The 2023 financial crisis: this time *is* different -- for the worse

Not much to add other than a link to my "old" post from late 2018, laying out the very simple logic and history of the neoliberal-era bubble. (Now that I'm proofreading, there's a little bit to add...)

I won't rehearse the entire post -- read it at that link, and read my comments, too. You'll learn more than anywhere else.

And best of all, you don't need to worry about understanding mortgages, commercial real estate, etc. Those are only the specific triggers for a bubble inflating, and the first symptoms of its popping. The trillions of fake newly printed dollars could've been misallocated into some other domain of society, it doesn't matter.

The point is: "big" can only be bailed out by "bigger", not by a peer at the same level of the pyramid, and certainly not by an inferior. Progressively since the neoliberal revolution of Reaganism, the finance sector has been destroyed at higher and higher levels, reaching the very tippy top after 2008, with a global network of central banks working as a policy team.

They destroyed their balance sheets after 2008, by absorbing so much toxic waste from the level just below central banks in the pyramid -- the big banks like JP Morgan etc. And that toxic waste was traded for freshly printed trillions of dollars, which the big banks spread through the top 10-20% of society, in the way you may have seen on the TV show Shark Tank. That was just open auditions for money-printer hand-outs, with the "investors" as the middlemen between the central bank and the "entrepreneurs".

But now that the global network of central banks have destroyed their own credit-worthiness, and are in need of a bailout themselves -- so sad, but there is no one higher up on the finance pyramid. No central bank of the solar system, galaxy, universe, etc., exactly as I said nearly 5 years ago, but which nobody seems to have absorbed in the meantime -- probably because they're all wish-casters relying on central bank 12-D chess brilliance to keep their overproduced elite status secured.

Sorry, suckers, there's no one to bail out the American central bank, let alone all the world's major central banks.

* * *

I was proven right when, not even 2 years later, the central banks turned the money printers on like crazy in 2020, printing as much in one summer as they had earlier printed in one decade -- a massive acceleration.

But the real lesson from 2020 was that the whole money-printing trick can only be done once, as my model makes clear. If you expect to keep the printer on forever, even accelerating its rate, no one will take you seriously, and you'll need to be bailed out by a superior. But since there are no superiors to the American central bank, or the global team of them, they would not get bailed out.

And sure enough, in the wake of the 2020 money-printing bonanza, suddenly inflation went sky-high and throughout the entire system. Not just higher than earlier periods, or in one sector of the economy but not others. It's high, and it's everywhere.

This is because the central banks have lost their credit-worthiness -- nobody believes or trusts them, which is the origin of the term "credit". During the 2010s, people could make-believe that the money-printing and 0% interest rates were merely temporary, an emergency, a radical intervention like surgery for an acute trauma -- not chronic, ongoing, indefinite things that would never be undone.

Central banks tried raising interest rates and contracting -- rather than further inflating -- the money supply during Trump's term, and by Christmas 2018 the stock market took a big fat shit. Rather than keep the pain on the overproduced elites of the neoliberal era, the central bank backed off, and turned on the money-printer in overdrive during 2020.

This proved that the temporary and emergency claims were fake. Technically they could not be proven or disproven when first administered under Obama. Maybe they'll succeed in rescuing the real economy, and all those trillions of new dollars can be withdrawn from circulation -- because they will have created tons more of dollars through their healing powers. Like taking someone off life-support, and they start breathing and walking around and talking again.

Without attempting to dial down the level of life-support, you cannot really know whether the patient is healed or still hopeless. Everybody with a brain knew the 2010s economy was fake, but you couldn't point to empirical evidence, since its fakeness vs. realness had not been tested.

But that changed in 2018, and by the 2020 acceleration in money-printing, all doubt was removed. The central banks 0% interest rates and printing of trillions of dollars, euros, etc., was *not* just a temporary life-support machine for an acutely ill patient.

When you dial down the life-support machine from 9 to 8, and the patient starts having an epileptic fit and flat-lining -- guess what, life-support didn't work, he's dead. Then in embarrassment you dial the machine back up to 9, then 10, then 11 -- and everybody can now see, with empirical testing, that your intervention failed.

That's why it took until 2021 and after for inflation to skyrocket and strike the entire economy rather than certain sectors. If the central banks are just going to print more and more dollars, they're worth less and less, so we have to ask for more of them in exchange for whatever we were selling before.

* * *

The rampant and intractable inflation proves that the central banks, and the elite class they try to placate, have lost control. They have not cynically but expertly "kicked the can down the road". They're not diabolical selfish geniuses. Their plans are already blowing up in their faces -- and ours. Their currency is openly worth less and less, and nobody believes or trusts them anymore, and on top of that, by weaponizing the dollar during the Ukraine-Russia War, the rest of the world has already started to ditch the dollar.

None of those results were present throughout the 2010s, or the 2000s, or the '90s, or '80s. This time *really is* different -- it's the end of the line for the neoliberal-era bubble, and it's taking down central banks and their currencies with it.

Why? Because this time is different in the lack of further higher-ups on the finance pyramid to bail out the acutely ill patient.

