Kafka’s Nightmare Emerges: China’s “Social Credit Score”

By Charles Hugh Smith

China is creating Kafka’s nightmare world as the perfection of centralized control of its citizenry.

China is rapidly building out a Total Surveillance State on a scale that far surpasses any government surveillance program in the West. The scope of this surveillance is so broad and pervasive that it borders on science fiction:

• Life Inside China’s Total Surveillance State (8 min video)


• China Aims For Near-Total Surveillance, Including in People’s Homes (“Sharp Eyes” nationwide surveillance network)


• “You’re Being Controlled All The Time” – An Inside Look At China’s “Social Credit Score”


• China Assigns Every Citizen A ‘Social Credit Score To Identify Who Is And Isn’t Trustworthy

It’s well known that the intelligence agencies in America seek what’s known as Total Information Awareness, the goal being to identify and disrupt terrorists before they can strike.

This level of surveillance has run partly aground on civil liberties concerns, which still have a fragile hold on the American psyche and culture.

The implicit goal of China’s Total Surveillance State is to control the citizenry and root out any dissent before it threatens The Communist Party’s hold on power, but the explicit goal is a behavioral psychologist’s dream: to reward “positive social behaviors” and punish “negative social behaviors” via a “Social Credit Score.”

There is something breathtakingly appealing to anyone in a position of power about this goal: imagine being able to catch miscreants who smoke in no-smoking zones, who jaywalk, who cheat people online, and of course, who say something negative about those in power.

But let’s ask a simple question of China’s vast surveillance system: what happens when it’s wrong? What if one of those thousands of cameras mis-identifies a citizen breaking some minor social code, and over time, does so enough times to trigger negative consequences for the innocent citizen?

What recourse does the citizen have? It appears the answer is none, as the process is not strictly speaking judicial; the system appears to be largely automated.

Here’s a second question: is the scoring system truly transparent, or can insiders place their thumbs on the scale, so to speak, to exact revenge on personal enemies?

Question #3: Who have the power to change the weightings within the automated software? Will criticizing the government online generate 1 negative point this month but 10 points next month? How can citizens with a handful of negative points, some perhaps incorrect mis-identifications, avoid crossing the dreaded threshold if they don’t know how the system is truly ranking various violations?

This aligns perfectly with the world envisioned by Kafka in his novels The Trial and The Castle.

Kafka’s fictional accounts of power manifesting through an impenetrable bureaucracy describe a world with two primary features:

1. The rules guiding the system are opaque to those enmeshed in the system


2. There is no recourse for those unjustly persecuted or convicted by the system

What is it like to inhabit such a world? I’ve assembled some insightful comments on Kafka’s works from online resources.

Critic Michiko Kakutani: “(his novels share)…the same paranoid awareness of shifting balances of power; the same atmosphere of emotional suffocation.”

The Trial is “the story of a man arrested and prosecuted by a remote, inaccessible authority, with the nature of his crime revealed neither to him nor to the reader.”

“The law in Kafka’s works, rather than being representative of any particular legal or political entity, is usually interpreted to represent a collection of anonymous, incomprehensible forces. These are hidden from the individual but control the lives of the people, who are innocent victims of systems beyond their control.”

“For Kafka, law ‘has no meaning outside its fact of being a pure force of domination and determination."”

Kafka’s novel The Castle explores “the motif of an oppressive and intangible system” and “the seemingly endless frustrations of man’s attempts to stand against the system.”

China is creating Kafka’s nightmare world as the perfection of centralized control of its citizenry. The question is: will the Chinese people tolerate this as long as the current artificial financialized “prosperity” reigns? What will happen to their perception and tolerance when the debt-fueled “prosperity” blows away like the sands of the Taklimakan Desert?

Gordon Long and I discuss the conceptual framework and implementation of Social Control in a two-part video series:

Part 1:

Part 2:

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

You can read more from Charles Hugh Smith at his blog Of Two Minds, where this article first appeared.

Also Read: China Accused of Using Biometric Surveillance to Send Thousands to Political Detention Camps

Is Profit-Maximizing Data-Mining Undermining Democracy?

By Charles Hugh Smith

If targeting political extremes generates the most profit, then that’s what these corporations will pursue.

As many of you know, oftwominds.com was falsely labeled propaganda by the propaganda operation known as ProporNot back in 2016. The Washington Post saw fit to promote ProporNot’s propaganda operation because it aligned with the newspaper’s view that any site that wasn’t pro-status quo was propaganda; the possibility of reasoned dissent has vanished into a void of warring accusations of propaganda and “fake news” –which is of course propaganda in action.

Now we discover that profit-maximizing data-mining (i.e. Facebook and Google) can–gasp–be used for selling ideologies, narratives and candidates just like dog food and laundry detergent. The more extreme and fixed the views and the closer the groups are in size (i.e. the closer any electoral contest), the more profitable the corporate data-mining becomes.

Meanwhile, back at the ranch, the data-mining gets all the important stuff wrong. As correspondent GFB explains, oftwominds.com was identified as “propaganda” by data-mining, which concluded that any site that posted content that wasn’t pro-Hillary was automatically propaganda:

At least we now know why your site was flagged as a source of Russian disinformation:

Cambridge Analytica is hired by the Russians to data mine to find the most efficacious targets for their disinformation campaign – and in the course of doing research, they find that a number of individuals who visit your site have shown – in other social media actions – to have anti-Hillary, or anti-powers-that-be tendency. They conclude the number of visitors that have that data profile would suggest that it is likely most, if not all visitors to your site would likely have the same view – and so any visitor to your site gets flagged to be targeted, if possible, by the disinformation campaign.

Now look at in reverse – someone who is investigating possible unscrupulous data mining re: the campaign, and through there own data mining notice that visitors to your site get an inordinate amount of targeted disinformation – – – and they conclude (incorrectly) that oftwominds.com is likely the source of that targeting.

Setting aside the quasi-monopoly on vast data-mining of users held by Facebook and Google, we have to ask: what sort of “democracy” do we end up with when data-mining ignores the “independent” middle/moderate voters in favor of the ends of the spectrum which can be more easily whipped up into a frenzy that might just lead to a few more votes being cast (Recall that voter participation in the US is abysmally low compared to other democracies.)

