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What’s Wrong With The Economy: 9 Toxic Dynamics

Consumption

These nine dynamics are mutually reinforcing.

Beneath the surface signals of an eternally rising stock market and expanding GDP, we all sense something is deeply, systemically wrong with the U.S. economy. These nine structural dynamics generate secondary dynamics, all of which are toxic to social mobility, sustainable prosperity, accountability and democracy:

1. The financialization of the economy, which transformed services, credit, risk and labor into commodities that could be traded globally. Financialization generates enormously asymmetric returns: those with access to low-cost credit, global markets and expertise in finance collect the lion’s share of gains in income and wealth.

2. The technological transformation of the economy, which has placed a substantial scarcity premium on specific tech/managerial/communication skills and devalued ordinary labor and capital. As a result, the majority of gains in wealth and income flow to those with the scarce skills and forms of capital, leaving little for ordinary labor and capital.

3. The end of cheap fossil fuels. The fracking boom/bubble has obscured the long-term secular trend: the depletion of cheap-to-access and process oil. As many analysts have observed (Nate Hagens, Gail Tverberg, Richard Heinberg, Chris Martenson et al.), the global economy only grows if energy and credit are both cheap.

4. Globalization, which transformed the developing world into the environmental dumping ground of the wealthy nations and enabled the owners of capital to offshore waste and labor.

5. The destructive consequences of “growth at any cost” are piling up. “Growth” is the one constant of all existing political-economic systems, and none of the current Modes of Production (i.e. the structures that organize production, consumption, the economy and society) recognize that “growth” is not sustainable.

The first two dynamics drive three other dynamics that have hollowed out the productive economy:

6. The dominance of debt-funded speculation as the means of “getting ahead”as opposed to producing products and services of intrinsic value that serve the core needs of communities.

7. The economy’s gains in income and wealth are concentrated in the very top of the wealth-power pyramid: the top 5%–entrepreneurs, professionals and technocrats, etc., and within this class, most of the gains go to the top 1/10th of 1% –the existing owners of wealth, and financiers/speculators with access to cheap credit.

The net result is the bottom 95% have few opportunities to “get ahead” outside of gambling in the asset bubbles du jour: the stock and housing market. While the average middle class household may be able to borrow enough to speculate in the housing bubble, two factors limit the odds of success for ordinary investors/gamblers:

A. The gains in housing are concentrated in specific markets; outside these hot markets, gains are modest.

B. Asset bubbles eventually pop, leaving those still owning the assets with losses. The risks are thus intrinsic and high. The average investor/gambler lacks the experience needed to recognize the bubble has stopped expanding and exit the market before ll the other speculators rush for the narrowing exit.

8. The devaluation of ordinary labor and capital means the bottom 60% of the economy that lacks the requisite skills with a scarcity premium in the Emerging Economy have lost easy access to the ladder of social mobility.

9. The concentration of wealth and power in the hands of the self-serving few corrupts the economy and democracy. The U.S. economy is dominated by insider and elite rackets, skims, scams and cartels/quasi-monopolies, all of which corrupt the economy by creating perverse incentives for exploitation and gaming the system to benefit the few at the expense of the many.

This corruption in service of maximizing private/personal gains at the expense of the system itself also corrupts the mechanisms of governance, which are now little more than cloaking devices that protect insiders and elites from scrutiny and consequences.

The 20% above the bottom 60% may appear to have some access to social/economic mobility, but this is largely an artifact of the bubble economy since 2009. Once the bubble deflates, the illusion of social mobility for the “middle class” between the bottom 60% and the upper 20% vanishes.

The “upper middle class” between the bottom 80% and the top 5% is being squeezed by the over-production of elites, i.e. the over-abundance of those with college degrees and the relative scarcity of secure jobs within the top 5%. As a result, credential inflation is rampant, with Masters Degrees replacing Bachelors Degrees as the default for a white-collar job, and PhDs replacing Masters diplomas as the new default for positions that lack security and upward mobility.