To be clear, the 2023 financial crisis is not about regional banks or commercial real estate -- the insolvency crisis is at the highest levels, the global central banks, including our own that used to print the world's unipolar reserve currency.

Why is this top level getting taken out now? Didn't central banks always jump on the grenade during neoliberalism's earlier crises? No -- read that 2018 post I wrote. Continental Illinois Bank, the largest regional bank at the time, blew up in 1982 -- and was rescued by the FDIC, with zero help behind the scenes from the central bank, or even from the big Wall Street banks.

As the bubble has inflated more and more, bigger and bigger rescuers have had to play the role of jumping on the grenade. And once the global central banks jumped on the grenade -- that was it. There's no one to jump on their grenade. Or to mix metaphors, no one to suck the poison out of their wounds. They're the top, period. When they're compromised, it's over for the whole pyramid.

* * *

I want to emphasize that the "diabolical genius" meme really is over. If the central banks try to print up another 10 trillion dollars, 20 trillion, 100 trillion, that won't buy its recipients anything. They'll be worthless. They could only pull that trick once, during the 2010s, when the credit-worthiness of the central banks had not yet been put to an empirical test. Will they normalize rates, will they withdraw the monetary life-support and keep it withdrawn? Who can say, for right now, in 2014?

Back then -- seems like another lifetime -- you could print up $5 trillion, hand it out via Shark Tank to the top 10% of society, and they could purchase a lot more stuff and services because of it. There was no system-wide inflation, let alone at such high levels.

Now, everyone has seen the results of the test of credit-worthiness, and so any future rounds of money-printing will have the same effects as the 2020 round -- soaring inflation, no improvement in the recipients' standard-of-living. You may go from a millionaire to a billionaire, but you won't be living in a bigger house, have a more beautiful wife, eat better food, or command a bigger army of slaves to drive you around, deliver your food, etc.

And no, they are not diabolical geniuses in the sense of at least staying even, while printing up more and more money. Everyone's standard of living will go down as a result of persistent stagflation and/or hyperinflation. How did the elite class of Weimar Republic Germany wind up? Or the elites of Zimbabwe? Did they enjoy the same standard of living, but just with increasingly ridiculous nominal valuations of their wealth due to the hyperinflation of the money supply? No, they fell off a cliff, and their societies turned into basket cases.

Our elites will suffer no different a fate. When belief, trust, and faith in the highest levels of the finance pyramid are removed, it will gum up the works in all kinds of ways. In some cases, the infinite supply of dollars won't buy anything in a certain sector -- because would-be sellers know that the currency is worthless now, and will be worth even less by the time they try to exchange it for some good or service that they want. So they just won't sell.

"Jay Leno is going to gobble up all of the classic car market!" -- unless people come to believe that dollars are just funny money, and losing value faster than they can be exchanged for what the seller wanted to spend them on. They'll just keep the classic cars to themselves. What is Jay Leno going to do -- hire a private army to force classic car sales at gunpoint? His would-be soldiers wouldn't accept being paid in worthless dollars.

Maybe if Jay Leno had gold, or oil, or food-producing land, or an armory full of toys for the soldiers to play with. But plain old dollars, whose value can no longer be stored for the future? Forget that.

Ditto for "the big banks and hedge funds will buy them up instead!" Not if the sellers don't want dollars, fearing their medium-to-long-term stability in value. Plus financial actors never use their own money, they borrow it from someone higher than them in the finance pyramid, then use it however they want. Credit conditions are tightening like crazy, so they have less money than before to play around with. No more buying sprees for banks and hedge funds.

* * *

Ultimately, the current crisis, which historians will start with the 2018 event that prompted my old post, will wind up depopulating a lot of the elite class, which has been over-produced for decades, and finally have no one left to bail them out and support their ambitious standard of living. Naturally that will leave some players left at the highest levels, presumably JP Morgan among banks, while lots of aspiring elites in the regional bank tier will have to move back to the suburbs of Green Bay where they came from -- and where they belong.

The system has finally become incapable of supporting 20% of the population competing to live in the 1% zip codes. Lots of people in the top 10-20% -- but below the top 1% or 0.1% -- are going to fall back down into the lower 80-90% of society, where their Greatest Gen ancestors were, before the destabilizing upward ambitions of the Silents and Boomers (collectively the "Me Generation" of the '70s).

This will echo the Great Depression, which wiped out the Great Gatsby-type strivers from the Roaring Twenties and earlier, leaving only the Rockefellers at the top. That reduced inequality, shrinking the number at the elite level. But it was done without destroying our central bank and its currency -- the central bank simply refused to jump on the grenade in order to bail out the strivers.

This time, though, we're going to see reduction in inequality while also lowering our average standard-of-living, since an imploding central bank and currency mean we can't buy stuff like we used to. The Great Depression saw reduced inequality, but with a rising average. (And no, homicide rates did not increase, nor did lifespans plummet -- those are independent of income and wealth trends.)

I won't introduce at this late stage of the post, a cross-imperial comparison -- but suffice it to say we're at the phase in the imperial lifespan when the elites just debase the shit out of their currency, dooming it to obsolescence, while obtaining no short-term benefits either, just committing monetary suicide out of overweening ambition and stubborn hyper-competitiveness.