It also turns out that data-mining draws all sorts of false conclusions about individuals, groups and sites. For example, if you visit a “prepper” site then the algorithms will reckon you’re pro-gun ownership. If you visit the Sierra Club website, then you’re targeted as a “social liberal,” and so on.

But in the mad rush to monetize their vast trawling of user data, Facebook, Google et al., niceties such as accuracy and the undermining of civil society don’t matter: these are privately owned corporations whose only responsibility is to maximize profits for their owners and managers.

If targeting political extremes generates the most profit, then that’s what these corporations will pursue. It’s nothing personal–maximizing profit by any means available is why they exist.

Of related interest:

Facebook Is a Utility Which Can’t Charge Its Users (July 22, 2010)

How Much of our Discord Is the Result of the “Engagement” Advert Revenue Model of Social Media? (October 24, 2017)

Should Facebook, Google and Twitter Be Public Utilities? (March 5, 2018)

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

You can read more from Charles Hugh Smith at his blog Of Two Minds, where this article first appeared.

Career Advice to 20-Somethings: Create Value as a Mobile Creative

By Charles Hugh Smith

Finding work that fits who you are is rarely easy, especially if you don’t fit into the mainstream, and usually it requires a lot of compromises, hard work and dead-ends. But that’s the process.

Establishing a satisfying career is difficult in today’s economy, doubly so for those who find life within hierarchical institutions (corporate America and government) unrewarding, and triply so for those burdened with student loan debt and college educations/diplomas of uncertain market value or those re-entering the job market with skills that have been marginalized.

Given that I wrote a book entitled Get a Job, Build a Real Career, and Defy a Bewildering Economy, it’s unsurprising that I get emails from young people asking for career advice.

I’ve also written essays of friendly advice such as A Teachable Moment: to the Young Person Who Complained About Her Job/Pay at Yelp and Was Promptly Fired.

Here is my response to a recent email from a 20-something in a familiar place: burdened with student loan debt, aware that the self-serving institutional shuck-and-jive is false (get a college degree and your future is secure), and uncertain how to proceed.

Here is my correspondent’s email:

I wish my faith in our conventional institutions had faded sooner, but I borrowed a lot of money in my early 20s only to find out that most of what I was learning was utterly useless.

But I can’t go back. Only forward. So with thousands of dollars in debt aside, and limited experience in the professional world (food service, retail, and industrial construction), where in the hell can I start? I get a lot of the concepts you are proposing. I get the need to create value for people. I’ve just never really seen it done in a “professional” environment. I’ve scrubbed floors, calibrated thermometers, bent tubing and made coffee. But intellectually this is obviously not satisfying.

I want to create value, I want to solve problems. Not just for altruistic reasons, but because it is the only thing that seems challenging.

So what would you tell a late 20 something, who’s not used to wearing a suit and tie, starting from the bottom, with the intellectual capacity to do more than scrub floors? Because I guarantee you… there are plenty of us waiting in the shadows to exercise our inalienable human right to achievement, collaboration, and freedom.

A lot of us just resent the monstrosity that centralized thinking has created. But we need to put that bitterness aside and come out of the shadows to contribute.

Extremely well said. Here is my response:

You’re right–there’s often very little value created in “professional” environments, which is partly why so many people are dissatisfied/frustrated with their jobs/ work life.

My book Get a Job, Build a Real Career has some suggestions, which I will summarize here.

1. Lower your cost basis (cost of living) so you can live a satisfying life while earning comparatively little money. This starts with the usual drill: cook all your own food, waste nothing, etc. The first bit of advice a successful artist tells people is “get accustomed to poverty.” But low income doesn’t have to mean unhappiness/destitution.

Focus on the highest expenses where you have the most leverage, which is often housing. How can you create value? Lots of small apartment owners can’t find anyone responsible to maintain their building, so becoming that person could drop your rent a lot. Another possibility is rent a house and then rent rooms to responsible people at rates that lower your share of the rent to very low rates. You’re in charge, you keep the place tidy, you select nice, responsible people to share the house and that’s why people will pay to rent rooms in your house. You’re creating value by taking care of all the stuff most people won’t do or can’t do.

2. Find ways to get satisfaction/meaning /purpose in life regardless of the income generated. This could be a community garden, volunteering at a church or school, or pursuing some project of your own that doesn’t rely on others’ approval or money for its success. If “work” isn’t satisfying, at least you have multiple sources of satisfaction/purpose outside of work.

3. As for work, the cliché is, find an endeavor that you would do for fun or after hours regardless of the pay. This “work” will align with your character, aptitudes, interests, strengths and subconscious/unconscious drives. As Carl Jung observed, “Until you make the unconscious conscious, it will direct your life and you will call it fate.”

And as Jerry Garcia said, “You do not merely want to be considered just the best of the best. You want to be considered the only one who does what you do.”

Finding work that fits who you are is rarely easy, especially if you don’t fit into the mainstream, and usually it requires a lot of compromises, hard work and dead-ends. But that’s the process.

4. Trust your network. I’m not good at networking, far from it, but the more people who know you’re a responsible hard-working person who will do what you say you’ll do, and the more people who know your interests, the greater the chances that somebody will offer you some apparently tiny opportunity that might turn into something larger with time.

5. As Drew Sample points out in our recent podcast, sometimes the best way to create value is to work on ourselves, i.e. develop the eight soft skills I list in my book that are applicable to every field of endeavor and are thus always in demand. They require dedication, self-awareness, humility and hard work to acquire. They create value in every field because all fields are now collaborative, networked, global and fast-changing.

6. Set a goal of creating multiple income streams/ways of creating value for others. In terms of living an anti-fragile, fulfilling and relatively resilient life, the ideal arrangement is multiple income streams/value creation in disparate (unrelated) fields, so if one field of endeavor is disrupted then others will still continue since they’re not connected to the sector that’s been overturned by technological innovation, globalization, etc.

This is what I call the Mobile Creative class–not necessarily mobile in terms of physical movement between locales but mobile between sectors and ways of generating value.

