Ed Zitron - The Enshittifinancial Crisis

[erronis]

https://www.wheresyoured.at/the-enshittifinancial-crisis/

One time, a good friend of mine told me that the more I learned about finance, the more pissed off I'd get.

He was right.

There is an echoing melancholy to this era, as we watch the end of Silicon Valley's hypergrowth era, the horrifying result of 15+ years of steering the tech industry away from solving actual problems in pursuit of eternal growth. Everything is more expensive, and every tech product has gotten worse, all so that every company can "do AI," whatever the fuck that means.

We are watching one of the greatest wastes of money in history, all as people are told that there "just isn't the money" to build things like housing, or provide Americans with universal healthcare, or better schools, or create the means for the average person to accumulate wealth. The money does exist, it just exists for those who want to gamble "private equity firms," "business development companies" that exist to give money to other companies, venture capitalists, and banks that are getting desperate and need an overnight shot of capital from the Federal Reserve's Overnight Repurchase Facility or Discount Window, two worrying indicators of bank stress I'll get into later.

No, the money does not exist for you or me or a person. Money is for entities that could potentially funnel more money into the economy, even if the ways that these entities use the money are reckless and foolhardy, because the system's intent on keeping entities alive incentivizes it. We are in an era where the average person is told to pull up their bootstraps, to work harder, to struggle more, because, as Martin Luther King Jr. once said, it's socialism for the rich and rugged free market capitalism for the poor.

The "free market" is a fucking con. When you or I run out of money, our things are taken from us, we receive increasingly-panicked letters, we get phone calls and texts and emails and demands, we are told that all will be lost if we don't "work it out," because the financial system is not about an exchange of value but whether or not you can enter into the currently agreed-upon con.

By letting neoliberalism and the scourge of the free markets rule, modern society created the conditions for what I call The Enshittifinancial Crisis -- the place at which my friend Cory Doctorow's Enshittification Theory meets my own Rot Economy Thesis in a fourth stage of Enshittification.

Per The New Yorker:

Enshittification unfolds in three phases: first, a company is "good to users," Doctorow writes, drawing people in droves, as funnel traps do Japanese beetles, with the promise of connection or convenience. Second, with that mass audience consolidated, the company is "good to business customers," compromising some of its features so that the most lucrative clients, usually advertisers, can thrive on the platform. This second phase is the point at which, say, our Facebook feeds fill with ads and posts from brands. Third, the company turns the user experience into "a giant pile of shit," making the platform worse for users and businesses alike in order to further enrich the company's owners and executives.

I'll walk you through it.

. . .

[bucolic_frolic]

1. Enshittification also includes devaluation of the dollar and what it manufactures

Products are made more cheaply and less durable because the dollars buy increasingly costly components and the public can't and won't pay more and more for the same utility. Shoes and clothing are my favorite examples but the concept extends to other goods as well.

[Bluetus]

2. Yes. That devaluation happens in multiple ways.

But the most basic is supply.demand. In 2008, for example, central banks willed into existence about $20 TRILLION, most of which is still sloshing around. That is what drove up stock marks to record after record.

These inflated stock, especially the Mag-7, themselves become currency. Stocks have always been used as a form of money as high rollers acquire companies through acquisitions that use conjured shares instead of government-backed currency (which is also conjured.) But post-2008, this stock-as-currency has gone off the charts.

And then comes crypto, another conjured currency, not sanctioned or recognized by governments. There is now more crypto currency (valued in dollar equivalents) in circulation than actual dollars. economists don't know how to account for this. the traditional measures of money supply (M1 and M2) to not include crypto. You can't buy groceries at Wal*Mart with crypto and you probably can't find a car dealer who will take Bitcoin as payment for a car. But the Tech Bros have been able to create lots of economic power for themselves by manipulating crypto and derivatives. In some respects, crypto currencies (which are rife with fraud and crime) are more important than any government currency in the world of high finance.

[erronis]

5. Also, add in the shadow banking system which isn't tracked by the feds or otherwise.

Apparently many new small/medium businesses are now getting loans from non-banking organizations. The amount and type of transactions are unknown, except to the operators. Makes me think of the old mafia-style system.

https://en.wikipedia.org/wiki/Shadow_banking_system

he shadow banking system is a term for the collection of non-bank financial intermediaries (NBFIs) that legally provide services similar to traditional commercial banks but outside normal banking regulations.[1][2] S&P Global estimates that, at end-2022, shadow banking held about $63 trillion in financial assets in major jurisdictions around the world, representing 78% of global GDP, up from $28 trillion and 68% of global GDP in 2009.[3]

Examples of NBFIs include hedge funds, insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations.[4][5] The phrase "shadow banking" is regarded by some as pejorative, and the term "market-based finance" has been proposed as an alternative.[6]

[gay texan]

3. XM radio is a good example

"Deep tracks" was oneof their top 10 channels. So they took it off of regular broadcast and made it streaming only, requiring use of cell phone data if you are mobile

[cachukis]

4. Long but valuable read. Coagulated a lot of my thinking.

[genxlib]

6. That dude needs a hobby

But I am glad he is willing to take that deep of a dive to inform others.

Incredibly in-depth piece worth the read.

The irony is that the probable market bubble crash he describes is probably the best possible outcome.

It will be immeasurably worse if there actually is a future that needs that much computing power.

The damage it will do to the human labor workforce and the environment will be much worse than losing money for wealthy investors.