Financialization is like the bubonic plague–it constantly needs new victims as it kills off its existing hosts. Housing? Dead, killed by financialization, aided, abetted and powered by the Federal Reserve. Now the Fed wants to “save” what it already killed via financialization–housing–by buying $1 trillion in plague-infested mortgages and brute-force efforts to keep interest rates below inflation, i.e. negative rates.[Let me take this disease analogy further.] Words: 514
So says Charles Hugh Smith (www.oftwominds.com) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited further below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
Smith goes on to say, in part:
Financialization: A Definition
Simply put, it is finance infecting and hollowing out all levels of an economy by incentivizing leverage, debt, opacity, speculation, financial fraud, collusion and the perfection of crony capitalism, i.e. financial Elites’ ownership of the government’s regulatory and legislative bodies…
Interestingly, plague, financialization and the power of the Fed all follow the same curve of emergence, expanion, maturity, stagnation and collapse. Natural systems follow S-curves, as described in this seminal paper: A Simple Model for Complex Systems.
The Financialization Lifecycle
Just as the plague reaches a point of maximum infection, levels off and then eventually disappears into protected pockets, financialization reached its maximum penetration in the housing bubble [as can be seen in the chart below].
Being an intrinsically destabilizing force, financialization led to the global financial crisis of 2008. Central banks went into panic mode, printing and injecting trillions of dollars of new infectious material into the global economy in the hopes of sparking a new even grander cycle of financialization – but you can’t create a new cycle of plague when the hosts are either dead or already infected. The world has run out of sectors that can be financialized; that plague has already killed or infected every corner of the global economy.
Ironically, all the central banks’ attempts to reinflate the speculative leverage-debt bubble are only hastening the disease’s decline and collapse. The global markets are cheering today because the plague-riddled corpse of Greek debt has been turned into a grotesque marionette that is being made to “dance” by the European Central Bank before an audience that has been told to applaud loudly, even though the ghastly, bizarre spectacle is transparently phony. Greek debt is already dead; it can’t be reinfected and killed again, and neither can the debts of Ireland, Spain, Portugal, Italy et al. Housing is also already dead, though the still-warm body is still twitching in certain markets around the world.
Why does this cruel stage-show have to continue? Because the Federal Reserve and the other central banks will decay and disappear if financialization can’t be revived. Since it can’t be revived, [however] we are stuck with a multi-year process of decline that will inevitably end with a massive fireworks-lit finale of collapse.
Editor’s Note: The above article has been has edited ([ ]), abridged, and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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Today’s western financial world operates much like government-sponsored medical systems. Mask the problem and give the bankers the pharmaceutical drugs (bail out money) to help them dull the pain and keep them on life support. Letting the free markets work in curing the ailment is not an option because then there would be little need for doctors (governments) or the manufacturers of these drugs (central banks). The banks are sick and should be allowed to pass on…so the virus known as debt does not affect the rest of the population. Unfortunately, the governments and central bankers have only one prescription drug of choice to keep them alive [and that seems to be the supposed cure-all of] printing money… [Let me explain further.] Words: 970
The time is now fast approaching when all debt will be defaulted on…A debtor’s default will impact the creditor (who is usually also a debtor to yet other creditors), causing him to default, and so on. When this begins in earnest, it will wipe out the banking system and thus everyone’s “money.” The paper currencies will not survive this. We are seeing the early edges of it now in the euro, and it’s anyone’s guess when it will happen in Japan, though it seems long overdue already. Last of all, it will come to the USA. The purpose of this article is to present the early-warning signal and explain the actual mechanism to these events. Words: 1386
In light of the unfolding global sovereign debt fiasco that has turned out to be less of a waterfall and more of an avalanche [than anticipated I present below a description of the 5 stages of collapse and discuss our preparedness. If you haven’t read it yet, perhaps you should.] It has been read by 70,000+ people so far – and is still being read by an average of 1,500 people each month – on my site alone. Words: 2525
Currency wars arise when a country steals growth from trading partners by cheapening its currency to promote exports. The new currency war began in 2010 when President Obama declared in his State of the Union address that it was the policy of the United States to double exports in five years. Since the U.S. would not become twice as productive in five years, the implication was the U.S. would severely cheapen its currency to achieve this goal. [Let me expand upon this.] Words: 666