The New Class: Mobile Creatives (May 1, 2014)

The Mobile Creative credo: trust the network, not the corporation or the state.

The Changing World of Work 3: “Full-Stack” Skills (April 15, 2015)

To be honest, I’ve struggled for decades to reach this understanding. I didn’t have any mentors, so I had to mentor myself, which given my lack of experience, was difficult. Sometimes we have to mentor ourselves from the perspective that we’re going to become successful at being ourselves and adding value, regardless of our income. As our own mentor, we seek to advise and encourage ourselves just as we would advise and encourage a close friend.

This advice is not age-specific. The Mobile Creative approach to creating value applies equally to people in their 30s, 40s, 50s, 60s and yes 70s.

Drew and I discuss the process of creating value from the perspective of those working outside “professional” institutional environments: The Sample Hour 184: Creating Value.

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

You can read more from Charles Hugh Smith at his blog Of Two Minds, where this article first appeared.

Image credit: Pixabay

Charles Hugh Smith: ‘ALL Currencies Will See A CATASTROPHIC DROP’ In The Economic Collapse

Financial writer Charles Hugh Smith recently sat down for an interview in which he boldly declared that ALL currencies – not just the United States dollar -will see a catastrophic drop during the coming economic collapse. It’s not just the dollar, but every currency backed by government force will fall.

In a video interview with USA Watchdog‘s Greg Hunter, Smith details the eventual collapse and says currencies such as the Chinese yuan will also drop. Smith, the author of the new book Money and Work Unchained and founder of the popular site OfTwoMinds.com says, “All these currencies, by which there is nothing backing the currencies except the government’s force. That’s the yen, the euro, the dollar and the Chinese yuan. They are all going to have a catastrophic drop against real assets because they are all based on too much leverage, too much debt, too much money being pumped into the financial system that ends up in unproductive speculation. You can’t grow your debt at six times the rate of your economy. In other words, if you are creating $6, $8 or $10 of debt to eke out $1 of low productivity growth, you are dooming your currency, and all currencies are doing the same thing. All the currencies are going to take a big drop at some point . . . relative to real stuff. Real stuff is commodities we need: water, grains, food, oil, natural gas, and of course, precious metals. Everybody knows they have been money for 5,000 years, and I personally feel there is a role for cryptocurrencies.”

“Once you destroy your currency, you destroy everybody’s savings, everybody’s purchasing power, everybody’s poor,” says Smith. He then explains that how governments run economies is not how economics works. Most assume we can continue to borrow from the future to pay today for the promises made yesterday. It simply doesn’t work that way. “Most of the households in the US are losing ground,” explains Smith. Hunter then asked a powerful question: “Do you think they [global elitists] are trying to crush the dollar on purpose?”

“Yeah…there’s that idea that we boost our exports if we can reduce the value of our currency compared to the yen and the euro and so on. But then of course, we have to think about the other side of that which is…the Japanese are even more dependent on exports than we are, so they don’t wanna see their currency, the yen, shoot up in value becasue their exports then become more expensive here. It’s kind of a zero sum game…no country becomes great by devaluing their currency.“

The entire system of government is broken at every level. Is it time to evolve beyond the need for rulers and authority and central planning? Smith explains that only the elites have access to the capitalism that will lift everyone out of poverty.

“If you’re in the inner circle, then capitalism works for you,” says Smith. The global elitists and politicians who get rich off the backs of those they force socialism upon don’t want a real free market to emerge because that’s how they will be taken down a notch and forced to compete in a real market scenario. “[The global elites] have protected it [capitalism] and only they get access to the benefits of capitalism and everybody else gets a watered down sort of socialism, like universal basic income. You don’t get any opportunity to do well.”

But of course, as with all government programs (including government employment), there’s always a problem, and universal basic income will create a disaster of epic proportions for human beings. The best single description of the problem, according to Smith, came from Hunter. “The fraud of universal basic income has to basically attach itself to a fraudulent money system.”

“It doesn’t really address the underlying problem which is a lack of productive work that gives a positive social role to people. In other words, they feel like they’re contributing to their family and their community. And just giving somebody a welfare check, I mean, how many people on welfare are writing poetry and really happy? I mean, we already have a test audience of what happens when you give people just enough money to scrape by, but no opportunity. What we really need is not universal basic income…we need to create opportunities to serve their community…the whole idea needs to be localized to the community...in a real free market, everybody has an opportunity to pursue what they want and to contribute and this is what we’ve lost.“

Smith says he’s more concerned, however, that the market will slowly decay rather than just crash because he thinks that the public would let the elitists get away with it.

“The consequences of the weight of our policies would become apparent if there’s a 5,000 or 10,000 point drop in the DOW. People would start asking questions…but if it just slowly erodes, people habituate to it.”

Be prepared to protect yourself and your family financially for the dollar’s imminent collapse.

 

Three Crazy Things We Now Accept As “Normal” For The Economy

By Charles Hugh Smith

How can central banks “retrain” participants while maintaining their extreme policies of stimulus?

Humans habituate very easily to new circumstances, even extreme ones. What we accept as “normal” now may have been considered bizarre, extreme or unstable a few short years ago.

Three economic examples come to mind:

1. Near-zero interest rates. If someone had announced to a room of economists and financial journalists in 2006 that interest rates would be near-zero for the foreseeable future, few would have considered it possible or healthy. Yet now the Federal Reserve and other central banks have kept interest rates/bond yields near-zero for almost nine years.

The Fed has raised rates a mere .75% in three cautious baby-steps, clearly fearful of collapsing the “recovery.”

What would happen if mortgages returned to their previously “normal” level around 7% from the current 4%? What would happen to auto sales if people with average credit had to pay more than 0% or 1% for a auto loan?

Those in charge of setting rates and yields are clearly fearful that “normalized” interest rates would kill the recovery and the stock bubble.

2. Massive money-creation hasn’t generated inflation. In classic economics, massive money-printing (injecting trillions of dollars, yuan, yen and euros into the financial system) would be expected to spark inflation.

