August 25, 2017

Many of those about to be vaporized did not grasp the fragility of the "prosperity" they assumed was both solid and permanent.

Business-cycle recessions are not just inevitable, they are necessary to flush bad debt and marginal investments/projects from the system.

The next recession--which I suggested yesterday has just begun--will be more than a business-cycle downturn; it will be a devastating meteor storm that destroys huge chunks of the economy while leaving other sectors virtually untouched.

The dynamic that's about to play out is simple: wages for the bottom 95% have gone nowhere for 17 years, while costs have soared far above official inflation for everyone exposed to real-world costs.

We have filled the widening gap between stagnant household income and rising expenses with debt. This stop-gap works for a while, but eventually the cost of servicing debt consumes the entire budget, leaving little to nothing to save or invest.

Absent savings and incentives for productive investment, productivity falters once productivity falters, wealth is no longer being generated or distributed widely.

After eight long years of filling the widening gap with borrowed money, the jig is up: the returns on adding debt have diminished to zero, and the financialization games that were supposed to be temporary emergency measures are now permanent.

Like a field exposed to toxins for 8 long years, all this permanent monetary and fiscal stimulus has weakened the productive economy while causing the most destructive weeds to flourish.

When credit expansion stops, the effect is like a meteor storm: marginal borrowers and lenders crater, and every sector that depends on marginal borrowers and lenders for sales and profits also craters.

Those sectors that are heavily in debt and dependent on marginal borrowers for sales implode once sales slump. As these enterprises default, all the lenders who issued this commercial debt also blow up.

Every node of the economy that is heavily indebted and dependent on marginal borrowers for sales, profits and taxes will be struck by a financial meteor. Every sector that avoided debt and sales funded by debt will escape with only light damage.

Here's total credit in the U.S.: up from $26 trillion 2000 to $66 trillion today. The $12 trillion increase since 2009 required trillions in monetary and fiscal stimulus and hundreds of billions of dollars in savings diverted to the banks via zero-interest rate policy (ZIRP).

While explode higher, wages for the bottom 95% stagnated. Only the top 5% of households experienced any real (inflation-adjusted) income expansion.

Wage Stagnation in Nine Charts (Economic Policy Institute)

U.S. Household Incomes: A 49-Year Perspective

Meanwhile, the engine of real income/wealth expansion, productivity, has faltered:

Many of those about to be vaporized did not grasp the fragility of the "prosperity" they assumed was both solid and permanent. The difference between earned income and sales derived from earned income and debt-based income and debt-based sales is about to become painfully clear: the coming financial meteor strike will vaporize debt-based activity and leave whatever isn't dependent on debt relatively unscathed.


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Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

Inequality is rising globally, and rising inequality is destabilizing. A status quo of increasing inequality self-destructs. To avoid this fate, we must answer this question: why is the gulf between the wealthy and everyone else widening so dramatically?

The answer boils down to one word: privilege.

What is privilege? There are many types of privilege, but they all share two characteristics: privilege delivers benefits, wealth and power that are unearned.

Privilege is destabilizing for many reasons: the dead weight of privilege reduces productivity, generates perverse incentives and fuels social injustice. Innovation and competition are threats to privileged monopolies and are therefore suppressed.

The only way to foster sustainable stability is to dismantle institutionalized privilege.

We have a moral imperative to eradicate privilege: privilege is immoral, as rising inequality is the only possible output of privilege. Privilege is exploitive, parasitic, predatory and destructive to the society and economy, and generates inequality by its very nature.

Stripped to its essence, privilege is nothing but institutionalized racketeering.

The only way to reverse rising inequality is to eradicate its source: privilege.

Inequality and the Collapse of Privilege ($3.95 Kindle ebook, $8.95 print edition)

Next Stop, Recession: The Financial Meteor Storm Is Headed Our Way August 25, 2017

Did the Economy Just Stumble Off a Cliff? August 24, 2017

Have We Lost the Ability to Adapt to Rapidly Changing Circumstances? August 23, 2017

Are We Fiddling While Rome Burns? August 22, 2017

Beware the "The Cultural Civil War" Narrative: You're Being Played August 21, 2017

We Need a Social Revolution August 20, 2017

Are Profit and Healthcare Incompatible? August 18, 2017

Why We're Doomed: Our Economy's Toxic Inequality August 16, 2017

Are We Already in Recession? August 14, 2017

What the Mainstream Doesn't Get about Bitcoin August 11, 2017

Powerlessness and Consumerism August 9, 2017

Not All Capital Is Equal; Some Is Destructive August 7, 2017

Is Another Oil Head-Fake Brewing? August 4, 2017

USD: Setting Up a Rip-Your-Face-Off Rally or in Freefall? August 3, 2017

Why We're So Risk-Averse: "We Can't Take That Chance" August 2, 2017

6 Key Questions about RussiaGate August 1, 2017


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Our status quo--the pyramid of wealth and power dominated by the few at the top--has failed and is beyond reform.

This failure is not rooted in superficial issues such as politics or governmental regulations; the failure is structural.

The very foundation of the status quo has rotted away, and brushing on another coat of reformist paint will not save our societal house from collapse.

Yet those who benefit from our status quo naturally deny it has failed, for the reason that it has yet to fail them personally—either pretending to not understand that all unsustainable systems eventually collapse, or hoping to postpone it.

Our status quo is not only failing to solve humanity’s six core problems--it has become the problem.

Since this failure is now inevitable, something is coming to replace it.

Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition, $5.95 audiobook)

Automation is upending the global order by eliminating human labor on an unprecedented scale--and the status quo has no solution to this wholesale loss of jobs.

What if we could hit the reset button on the way we create money, work, commerce and community? What if we could design a social economy rather than a merely financial one? These are not idle questions, for technology now enables us to hit that reset button and organize the creation of money, work, commerce and community in new ways.

If we could start from scratch, what would a new system look like? Clearly, we need a system that offers what the current system cannot: meaningful work for all.

This book is the practical blueprint of a new system that offers opportunities for meaningful work and ownership of the sources of prosperity not just to a few, but to everyone.

A radically beneficial world beckons—what are we waiting for?     Introduction     Chapter One (free PDF)

"I want to thank you for creating your book Get a Job. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated." Laura Y.         Test-drive the first section and see for yourself.

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