The real story of the US economy isn’t about AI, it’s about an economy that’s run out of rope. AI is being hyped not just by promoters reaping billions of dollars in stock market gains, it’s being hyped by the entire status quo because it’s understood to be the last chance of saving an economy doomed by the consequences of decades of artifice.
The real story of the US economy is that decades of “financial innovations” finally caught up with us in 2008, when the subprime mortgage scam–a classic example of “financial innovations” being the cover story for greed and fraud running amok–pulled a block from the global financial Jenga Tower that nearly collapsed the entire rickety, rotten structure.
Our political leadership had a choice: clean house or save the scam. They chose to save the scam, and that required not just institutionalizing moral hazard (transferring the risks of fraud and leveraged speculation from the gamblers to the public / Federal Reserve) but pursuing policies–zero interest rate policy (ZIRP), quantitative easing, increasing the money supply, and so on–that had only one possible outcome:
An economy permanently dependent on inflating asset-bubbles that enriched the top 10% while the bottom 90% who depend on earned income fell behind.
The desired goal of permanent asset-bubbles is the “wealth effect,” the cover story for transferring all the gains into the hands of the top 10%, who can then go on a spending spree which ‘trickles down” to the bottom 90%, who are now a neofeudal class of workers serving the top 10% who account for 50% of all consumer spending and collect 90% of the unearned income and capital gains.
This arrangement is inherently unstable, as “financial innovations” suffer from diminishing returns. Eventually the debt-serfs can no longer borrow more or service the debt they already have, and every bubble being bigger than the previous bubble guarantees the next implosion will be larger and more devastating than the previous bubble-pop.
So what does a system that’s run out of rope do? Seek a savior. The rope has frayed, and the rocks are far below. The impact is going to be life-changing, and not for the better.
The choice remains: clean house, end the bubble-dependent frauds and scams, or find a way to inflate yet another credit-asset bubble. Clean house and lose all our bubble-wealth? You’re joking. The solution is to blow an even bigger bubble. Hey, it’s worked great for 17 years.
Never mind that the precarity of the bottom 90% is accelerating as both the state and Corporate America have offloaded risks onto households and workers; they have OnlyFans, 24% interest credit cards, zero-day-expiration options and side hustles to get by. Never mind that for many Americans, basic services are on the same level as impoverished developing-world economies. What matters is maintaining the wealth of the few at the expense of the many, by any means available.
Hellbound and Down 