As many of us have observed, “official” inflation of less than 2% does not align with “real-world” inflation in big-ticket items such as rent, healthcare and college tuition/fees. A more realistic inflation rate is 7%-8% annually, especially in the higher-cost regions of the US.

But setting that aside, there is a puzzling asymmetry between low official inflation and the unprecedented expansion of money supply, debt and monetary stimulus (credit and liquidity). To date, most of this new money appears to be inflating assets rather than the real world. But can this asymmetry continue for another 9 years?

3. Stock markets are soaring but sales and profits are stagnant. Everyone knows central banks are still pumping billions of dollars per month into the financial system, and this (coupled with central bank purchases of stocks and bonds) has been pushing stocks sharply higher for the past 9 years, with only a few hiccups along the way.

This is pushing valuations out of alignment with traditional metrics of valuing assets such as sales and profits–a process known as “price discovery.” In essence, traders and investors have habituated to central banks driving private-sector markets higher, not because the assets are generating more value or profits. but simply as a function of centralized money creation and asset purchases.

All of these extremes generate mal-investment, diminishing returns and perverse incentives for ramping up unproductive and risky speculation, leverage and debt. Yet the central banks have trapped themselves in this risky trajectory because they’ve pushed the accelerator to the floorboard for 9 years. Any extreme held in place for 9 years has long slipped from “temporary” to permanent.

Participants have now habituated fully to central banks extreme stimulus of financial markets, and in a sense they’ve forgotten how to price assets based on real-world private-sector measures.

How can central banks “retrain” participants while maintaining their extreme policies of stimulus? The only possible answer is: they can’t.

This essay was drawn from Musings Report 2018:1. The Musings Reports are emailed weekly to contributors, subscribers and patrons. Than you for your financial support of my work.

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Why the Financial System Will Break: You Can’t “Normalize” Markets that Depend on Extreme Monetary Stimulus

By Charles Hugh Smith

Central banks are now trapped.

In a nutshell, central banks are promising to “normalize” their monetary policy extremes in 2018. Nice, but there’s a problem: you can’t “normalize” markets that are now entirely dependent on extremes of monetary stimulus. Attempts to “normalize” will break the markets and the financial system.

Let’s start with the core dynamic of the global economy and nosebleed-valuation markets: credit.

Modern finance has many complex moving parts, and this complexity masks its inner simplicity.

Let’s break down the core dynamics of the current financial system.

The Core Dynamic of the “Recovery” and Asset Bubbles: Credit

Credit is the foundation of the current financial system, for credit enables consumers to bring consumption forward, that is, buy more stuff today than they could buy with the cash they have on hand, in exchange for promising to pay principal and interest with their future income.

Credit also enables speculators to buy more assets than they otherwise could were they limited to cash on hand.

Buying goods, services and assets with credit appears to be a good thing: consumers get to enjoy more stuff without having to scrimp and save up income, and investors/speculators can reap more income from owning more assets.

But all goods/services and assets are not equal, and all credit is not equal.

There is an opportunity cost to any loan (i.e. credit), as the income that will be devoted to paying principal and interest in the future could have been devoted to some other use or investment.

So borrowing money to purchase a product or an asset now means foregoing some future purchase.

While all products have some sort of payoff, the payoffs are not equal. If I buy five bottles of $100/bottle champagne and throw a party, the payoff is in the heady moments of celebration. If I buy a table saw for $500, that tool has the potential to help me make additional income for years or even decades to come.

If I’m making money with the table saw, I can pay the debt service out of my new earnings.

All assets are not equal, either. Some assets are riskier than others, with a less certain income stream or payoff. Borrowing to buy assets with predictable returns is one thing, buying assets with highly speculative returns is another; regardless of the eventual result of the investment, the borrower still has to pay interest on the debt, even if the speculative investment goes bust.

The basic idea here is the loan is based on collateral, that there is something of value that is anchoring the loan above and beyond the borrower’s ability to pay principal and interest.

The classic example is a house: the lender issues a mortgage based on the market value of the house, i.e. what it can be sold for should the buyer default on the mortgage and the lender has to sell the collateral (the house) underpinning the loan.

The value of the collateral is obviously contingent on the market; the value of the house goes up and down depending on supply and demand, the availability and cost of credit, and so on.

If a lender loans me $500 to buy a new table saw, and I default on the loan, the table saw is the collateral. Unfortunately for the lender, the market value of the used tool is perhaps $250 at best. So the lender loses $250 even after repossessing and selling the collateral.

If the lender loaned me $500 to buy champagne and I default, there is no collateral at all; the loan was based solely on my ability and willingness to pay principal and interest into the future.

When I say that all credit is not equal, I’m referring to the creditworthiness of the borrower.

Lenders make money by issuing credit to borrowers. The incentives are clear: the more credit they issue, the higher their income.

Given this incentive, it’s easy to convince oneself that a marginal borrower is creditworthy, and that a speculative investment is a safe bet.

This is especially true if the government guarantees the loan, for example, a home mortgage. With the government guarantee, there’s no reason not to take a chance on a marginal (risky) borrower buying a marginal (risky) house.

If we take some home mortgages and bundle them into a mortgage-backed security, we can sell the future income stream (i.e. the payments made by the borrowers in the future) as securities that can be sold worldwide to investors. I can make risky loans, skim the fees and pass the risk onto global investors.

All this debt is now considered an asset to investors.

There’s one last feature of credit: liquidity. Liquidity refers to the pool of credit available to refinance or roll over existing debt. If I’m having trouble paying my credit card, for example, and there’s plenty of liquidity in the credit system, I can obtain a larger line of credit and borrow enough to pay my monthly principal and interest on the existing debt.

If I can refinance my existing debt at a lower interest rate, so much the better.

Credit can be issued by private-sector lenders to private-sector borrowers, or by public-sector central banks to private-sector lenders. Central banks can buy public and private debt (government and corporate bonds, mortgages, etc.), effectively transferring debt from the private sector to the public sector.

These are the basic moving pieces of the credit expansion that has fueled both the “recovery” and the reflation of asset valuations, which have now reached historic extremes.