In other words, the number of people who qualify for and desire a slot in the elite class (top 5%) far exceeds the number of slots available. As Peter Turchin has explained, this competition generates social disorder at the top of economic heap as the top 20% fight over the few positions open in the top 5%. The disgruntled, frustrated losers far outnumber the relatively few winners.

These nine dynamics are mutually reinforcing, meaning that each dynamic strengthens one or more of the others, reinforcing each other so the sum of the nine is far more powerful than a mere addition might suggest.

The New Aristocracy (the top 9.9%) (The Atlantic)

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Charles Hugh Smith via OfTwoMinds blog



346 Comments on "What’s Wrong With The Economy: 9 Toxic Dynamics"

  1. JuanP on Thu, 14th Jun 2018 8:25 pm 

    Mak, The reason the exceptionalist turd resents you so much is because deep down he knows you are right and he is wrong. Why would he mind otherwise? The reason he resents your contentment with your situation is obviously that he is not happy with his life. His twins are in elementary school already and by now they’ve probably figured out that their bitch of a daddy is a total loser. There is nothing worse for a narcissist like him than being disrespected by his own children. His Spanish daughter probably hasn’t spoken to him in years. His “girlfriend” is actually a boyfriend and a goat, too. No real woman would put up with a delusional jerk like him. Davy has absolutely nothing to offer as a friend, man, or father.

  2. Davy on Thu, 14th Jun 2018 8:32 pm 

    Sure aren’t doing shit now grehggie being a millionaire with the doctor wife. What a scumbag, You then have the boldface to talk social justice issues. What a crock of shit.

  3. Davy on Thu, 14th Jun 2018 8:36 pm 

    Good one Juan I have kids and you have nobody. I imagine now that you are off your meds your wife is likely gone meaning more psychological turmoil. Don’t take the way out Ape man may have taken. Remember the gang leader from a few years back. You like to talk depression and suicide be careful.

  4. MASTERMIND on Thu, 14th Jun 2018 8:43 pm 

    Greg

    Don’t worry those millionaires will stroke out when the oil starts to run out and the police can’t show up to save them..

    I hope they have to let the unabomber out!

  5. MASTERMIND on Thu, 14th Jun 2018 8:44 pm 

    Juanp

    Does the psych ward know you smuggled in a mobile phone?

  6. JuanP on Thu, 14th Jun 2018 8:44 pm 

    Davy, You live alone, pussy, I don’t. And, I know you already regret the mistake you made today, but I am not going anywhere so suck it up. I am younger than you, comfortably retired, and in perfect health, so I have all the time in the world to fuck with you, little bitch, and I intend to do so for the foreseeable future. You know it is only a matter of time before the twins see you for what you are and turn their backs on you just like your daughter and your wife did. You are a pathetic loser and clinically insane; the twins would have to be insane, too, to want to have anything to do with you once they get to really know you, if they haven’t already.

  7. JuanP on Thu, 14th Jun 2018 8:48 pm 

    Mm, since I am going to be fucking with Davy now, I might as well fuck with you, too, pussy! You two are two of a kind. Throw Boat in and we have the three stooges, except you guys are not funny at all, just delusional and stupid.

  8. MASTERMIND on Thu, 14th Jun 2018 8:53 pm 

    When the oil shortage hits, we’ll probably see rich people jumping out the window on TV.

  9. JuanP on Thu, 14th Jun 2018 8:53 pm 

    Davy, I forgot to include the twins’ mom in the list of people you’ve turned against you with your arrogance, narcissism, delusions, and insanity. I pity anyone who had the disgrace to ever love you. You are one seriously unlovable piece of shit of a person.

  10. JuanP on Thu, 14th Jun 2018 8:55 pm 

    Mm, At least they are having a good time now, not like you on your mom’s basement. And your pretending to know what the future will bring is completely idiotic. Go release yourself!

  11. MASTERMIND on Thu, 14th Jun 2018 8:59 pm 

    Will see fights and rioting when the oil shortage comes, at the fuel pumps and grocery stores..Most peoples job will be gone..

