by Charles Hugh Smith, Of Two Minds:
Just in case you missed what’s going on in France: the status quo in Europe is doomed.
The status quo has a simple fix for every crisis and systemic problem:
1. create currency out of thin air
2. give it to super-wealthy banks, financiers and corporations to boost their wealth and income.
One way these entities increase their wealth and income is to lend this nearly free money to commoners at much higher rates of interest. I borrow from central banks at 1% and lend it to you at 4.5%, 7% or even 19% or more. What’s not to like?
If a bank is insolvent, it can borrow money at 1% from central banks. If Joe Blow is insolvent, the only loan he can get is at 23%, if he can get any credit at all.
3. China has a variant fix for every financial crisis: build tens of millions of empty flats only the wealthy can afford as second or third “investment” flats. If the empty flats start dropping in price, government entities start secretly buying flats to support the market.
4. Empty malls, bridges to nowhere and ghost cities are also a standard-issue fix in China. Built it and they will come, until they don’t. But who cares, the developers and local governments (i.e. corrupt officials) already pocketed the dough.
You see the problem: making rich people richer doesn’t actually fix what’s broken, it only makes the problems worse. So why can’t we fix what’s broken?
It’s a question that deserves an answer, and the answer has six parts:
1. Any meaningful systemic reform threatens an entrenched, self-serving interest/elite which has a tremendous incentive to squash, co-opt or water down any reform that threatens their monopoly, benefits, etc.
2. It’s far cheaper in cash and political capital to block something than it is to push through a reform that reduces the skims and scams of entrenched, self-serving interests.
3. Entrenched, self-serving elites are disconnected from the real world of the commoners; they live in protective bubbles, from you-can’t-fire-me job security to gold-plated healthcare to generous pensions to access to central bank credit lines– all of which is unavailable to the commoners wearing yellow vests. As a result, their grasp of the real problems is unrealistic, as the real-world experience of the bottom 90% is an abstraction.
4. Entrenched, self-serving elites are protected from the disastrous consequences of their policies and self-serving greed. In Taleb’s terminology, they have no skin in the game: policies can be complete failures but nobody’s fired, and nobody’s pay is cut.
5. The Neofeudal “fix” to all crises, and social and financial problems–enriching the already rich and empowering the already powerful–signals the entrenched elites that the system is working just fine: if it’s working great for me and my cronies, so clearly it’s working great for everyone.
6. The corporate media and the social media giants are entrenched interests, and so it serves their interests to ceaselessly promote the status quo Neofeudalism as the cat’s meow and marginalize dissenters, skeptics and reformers.
Just in case you missed what’s going on in France: the status quo in Europe is doomed. The status quo fixes of enriching the already rich as the solution to every problem have gutted the social contract and destabilized the economy. Giving more nearly free money to banks, financiers and corporations is only going to speed the dissolution of the Eurozone and the existing social order.
What’s broken? Nothing, from the perspective of those at the top of the wealth-power pyramid: