The "Death" of Capitalism

We live in some pretty wild times. Rent across the entire country is too expensive for people to afford while more millionaires and billionaires have been created in the last few decades than even seemed possible. Governments start wars but chastise other governments for starting their wars, genocide remains ongoing in Palestine and Sudan, and the US government is now protecting pedophiles while destabilizing markets and threatening to deport an enormous percentage of its workforce which primarily processes food for the rest of the country.

Much of the world’s total wealth is currently wrapped up in what’s called private equity. As an example, the company Black Rock owns about 12 trillion dollars in assets. When the economy crashed in the Great Depression in 1929 it was because banks owned more assets than they had cash on hand, and when people panicked and went to withdraw their money there wasn’t enough to pay them back as it was wrapped up in those assets. It took years to get out of that depression, but it led to regulations like the FDIC which insures deposits up to a certain amount in order to protect the banking industry from its own hubris and mismanagement, so that depositors feel less insecure about depositing their money in banks. Recently when banks failed in California the government not only rescued them but paid out even more than what they were insured for. They didn’t have to do that, but it’s taxpayer money so fuck the taxpayer, I guess.

The truth is that our economy has been running on fumes for a very long time now, about since the last financial crisis in 2008 when the Obama administration absolutely failed to hold even a single person responsible for the criminal mismanagement which led to the subprime housing loan scandal. While Obama propped up the financial industry he did enact some regulations such as the requirement that banks hold more cash on hand than was previously required to cushion them against any instability (the Trump administration just rescinded that requirement). The infusion of trillions of dollars of cheap money during the coronavirus pandemic and Biden administration further imperiled the economy, while temporarily preventing its collapse due to the pandemic also fueled inflation and now the USA carries 36 trillion dollars in debt it can’t pay down especially after the current GOP controlled government just eliminated enormous sources of tax revenue through permanent tax breaks for the richest people and corporations (the small tax breaks for everyone else expire in 2 years).

Frankly, I’ve been surprised that the US has lasted this crisis for so long. I thought for sure it would have occurred around 2019-2020, but the pandemic and its infusion of stimulus money helped keep it at bay a little longer. Today, an unknown foreign institution withdrew $56 billion from Black Rock, which sent its stock down by 5.6%. While this event is being dismissed by the industry as business as usual it is not, in fact, as private equity firms are one of the only places for super wealthy people to continue growing their money, because capitalism is inherently dependent on the assumption of infinite growth which does not actually exist, so large withdrawals are the beginning of people seeing the writing on the wall and getting out before the rug gets pulled out from under them. When the Great Depression and Stock Market Crash of 1929 occurred it primarily wiped out stocks, which are mostly paper investments, and while that can have rippling effects through the economy what mostly happens is that rich people simply aren’t rich anymore. But what happens today when so many assets are concentrated into just a few, giant, dystopian firms like Black Rock with trillions and trillions of dollars in assets? Even a somewhat small withdrawal by investors will force the company to dump assets back onto the market in order to recoup their client’s investments, and the dumping of those assets will dilute the market and lower prices, and the lower prices means that Black Rock and other companies can’t get as much value out of their held assets as they need to pay back their clients, so they sell more assets which further dilutes the market, then everyone with a vacation rental property or an overpriced house they bought recently will also see the market plummet and try to sell them too but the market will already have crashed as everyone piles on to try and get rid of their investments, and the entire thing spirals out of control faster than any crash we have ever seen.

This will certainly make things volatile and will probably occur within the next six months. But the upside is that this is simply a major correction which always occurs in capitalism when capital and control becomes concentrated in the hands of a very few. The rest of us will just go on living our lives, because for many of us things won’t really change, and for those who have been wanting for opportunity may now be able to find it, but it will be a bit rocky before we get to the end of it. Especially because of social media, it will be very interesting to see this crash play out in real time, and how people come together to help each other, to find that the only things of real value in life are in fact immaterial.

If you’re tired of the state of things, read my other articles How to Change Politics or The State of Things. Money isn’t real, and if you are having financial stress you might like to read about Money and Success in this Economy, the problem with Minimum Wage Laws, or how to Be Joyous and Thrive.