  12. MASTERMIND on Thu, 14th Jun 2018 9:05 pm 

    As food prices go up people will start rioting even more..Then we’ll see martial law..
    As the governments try to keep things under control i think a war will get triggered.

  13. JuanP on Thu, 14th Jun 2018 9:06 pm 

    Hey, Nanomind, you haven’t posted your links for at least an hour; please refresh our minds! LOL!

  14. Makati1 on Thu, 14th Jun 2018 9:09 pm 

    I’m gone for an hour and Davy chimes in with his usual bullshit, third grade putdowns and other meaningless posts numerous times.

  15. GregT on Thu, 14th Jun 2018 9:11 pm 

    “Will see fights and rioting when the oil shortage comes, at the fuel pumps and grocery stores..Most peoples job will be gone..”

    So glad I opted out when I did, hopefully the internet goes down too, so I won’t have to watch you wallow in misery Baby doomer.

    LOL

  16. GregT on Thu, 14th Jun 2018 9:14 pm 

    “When the oil shortage hits, we’ll probably see rich people jumping out the window on TV.”

    We only get one channel of TV OTA here. Hopefully that goes down too.

  17. JuanP on Thu, 14th Jun 2018 9:19 pm 

    Mak “I’m gone for an hour and Davy chimes in with his usual bullshit,”
    I am glad you are back because I am going out with my wife and some friends and I don’t want the exceptionalists to get a break. LOL!

  18. JuanP on Thu, 14th Jun 2018 9:21 pm 

    MM ““When the oil shortage hits, we’ll probably see rich people jumping out the window on TV.”
    He is just envious because his basement has no windows or TV. LOL!

  19. Makati1 on Thu, 14th Jun 2018 9:21 pm 

    LOL I’ll try to pick up the slack. He goes to bed soon.

  20. GregT on Thu, 14th Jun 2018 9:21 pm 

    “Don’t worry those millionaires will stroke out when the oil starts to run out and the police can’t show up to save them..”

    Hopefully the goons lynch them all MM.

  21. MASTERMIND on Thu, 14th Jun 2018 9:21 pm 

    This is why they got fema camps on stand by and homeland security..

  22. MASTERMIND on Thu, 14th Jun 2018 9:23 pm 

    Homeland Security aims to buy 1.6 billion rounds of ammo
    https://www.denverpost.com/2013/02/14/homeland-security-aims-to-buy-1-6-billion-rounds-of-ammo/

    Death by Government
    https://www.hawaii.edu/powerkills/NOTE1.HTM

    What does homeland security need all those bullets for? That is more ammo than our military used in the entire Iraq war..

  23. GregT on Thu, 14th Jun 2018 9:24 pm 

    “This is why they got fema camps on stand by and homeland security”

    There’s only one country in the world, that I’m aware of, that has FEMA camps and homeland security. Sure glad I live nowhere near it.

  24. GregT on Thu, 14th Jun 2018 9:28 pm 

    “Homeland Security aims to buy 1.6 billion rounds of ammo”

    That was 5 years ago Baby doomer. I’m sure it’s much worse now. It isn’t too late to move to the Philippines.

  25. Makati1 on Thu, 14th Jun 2018 9:33 pm 

    For those who travel internationally, it is obvious when you enter the Us police state. The security is like getting into a maximum security prison or worse. Scans, drug dogs, pat downs, x-rays, baby bottles analyzed, semi-strip search (remove shoes, belt, jacket, etc), etc all done by under educated, low paid, bored drones. Not so in other more rational countries. But the average American never leaves the country so they are ignorant of the real world.

  26. Makati1 on Thu, 14th Jun 2018 9:36 pm 

    GregT, The Ps is looking for English speaking Americans to teach English here. But I doubt he could make the grade.

  27. GregT on Thu, 14th Jun 2018 9:48 pm 

    I’m sure the P’s are looking for decent Americans like yourself Makati. That pretty much rules out both Davy and MM. Davy will have to settle for the EU, while MM is going to be SOL.

