Tuesday, October 14, 2008

Decapitalizing Capitalism

Dear George,

The reason Wall Street has its knickers in a knot is because nobody understands New Age Capitalism. They are all mired in a past when capitalism was anchored to reality. This lack of understanding was expressed by a writer who said:

The funny thing about capitalism is that you need capital to play. When the bank-vault is full of nothing but worthless mortgage-backed securities (MBS) and overvalued junk bonds, the whole thing goes belly up fast.

How naive.

The one salient fact about US capitalism is that no capital is required. All that is needed is reams of worthless paper and a big set of balls.

In the bad old days, a capitalist had to have real money, backed up by real gold, to play. The problem was that it was too risky since the capitalists of old had a tendency to go bust because the more money they accumulated, the greedier they became. As this greed rotted their brains, their investments became dumber until they invested themselves into a Great Depression and ended up selling apples on Wall Street.

That was when the government stepped in and tried to protect capitalists from their innate stupidity with rules and regulations.

However, the one characteristic of stupidity is that it believes itself to be intelligent. Prosperity is capitalists living by their wits; a recession is capitalists discovering they don’t have any.

Consequently, capitalists found the regulations onerous and oppressive. So, they bought themselves a Congress and deregulated the regulations, thus freeing the market to begin another march towards self destruction.

But there was one important difference between the go-go nineties and the roaring twenties: when Nixon backed out of Bretton Woods, money ceased to have any value and became a superstition. Its value depended on people believing in something that wasn’t there.

Under the new order it became possible for a firm to leverage itself 40:1 because nothing of value was at stake. The dirty little secret was that there were no assets supporting the series of asset bubbles that floated out of Wall Street.

The beauty of this arrangement was that when bubbles started popping, the capitalists simply ordered their congressional employees to dump public money into the system to keep it afloat. The fact that public money is as worthless and private money makes no difference since New Age Capitalism is more concerned with image and appearance than with reality.

This is how the system is able to perpetuate itself. Make believe is always easier than reality. Reality is the deadweight that keeps us earthbound. Fantasy soars and in doing so keeps alive the false prosperity without which our empire would collapse.

Your admirer,
Belacqua Jones


Anonymous said...

I foundout today that I will be the proud owner of various bank stocks. I wonder what my return will be? OH! thats right, it's a tax return.

Case Wagenvoord said...

This is corporate socialism we're looking at. All we get is the bill, and anything else that happens to trickle down, though trickle down economics has been known to defy the laws of gravity.

Anonymous said...

New Age capitalism, good phrase.

I am on the Internet now because I have to take a break from reading student compositions, I do not like their content. I just read one which said that people who believe global warming is real are depressed (and it goes on with this kind of reasoning). Oh yes, imagine that there are no problems and everything will be fine ... the starving are just whining to bother us, anyway!

Case Wagenvoord said...


Tell your student the real cause of global warming is the Flying Spaghetti Monster. This shoulc convince him it's real.