The Current (Flawed) Logic We’re Pursuing

In response to the Global Financial Crisis (GFC) of 2008, central banks lowered interest rates to near-zero to boost private-sector lending, and increased liquidity to enable private-sector lenders and borrowers to refinance existing debt and generate new credit.

They also bought assets: government bonds, corporate bonds and in some cases, stocks via ETFs (exchange traded funds).

The goal here was to prop up the collateral underpinning all the debt. If liquidity dried up, consumers and enterprises would default, handing lenders catastrophic losses, as the crisis had crushed the market value of the collateral that lenders would have to sell to recoup their losses.

And so central banks pursued heretofore unprecedented policies aimed at goosing private-sector lending and borrowing while boosting the markets for stocks, bonds and real estate—the collateral that supported all the debt that was at risk of default.

All this low-cost and easily available credit, coupled with the central banks’ public messages that they would “do whatever it takes” to restore credit mechanisms and reflate the private-sector markets for stocks, bonds and real estate, worked: credit expanded and markets recovered, and then soared to new highs.

While these policies accomplished the intended goals, boosting both new credit and asset valuations, they also generated less salutary consequences.

By lowering interest rates and bond yields to near-zero, central banks deprived institutional owners who rely on stable, high-yielding safe investment income—insurers, pension funds, individual retirement accounts, and so on—of exactly what they need: safe, stable, high-yield returns.

In this “do whatever it takes” environment, the only way to earn a high return is to buy risk assets—assets such as stocks and junk bonds that are intrinsically riskier than Treasury bonds and other low-risk investments.

The Stark Conundrum We Face

Central banks are now trapped. If they raise rates to provide low-risk, high-yield returns to institutional owners, they will stifle the “recovery” and the asset bubbles that are dependent on unlimited liquidity and super-low interest rates.

But if they keep yields low, the only way institutional investors can earn the gains they need to survive is to pile into risk assets and hope the current bubbles will loft higher.

This traps the central banks in a strategy of pushing risk assets—already at nose-bleed valuations—ever higher, as any decline would crush the value of the collateral underpinning the titanic mountain of debt the system has created in the past eight years and hand institutional owners losses rather than gains.

This conundrum has pushed the central banks into yet another policy extreme: to mask the rising systemic risk created by asset bubbles, central banks have taken to suppressing measures of volatility—measures than in previous eras would reflect the rising risks of extreme asset bubbles deflating.

In Part 2: So What Comes Next & How Can We Prepare For It?, we’ll ask: how does this resolve? Can central banks raise rates without popping the bubbles the system needs to remain solvent? Or can they keep yields near zero and keep pushing asset valuations higher for years or decades to come?

Or is this all much more likely to end in a massive financial/currency crisis? One characterized by default and liquidation of America’s high-fixed-cost, heavily indebted households and enterprises that have only stayed afloat by borrowing more money?

This vast expansion of stimulus in year Eight of “expansion/recovery” is an unprecedented extreme: does anyone seriously believe you can stop this flood and markets will “normalize”?

This essay was first published on peakprosperity.com under the title The Inescapable Reason Why the Financial System Will Fail.
Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format.

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If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

You can read more from Charles Hugh Smith at his site Of Two Minds

Regulating Cryptocurrencies — And Why It Matters

By Charles Hugh Smith

Nations that attempt to limit cryptocurrencies’ ability to solve these problems will find that protecting high costs and systemic friction will grind their economies into dust.

There’s a great deal of confusion right now about the regulation of cryptocurrencies such as bitcoin. Many observers seem to confuse “regulation” and “banning bitcoin,” as if regulation amounts to outlawing bitcoin.

Further confusing things is the regulation of cryptocurrency exchanges, where cryptocurrencies are bought and sold.

In China, for example, cryptocurrencies are not outlawed, but exchanges were shut down until regulators could get a handle on how to deal with the potential for excesses such as fraud, misrepresentation, etc.

A Wild West free-for-all is conducive to scammers, and so some thoughtful regulation that protects users is to be welcomed.

Governments tax income and capital gains. This is how they fund their activities. Clearly, gains reaped from cryptocurrencies are no different from gains reaped from other speculations and investments, so they should be recorded and taxed in the same manner.

Some enthusiasts of cryptocurrencies seem to think that regulations requiring the reporting and taxation of gains made buying and selling cryptocurrencies is tantamount to destroying cryptocurrencies.

I think this view has it backwards: fully legalizing and regulating cryptocurrencies as financial instruments legitimizes them in a much wider circle of potential users, and common-sense regulations are to be encouraged and welcomed, not viewed as threats to cryptocurrencies.

I want to stress that beneath all the speculative frenzy we see in the cryptocurrencies, what will retain value and remain scarce and in demand is whatever solves problems.

Cryptocurrencies have the potential to solve two problems:

1. reducing the cost and friction of financial intermediaries.


2. holding value as the $250 trillion in phantom wealth created in the asset bubbles of the past 12 years vanishes.

These are real problems: financial intermediaries introduce a great amount of friction and cost globally, and even a modest reduction in cost and friction (time, effort, compliance, recording transactions, etc.) would add up very quickly.

The global value of real estate, stocks, bonds and debt-assets such as mortgages and auto loans is around $500 trillion. By my rough estimate, about half of this was created in the past 12 years as central banks inflated enormous bubbles.

A house that was worth $200,000 in 2005 is now worth $500,000, but it provides no additional value as shelter; it is the exact same house with the exact same utility value. So the additional $300,000 of current market value is entirely phantom wealth.

The same can be said of all the other assets whose value has skyrocketed: the underlying assets/collateral haven’t changed enough to justify the current valuations.

Once the bubbles in stocks, bonds, housing, commercial real estate and debt-assets start popping, the owners of all that phantom wealth will be desperate to sell what is dropping in value and convert that wealth into assets that are either holding their value or appreciating.

Virtually all of this newly created financial “wealth” is ephemeral. Bitcoin et al. are routinely criticized as being “worthless” due to their digital/ephemeral nature.

But critics rarely if ever examine the equally ephemeral nature of $250 trillion in financial “wealth.”

Bitcoin in particular has two features which may be viewed as having value as all these coordinated bubbles pop:

1. The organization and distribution of bitcoin is mathematical. It is not something that can be changed at the whim of a handful of self-serving people in a room (i.e. central bankers).