  28. GregT on Thu, 14th Jun 2018 9:53 pm 

    “For those who travel internationally, it is obvious when you enter the Us police state.”

    The U.S. police state is in Canadian airports as well Makati, both US border patrol, and DHS.

    Gee, I wonder why?

  29. MASTERMIND on Thu, 14th Jun 2018 9:56 pm 

    You can run from collapse but you can’t hide..And the US will likely be the last country to collapse..I plan on staying put and trying to keep chugging until the food runs out and I know its never coming back..If you guys want to fight all the zombies go right ahead. I am not a fighter, I am a snowflake..I am not the hunter of the tribe, I am the guy writing on the cave wall..

  30. Makati1 on Thu, 14th Jun 2018 9:57 pm 

    Probably correct, GregT. Loudmouthed Americans are unwanted here. You can almost always tell an American by the level and quality of their speaking. Often loud and obnoxious,as if they owned the world. Some of that exceptionalist brainwashing, I guess.

  31. Makati1 on Thu, 14th Jun 2018 10:03 pm 

    “… the US will likely be the last country to collapse.”

    No, MM, it will be among the first, if not THE first to go. That JIT delivery system will mean the unprepared will be hungry by the 3rd day after the trucks stop.

    I am not a fighter either. I am a good neighbor. A friend. A skills resource. I have a lot to offer for survival. I plan to live a long time, collapse or no collapse. In that respect I am a ‘fighter’, not a quitter.

  32. GregT on Thu, 14th Jun 2018 10:08 pm 

    “You can run from collapse but you can’t hide.”

    Collapse now, avoid the rush, and be sure to choose a wise location.

    “I plan on staying put and trying to keep chugging until the food runs out and I know its never coming back.”

    Great plan Baby doomer! I plan on finishing off my fencing. It’s really hard keeping all of that drug and hormone free meat from eating my gardens.

    “If you guys want to fight all the zombies go right ahead. I am not a fighter, I am a snowflake..I am not the hunter of the tribe, I am the guy writing on the cave wall..”

    No zombies around here MM, and no worries about any of them ever surviving the journey getting here either.

    And MM, Not only am I a hunter, I’m one of the guys who have been writing on the cave wall for longer than you’ve been alive.

    Good luck to you, little Baby doomer.

  33. Cloggie on Fri, 15th Jun 2018 12:42 am 

    “Homeland Security aims to buy 1.6 billion rounds of ammo”

    The US deep state knows very well what is coming: an attempt by whitey to escape from Washington and secede, where Washington will attempt to keep a strangle-hold onto their tax-farm.

    Expect the milliminds of this world to try to turn the US into the next USSR.

    The best way to help the secession to succeed is to park a large part of the US army somewhere in the ME or East-Asia, engaged in some useless war.

  34. Cloggie on Fri, 15th Jun 2018 12:47 am 

    US imposes 50 billion fine on China:

    https://www.bloomberg.com/news/articles/2018-06-14/trump-said-to-shape-china-tariff-list-to-focus-more-on-high-tech

    Good, the more friction between the US and China, the better. Makes my only fear in geopolitical life, namely a last-minute US-Chinese alliance (a la the US-Soviet counterpart from 1933), less likely.

  35. Davy on Fri, 15th Jun 2018 3:47 am 

    “No, MM, it will be among the first, if not THE first to go. That JIT delivery system will mean the unprepared will be hungry by the 3rd day after the trucks stop.”

    3rd world, like the rest of the world is not plugged into it also. Add to that in Asia you have a destroyed environment with populations in overshoot that cannot feed themselves without imports. You are a definitely an old blind anti-American.

  36. Davy on Fri, 15th Jun 2018 3:51 am 

    “The US deep state knows very well what is coming: an attempt by whitey to escape from Washington and secede, where Washington will attempt to keep a strangle-hold onto their tax-farm.”
    Neder, when a collapse comes that will visit your Europe even worse then it is wise to have security forces to keep the worst of the panic and looting to a minimum. We need only look at what happened to Iraq after the invasion

    “The best way to help the secession to succeed is to park a large part of the US army somewhere in the ME or East-Asia, engaged in some useless war.”
    Or Europe where the next big war might happen.

