little fat is left on the bones of the country's decaying agricultural and industrial asset base.

In the UK and US, it looks like this: bankers cashing in million-dollar cash bonuses at the Ferrari dealership, while their deals go down in flames - and you foot the bill.

See the similarity yet? The underlying economic principle is exactly the same: without mincing words, it's theft; a transfer of wealth from the poorest to the richest.

Look. We can apply all sorts of rocket science to analyze this. And we will, at my HBS blog, in relatively short order.

But the reality is simple. It's not just that the guys who perpetuated the macropocalypse are laughing all the way to the bank. It's that if you don't know who the sucker is yet - that's because it's you. You are the pawn in this game.

Whether it's Bernanke slashing and burning the economy to a devaluation of Third World proportions, or Gordon Brown nationalizing the very real costs of greed and fear, the problem is the same: the DNA of the financial system is in near-total decay.

Economies that are run this way - to transfer value from poor to rich, rather than create value - end up in a single, bad, equilibrium: stagflation/hyperinflation.

Think Japan, or better yet, Zimbabwe.

Why? Think about it. In such an economy, the incentive for investment dies. And that kills any further productivity/efficiency/etc gains. And so the economy begins going into reverse, eating itself from the inside out.

So here - as plain as a sunny June day - is the fourth horseman of the macro crisis: instead of organizing and managing the financial system for value creation, the pliance and complicity of governing bodies in organizing and managing it so wealth is transferred from those who need it most, to those who need it least (and who are willing to abuse it most).

That sounds hyperbolic. Unfortunately, it's not a joke. It's an economic disgrace.

In fact, more than that - it's an economic act of violence: theft.

-- umair // 8:39 PM //


No, not at all hyperbolic. As we can see, the crude tool of slashing interest rates at the Fed Discount window is now in full swing, as the portfolio managers on CNBC shout, and as always talking way too fast, say, "The Fed should cut further, further, it's not enough."

As we sink towards a third world economy. I cant get health insurance worth paying for, even as a member of the 'knowledge economy'.

If you believe Gentle Ben, and CNBC, Fed funds should go to Zero, banks need not hold paper, and the working American should pay ever increasing share to IRS, as dollar earns and buys less.

Fall of the Veimar Republic Government to national Socialism, packing money in suitcases to buy bread.

Good night America, as you sell insurance to each other, and the best that the tech sector can do is cerate more cloned social networks that create no value...

Good night/
// OpenID abmw // 9:49 PM

There is one myth that helps the American corporate nomenclature to perpetuate the wealth transfer without any meaningful resistance from the public.

That's the myth of the "essential" individual genius whose creativity and heroic contributions to the success of the business is worth the huge compensations.

This myth is directly inherited from the religious "creation" myths - where a god is like the "origin," "source," and "cause" of all there is.

The myth, of course, is a total bullshit. But it works - as an absolute ideological cover for what happens in reality.

The reality being a con-versational, con-textual, co-evolutional, co-operative networked production of everything we people do... and always did.

Unfortunately people love the "inspirational" aspect of the myth - not noticing its manipulative power.
// Blogger Emil Sotirov // 11:14 PM

What's the economic explanation for the US housing bubble? Why did 100% of the benefit from lower rates end up with the home owners and nothing with the buyers? The mass buyer insanity caused prices to be bid up so much that the buyers are worse off than before the rate cuts. I suspect the price proportional fee based compensation structure from realtor, appraiser, mortgage broker, mortgage bank, etc contributed. Who ended up with the billions of dollars from the mispriced insurance, the home sellers? This was a gigantic market that should have worked efficiently but it obviously didn't.
// Blogger Jon Smirl // 1:39 AM

also in common, zimbabwe and wall street... those in power will not let go of it..

the flow of time, karma, will get them, but not quickly...

how do YOU think change will happen?

to emil, above... nice point,... religion, science, business, are all out of the same pattern... a new world view is needed in all fields....
// Blogger gregory // 7:37 AM
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