Brilliant, of course, but you're missing a key element: zero interest made this possible. In a zero interest environment, stocks/bonds become the only possible source of return, but money flows in creating enormous "beta." (This also creates further concentration of wealth as big business can take advantage of this free $ more easily than small businesses, which can't issue securities as easily & as rich people, who own financial assets, benefit from the eternal rise of financial assets.) When beta's this high, who needs to perform? Neither corporate managers nor people investing other people's money cared - beta covered all their sins. (Free money always leads to corruption.).
What this means, of course, is that the system CANNOT allow interest rates to rise - they will be forced to print $ until the currency collapses because rising interest destroys the whole thing. Look what our pathetically low interest rates have done to the banking sector already!
They can't stop inflation because they can't raise interest rates & they can't stop printing $ to cover all their losses.
And it's why Rs spend as much as Ds when they're in power: the point of government spending isn't so much to do whatever they claim as it is to keep spending - the spending is the point because spending = borrowing = money printing & money printing is everything. The Fed hands newly printed $ to banks, which give them financial assets in return. This means the financial assets rise in value as they have a market that pays full price for assets that aren't worth much (if anything). The fact that you can always dump these assets on the Fed = they're very safe = interest rates are very low & that keeps the whole thing going.
It's all about the interest rates, which have corrupted us & forced our leaders to keep cheap $ for ever. It ends when the $ collapses.
Bingo. What we have here are government economists who got into Harvard because they checked a box and bankers who didn’t understand what interest rates do to bonds.
"If the mood is sour even among US allies, we can be sure that much of the global south is ready to jettison this rules-based order, default on their debts to western financial institutions and possibly even renationalize their industries and resources. This would be the "bottom falling out" moment for the western financial system."
Brilliant, of course, but you're missing a key element: zero interest made this possible. In a zero interest environment, stocks/bonds become the only possible source of return, but money flows in creating enormous "beta." (This also creates further concentration of wealth as big business can take advantage of this free $ more easily than small businesses, which can't issue securities as easily & as rich people, who own financial assets, benefit from the eternal rise of financial assets.) When beta's this high, who needs to perform? Neither corporate managers nor people investing other people's money cared - beta covered all their sins. (Free money always leads to corruption.).
What this means, of course, is that the system CANNOT allow interest rates to rise - they will be forced to print $ until the currency collapses because rising interest destroys the whole thing. Look what our pathetically low interest rates have done to the banking sector already!
They can't stop inflation because they can't raise interest rates & they can't stop printing $ to cover all their losses.
And it's why Rs spend as much as Ds when they're in power: the point of government spending isn't so much to do whatever they claim as it is to keep spending - the spending is the point because spending = borrowing = money printing & money printing is everything. The Fed hands newly printed $ to banks, which give them financial assets in return. This means the financial assets rise in value as they have a market that pays full price for assets that aren't worth much (if anything). The fact that you can always dump these assets on the Fed = they're very safe = interest rates are very low & that keeps the whole thing going.
It's all about the interest rates, which have corrupted us & forced our leaders to keep cheap $ for ever. It ends when the $ collapses.
Bingo. What we have here are government economists who got into Harvard because they checked a box and bankers who didn’t understand what interest rates do to bonds.
*air quotes* Experts *closes air quotes*
https://alexkrainer.substack.com/p/what-if-you-threw-a-rules-based-party
"If the mood is sour even among US allies, we can be sure that much of the global south is ready to jettison this rules-based order, default on their debts to western financial institutions and possibly even renationalize their industries and resources. This would be the "bottom falling out" moment for the western financial system."
Thanks for very insightful comment & reference!