2. It is limited in quantity.

Some critics claim this can be changed, but that’s not the way it works. A group of bitcoin miners can propose a new version of bitcoin that will issue a trillion coins, but if nobody supports their new version, it dies.

In other words, the marketplace of users decides what has value and what doesn’t.

Regulations that enable cryptocurrencies to solve the two problems listed above should be welcomed, as these problems are structural and impact everyone in some fashion.

Nations that attempt to limit cryptocurrencies’ ability to solve these problems will find that protecting high costs and systemic friction will grind their economies into dust.

I’m offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20).

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Could Central Banks Dump Gold in Favor of Bitcoin?

By Charles Hugh Smith

All of which brings us to the “crazy” idea of backing fiat currencies with cryptocurrencies, an idea I first floated back in 2013, long before the current crypto-craze emerged.

Exhibit One: here’s your typical central bank, creating trillions of units of currency every year, backed by nothing but trust in the authority of the government, created at the whim of a handful of people in a room and distributed to their cronies, or at the behest of their cronies.

And this is a “trustworthy” currency?

Exhibit Two: central banks can’t become insolvent, we’re told, because they can create as much currency as they want, whenever they want. And this is a “trustworthy” currency?

Exhibit three: and here’s what happens when trust in the currency is lost due to excessive currency issuance: the currency goes from 10 to the US dollar to 5,000 to $1 and then to 95,000 to $1, on its way to 2,000,000 to $1:

Yes, this was once a “trustworthy” currency.

While many people expect China to issue a gold-backed currency some day, they overlook the inconvenient reality that China is creating far more fiat currency than it is adding in gold reserves. They also overlook that gold-backed means nothing if the currency isn’t convertible into gold.

If it isn’t convertible, it isn’t gold-backed. Claiming there’s gold somewhere in a vault doesn’t make a currency gold-backed, as the central bank can devalue the currency it issues at will. Gold-backed means the currency is pegged at X units of currency to 1 unit of gold, and X units of currency can be exchanged for 1 unit of gold.

All of which brings us to the “crazy” idea of backing fiat currencies with cryptocurrencies, an idea I first floated back in 2013, long before the current crypto-craze emerged: Could Bitcoin (or equivalent) Become a Global Reserve Currency? (November 7, 2013)

Since there is no real-world commodity backing the digital currency, its value must be based on scarcity and its ubiquity as money. The two ideas are self-reinforcing: there must be demand for the digital money to create scarcity, and the source of demand is the digital currency’s acceptance as money that can be used to buy commodities, goods, services and (the ultimate test) gold.

Speaking of gold, correspondent Liberty Philosopher recently posed a scenario that was new to me: if gold continues losing value, could central banks dump their gold in favor of cryptocurrencies?

Yes, I realize this is anathema to those who anticipate a gold-backed currency becoming the dominant form of centrally issued currency, but the idea of governments that have debauched their currencies building reserves of decentralized and limited-in-issuance cryptocurrencies may not be as farfetched as you might imagine.

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Here is Liberty Philosopher’s commentary:

My understanding is that gold is kind of a reserve asset held by governments that provides the ultimate assurance that they are able to pay their debts. If the value of the assets they hold, which are a guarantee of their ability to pay, begins to erode, and the erosion in value is not a temporary or passing phenomenon, but a continuous and long-term trend, this would imply that the ability of governments to ultimately pay their debts would be eroding. If the value of gold begins to decline, governments who have gold reserves, but whose ability to pay their debts may be somewhat in question, would come under pressure to fortify their reserves as proof that they remained able to pay their debts.

If the price of gold were to continue to decline, my thought is that governments would be under pressure to sell the reserve asset that was declining in value, because the continuing decline in value would call into question their ability to repay their debts. They couldn’t just sit there and allow their reserves to decline in value year after year. They would have to act. If the need for having some kind of “hard” currency reserve remains (creditors may not want to accept newly printed bank notes in lieu of “hard” reserves), and they are forced to begin selling their gold reserves, what other hard reserve asset could they obtain or purchase? I think they could become purchasers of the most valuable cryptocurrencies as a replacement for their gold reserves.

The ideal reserve gains in purchasing power over time. If Venezuela had purchased bitcoin in size when it was $100, or even $1,000 in January 2017, its own currency wouldn’t be heading to near-zero quite so quickly.

In my book A Radically Beneficial World, I proposed that nations which had debauched their centrally issued fiat currency could acquire the labor-backed currency I propose as reserves.

The acquisition of decentralized cryptocurrencies as reserves may sound crazy now, but as central banks destroy the purchasing power of their fiat currencies, all sorts of ideas that seem crazy now will start looking practical once the death spiral of the current unstable monetary regime begins.

I’m offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20).

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

You can read more from Charles Hugh Smith at his blog Of Two Minds, where this article first appeared.

Top image credit

Marx, Robotics and the Collapse of Profits

By Charles Hugh Smith

Whatever commoditized robots can produce is no longer profitable; rather, the production destroys capital.

Yesterday I discussed how robots only do work that’s profitable, as any enterprise buying, programming and maintaining robots to do unprofitable work will soon be out of business.

What few observers seem to grasp is that automation goes through two distinct stages of profitability: when robots/automation first replace high-cost human workers, profits soar. Observers then draw projections based on the belief that these initial profits will continue essentially forever.

But this initial boost phase of profits gushing from automation is short-lived; as the tools of automation are themselves commoditized and become available to anyone on the planet with some capital and ambition, lower cost automated competitors come to market, destroying the pricing power of the first adopter.

Once an enterprise is competing only with other automated enterprises, profits fall to near-zero as lower cost competitors emerge. Competitive advantages are small once a field has been commoditized/globalized, and there is little pricing power left except for brands that establish some cache people will pay extra to have and hold.

But everything that’s been commoditized will no longer be profitable, as the competitive advantage of replacing human workers with robots vanishes once competitors have also replaced their human workers with robots.