  37. Davy on Fri, 15th Jun 2018 3:53 am 

    “Good, the more friction between the US and China, the better. Makes my only fear in geopolitical life, namely a last-minute US-Chinese alliance (a la the US-Soviet counterpart from 1933), less likely.”

    Trade issues are going to visit you northern Europeans who like the Chinese do not trade fairly. Lets see how wonderful those economies are then.

  38. Makati1 on Fri, 15th Jun 2018 5:10 am 

    …..Davy chimes in with his usual bullshit, third grade putdowns and other meaningless posts.

  39. JuanP on Fri, 15th Jun 2018 5:50 am 

    Davy “Trade issues are going to visit you northern Europeans who like the Chinese do not trade fairly.”
    What a load of crap. Don’t tell me you are going to start babbling the same nonsense that Trump does about the poor USA that hasn’t been treated fairly. Other countries’ tariffs on imports from the USA are insignificant compared to the US subsidies that supports those imports. For someone who claims to be an “economist” your understanding of the economy is thoroughly deficient, exceptionalist. More delusions from a clinically insane mind. Are you sleeping well, exceptionalist? You sound even more unhinged than last night. Maybe you should take a short break and go visit your goats to calm down. Don’t worry, you won’t miss me; I will be here on and off for the next 17 hours, so apply some butter to your hole, bend over, and get ready! LOL!

  40. JuanP on Fri, 15th Jun 2018 5:59 am 

    MM “I am not the hunter of the tribe, I am the guy writing on the cave wall..” Says the board’s illiterate rapist. Your pretending to be a writer when everybody here knows as a fact that you are a functionally illiterate fool is beyond funny. LOL! I think it is time for you to post your links and conclusions that also prove your total lack of reading comprehension capacity. The truth is, Nanomind, that you don’t know how to do anything useful and you contribute absolutely nothing to society. You are dead weight and the sooner you throw yourself overboard the better for the rest of us. You are not worth the air you breath, for fucks sake! You are scum!

  41. Davy on Fri, 15th Jun 2018 6:30 am 

    Juan, you are the high school drop out no doubt. Trade is not fair for the US stupid. This is obvious. What is also obvious is the US does not play fair with its oversized financial clout. This needs to change also. Globalism is no longer free and fair. It never was but today it has become dysfunctional and unfair both within nations and outside them.

  42. JuanP on Fri, 15th Jun 2018 7:03 am 

    Davy “Trade is not fair for the US stupid. This is obvious.”
    It may be obvious to you in the alternative reality world you have created in your delusional, exceptionalist, sick mind. The REAL world is not like that, lunatic! LOL! I look forward to fucking you all day!

  43. Davy on Fri, 15th Jun 2018 7:42 am 

    Translation: Juan said nothing about the issue under discussion because he has nothing to rebut with. Waste of time Juan.

  44. JuanP on Fri, 15th Jun 2018 7:50 am 

    Davy, Read your own comments, retard. I am not here to write about the article. I am going to spend three months fucking with you non stop. Get used to it! LOL!

  45. Anonymouse1 on Fri, 15th Jun 2018 10:18 pm 

    THe excptionalturd seldom has much to say about any topic at hand, preferring instead to spend his time flinging poo and making himself look as stupid as he possibly can. The few times he does wander onto something close to topic, he is invariably wrong.

    So yes, keep up the good work, dumbass.

  46. Davy on Fri, 15th Jun 2018 10:36 pm 

    “THe excptionalturd seldom has much to say about any topic at hand”

    come on weasel you rarely if ever say anything. Most of the time you stalk and prick and act the little dog at the big dog fight. You have never shown any nuts by telling us about you are who you are. You are just a little millennial pussy with a bad attitude. The best thing that could happen to you is a good ass kicken at your young age to give you an attitude adjustment.

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