Karl Marx described this dynamic of profits cratering and then vanishing in the 19th century. Marx described the consequences of over-investment in commoditized production and the resulting over-capacity: when anyone with access to investors or credit can buy the same machinery—that is, the machines are interchangeable commodities such as sewing machines, power looms, etc.–the capacity to produce rises as every competitor attempts to lower the unit cost of each product by producing more.

In other words, the only competitive advantage in an economy of commoditized machines and products is to increase production by over-investing in productive capacity. If competition has lowered the price of products, those who can double their production will achieve profitable economies of scale.

Over-investment and overcapacity are intrinsic dynamics of production; those who fail to invest heavily in increasing capacity will become unprofitable. Once their capital is destroyed, they vanish in insolvency.

As Marx explained, every enterprise is driven to pursue the same strategy, and the end result is massive over-investment and overcapacity. The flood of products overwhelms demand, and prices fall below the production costs.

Over-investment leads to overcapacity that devalues whatever is being produced.

This leads to a counter-intuitive result: over-investment destroys capital.

The naïve faith that robots will generate so much wealth that humans will have no work has it backward: over-investment in commoditized robots and their commoditized production will destroy capital, not create it.

Recall that enterprises don’t have profits, enterprises only have expenses. Robots will never be free, due to their intrinsic complexity and use of resources and energy. As robots and other tools of automation become commodities that anyone can buy, whatever robots can produce is devalued accordingly.

In other words, whatever commoditized robots can produce is no longer profitable; rather, the production destroys capital.

This leads to a startling conclusion: this destruction of capital must be subsidized by taxing whatever is still profitable, i.e. whatever cannot be commoditized or automated.

In other words, enterprises profiting from human labor that can’t be replaced by commoditized (interchangeable) robots will be subsidizing intrinsically unprofitable robotic production that destroys capital.

Exactly how will all these robots create unimaginable wealth when every moment they’re in production they’re destroying capital? It will fall to the remaining profitable enterprises and their human employees to subsidize the capital-destroying robots.

Robots can only perform profitable work, and in a fully commoditized production chain, very little production will be profitable. This raises a question: who will subsidize all the unprofitable robots? Who will buy them, program them, repair them and energize them? Who will subsidize all this capital-destroying work performed by robots?

The overcapacity intrinsic to automation destroys financial capital, globalized commoditization destroys social capital, and overconsumption destroys the planet’s natural capital.

The fantasy that robots will do all the work of stripmining the Earth to provide for our endless overconsumption, and generate vast profits doing so, is just another manifestation of an intrinsically destructive and unsustainable Mode of Production.

The opportunity to get a 25% discount on my new book vanishes tomorrow morning.

This essay was drawn from my new book, Money and Work Unchained, which I’m offering to my readers at a 25% discount ($7.45 for the Kindle ebook and $15 for the print edition) through Saturday, December 9, after which the price goes up to retail ($9.95 and $20).

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

You can read more from Charles Hugh Smith at his site Of Two Minds, where this article first appeared.

What Is Money? (Yes, We’re Talking About Bitcoin)

By Charles Hugh Smith

Good ideas don’t require force. That describes the Internet, mobile telephony and cryptocurrencies.

What is money? We all assume we know, because money is a commonplace feature of everyday life. Money is what we earn and exchange for goods and services. Everyone thinks the money they’re familiar with is the only possible system of money—until they run across an entirely different system of money.

Then they realize money is a social construct, a confluence of social consensus and political force– what we agree to use as money, and what our government mandates we use as money under threat of punishment.

The Demise of Dissent: Why the Web Is Becoming Homogenized

By Charles Hugh Smith

In other words, we’ll be left with officially generated and sanctioned fake news and “approved” dissent.

We’ve all heard that the problem with the web is fake news, i.e. unsubstantiated or erroneous content that’s designed to mislead or sow confusion.

The problem isn’t just fake news–it’s the homogenization of the web, that is, the elimination or marginalization of independent voices of skepticism and dissent.

There are four drivers of this homogenization:

1. The suppression of dissent under the guise of ridding the web of propaganda and fake news–in other words, dissent is labeled fake news as a cover for silencing critics and skeptics.

2. The sharp decline of advertising revenues flowing to web publishers, both major outlets and small independent publishers like Of Two Minds.

3. The majority of advert revenues now flow into the coffers of the quasi-monopolies Facebook and Google.

4. Publishers are increasingly dependent on these quasi-monopolies for readers and visibility: any publisher who runs afoul of Facebook and Google and is sent to Digital Siberia effectively vanishes.

The reason why publishers’ advert incomes are plummeting are four-fold:

1. Most of the advert revenues in the digital market are being skimmed by Facebook and Google, as the chart below illustrates.

2. Ad blockers have become ubiquitous.

3. Few people click on the display ads that are the standard in desktop web publishing; in other words, these ads simply don’t work very well, and much of the revenue being generated is click-fraud, i.e. bots not real people clicking on adverts because they’re interested in the product/service. As a result, advertisers are pulling away from these type of ads as they search for advert models that aren’t so vulnerable to click-fraud.

4. The web is increasingly shifting to mobile, which has fewer advert spots due to the small size of the display. In addition, major third-party advert services such as Google AdSense place restrictions on the number and size of ads being displayed on publishers’ sites.

The systemic erosion of advert revenues for everyone other than FB and Google is evident everywhere: for example, BuzzFeed Set to Miss Revenue Target, Signaling Turbulence in Media Prospects for a 2018 initial public offering by the high-profile publisher now appear remote.

Digital publisher BuzzFeed is on track to miss its revenue target this year by a significant amount, the latest sign that troubles in the online-ad business are making it tough for new-media upstarts to live up to lofty expectations.

As a result of these two dynamics–the censorship of dissenting views under the excuse of limiting fake news, and the erosion of advert income–independent publishers are losing ground. While those posting on Facebook and other social media sites have little expectation of monetizing their content, many web publishers made enough income off adverts or affiliated income (from YouTube channels, for example) to justify the enormous time and effort they expended keeping their channel/site going.

As advert income has dwindled, there are only two other revenue models available to publishers: a subscription service or Patreon, i.e. the direct financial support of users/readers/viewers. Major publishers are struggling to build a subscription base large enough to fund their operations, a task made more difficult by the expectation that all content is free or should be free.

Patreon has been a boon for thousands of independent writers, journalists, cartoonists, filmmakers and other creators of content. The Patreon model (as I understand it, and yes I have a Patreon campaign) is not based on content that’s behind a paywall available to subscribers only, but on providing incentives in the form of content or other rewards to those who choose to contribute.

The Patreon model only works if enough users/readers/viewers step up to support content creators they value. I think the success of Patreon suggests that many people are willing to support the content creators they value. But like all voluntary revenue models, there’s the free-rider issue: people who may have the income to pay a bit for content choose not to, and in essence free-ride on those few who do contribute/pay for content.

Some people have advanced the model of micropayments as the solution to the problem of compensating content creators fairly. While this model has some obvious benefits–pennies charged for access to content might add up to a living for content creators if their audience was large enough–it would still be a voluntary system, and thus it would have the same free-rider issue as every other voluntary payment-for-content idea.

Posting “free” content on social media ends up driving advert revenues to the social media and search monopolies, leaving nothing for the content creators. There is only so much serious content that can be created for free.

If what we’re left with is “free” content (i.e. the creator gets no income for creating and posting content), Facebook, Google and click-bait link farms of sensationalist headlines, we’ll end up with a thoroughly homogenized web of “approved content” underwritten by lobbyists, the entertainment industry and elitist foundations/think tanks, and little in the way of real dissent or diversity of independent analysis.

In other words, we’ll be left with officially generated and sanctioned fake news and “approved” dissent: unemployment is at record lows, inflation is near zero, the “recovery” is alive and well, Russia is the enemy and any suggestion to the contrary is propaganda that must be eradicated as fake news, etc.

Simply put, the web is becoming Orwellian. There’s plenty of approved “diversity of opinion,” but dissent is being sidelined to the fringes as a risk to the perfection of managed content.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Image Credit: Pixabay

Is This Why Productivity Has Tanked and Wealth Inequality Has Soared?

By Charles Hugh Smith

Needless but highly profitable forced-upgrades are the bread and butter of the tech industry.

One of the enduring mysteries in conventional economics (along with why wages for the bottom 95% have stagnated) is the recent decline in productivity gains (see chart). Since gains in productivity are the ultimate source of higher wages, these issues are related. Simply put, advances in productivity are core to widespread prosperity.

But that’s only half the problem–productivity gains have flowed to the top of the income-wealth pyramid as financialization and cartels have replaced real-world wealth creation as the source of wealth-income.

Longtime correspondent Zeus Y. recently identified one cause of declining productivity and the narrowing of financial gains in the top: the quasi-cartels that dominate our economy profit by introducing and maintaining inefficiencies, not eliminating them. This runs counter to the accepted wisdom in classical free-market capitalism that generating efficiencies increases profits.

Here is Zeus’s explanation of this perverse dynamic:

“With Big Data and Big Profit dominating the products, services, and platforms of everything from iOS operating updates to delivery of healthcare, let’s make the plain-as-day argument: PROFIT and EXTRACTION MEANS PRODUCING INEFFICIENCIES, NOT ELIMINATING THEM.

They make their money by creating inefficiencies, bottlenecks, and gatekeepings that they can profit from. Every middleman function they can stick in their system is a potential profit source for them.

This was especially apparent to me in all the bugs I have experienced with Apple upgrades on my phone. I have to take the time to fix their screw-ups, which are designed to aggregate my data and usage to profit them. You see this with the manipulation of Facebook, creating a very black and white world that motivates and manipulates people to a froth with filters and algorithms that reinforce their biases.

This is not free and democratic access, but inefficient and narrow manipulation, cutting down on alternatives, possibilities, and better ways to think and do. What would a more efficient and democratic system look like, one where access, freedom, and, yes, real efficiencies (especially democratic and community efficiencies) would predominate?”

Thank you, Zeus. As Marx observed 150 years ago, the most profitable arrangement is monopoly, or failing that, a cartel that controls a specific market. Thus it is no surprise that Google, Facebook and Amazon are attempting to become quasi-monopolies in their respective spaces, just as Standard Oil gained a near-monopoly on the oil market in the early 20th century.

Corporations no longer seek a coercive old-style monopoly that violates anti-trust laws; today they eliminate competition by scaling up to dominate a sector. I covered this in Are Facebook and Google the New Colonial Powers?(September 18, 2017).

Once a corporation achieves dominance, it can impose profitable inefficiencies (for example, healthcare and higher education), force customers to perform labor that was once done by companies as part of their service (self-checkout, endless software updates), and profit from customer data with little fear of blowback: now that you need us, we can extract maximum profit from you without fear of regulation or competition.

Once customers are dependent (or addicted, in the case of opioids, mobile telephony, Facebook, etc.), then corporations can impose all sorts of burdens on their customers and demand annual ransom, a.k.a. software licensing and/or update fees.

Consider Microsoft’s dominance in operating systems and Office. Microsoft can sell buggy, insecure software, and require constant purchases of “upgraded” software that has lower functionality than the product it replaces.

The same dynamic is in play with Apple and Android OS in the mobile space. I was recently forced to upgrade my perfectly functional iPhone 4 because some apps only work now in the latest iOS. Meanwhile, Windows 10 is demanding I upgrade my BIOS so my laptop can accept the latest Win10 update. Needless to say, Microsoft offers zero assistance beyond the nag-box.

Needless but highly profitable forced-upgrades are the bread and butter of the tech industry. If we actually valued efficiency and productivity, our system would encourage durability, efficiency and reducing waste. Alas, all three of these worthy traits drastically reduce profits, so instead our maximizing profits by any means available system incentivizes planned obsolescence, inefficiencies controlled by cartels and endless waste of goods, services, customer time and resources.

The immense profitability of inefficiencies controlled by monopolies, quasi-monopolies and cartels is a key reason productivity has faltered and gains flow only to the top. There are other models for distributing software and services, for example, open-source software. There are other models of ownership, for example community ownership of resources and enterprises. But given the financial and political dominance of cartels, these options have been neutered or marginalized.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.