From one of our favorite Marxist professors, Fabio Vighi. As noted in the introduction to June 2024's "The Enemy and the Libidinal Economy of the Apocalypse":
Professor Fabio Vighi (Critical Theory and Italian at Cardiff Uni.) can get heavy/borderline tedious but I think he's on to something. Plus, where else are you going to find sentences like:
"At the heart of this process is the reliance on the toxic fetish of the speculative bubble: trillions (quadrillions if we count derivatives) of insubstantial money orbiting above our heads at the speed of light."
There is a good chance that I will purloin "...the toxic fetish of the speculative bubble"
A couple other visits after the jump.
Here he is at The Philosophical Salon, September 5, 2022:
We have entered a global cycle of secular inflation that is unique in history. The cynical attempt to preserve a system based on the ontological assumption of permanent monetary injections now entails the controlled demolition of the real economy and the world it supports. Ever-expanding artificial liquidity can only destroy currencies. The immediate consequence of this implosive process, however, is not liberation from capitalism, but a new capitalist phase of ideological manipulation and authoritarian violence, which is now upon us. Each step in the global economic downfall will continue to be matched with emergency narratives of corresponding gravity. This is why any resistance to the new status quo in the making, whether motivated by the unsustainable rise of the cost of living or the increased discrimination over human life, will entail a struggle to define the cause of our predicament as systemic rather than exogenous.
The inflation genie
What sort of world do we live in? There is one answer that takes precedence over all others: our globalised world is a debt-based system of simulated financial growth that relies on the continuous expansion of liquidity, which is created “out of nothing” in the form of debt/credit. Our civilization is addicted to money printing and asset bubbles, a dependence that can hardly be broken. In a debt-soaked world like ours, nothing is more dangerous than interfering with the expansion of fake liquidity; nothing more threatening than a sudden “credit crunch”, a haemorrhage of freshly minted money. The cash-flow heading to the stock markets must continue to increase, whatever it takes. As I have argued in my previous pieces on this matter, COVID-19 was, in essence, an unprecedented attempt to restore the expansive capacity of artificial liquidity at a critical time in the history of casino-capitalism. By the end of 2019 the financial sector was, again, at risk of rapidly becoming illiquid as the Monopoly money was drying up – a predictable occurrence that had already triggered the Great Financial Crisis. However, in 2019 the stakes were much higher than in 2008, for the system’s monetary addiction had reached breaking point. Today, in seemingly post-pandemic times, we remain hostage to a Ponzi scheme where toxic liabilities act as collateral for other toxic liabilities, in what is an endless trail of insubstantial paper. Central Banks expand their balance sheets to purchase these liabilities merely to prevent their loss of paper value.
Putting an end to monetary expansion is like provoking a cardiac arrest. If the money supply curve declines or even flattens, our world experiences convulsions, withdrawal symptoms, and goes cold turkey. Eventually, it collapses. With a grotesquely over-leveraged financial industry like ours, the entire economy and social fabric is hanging on the edge of a cliff. The choice faced by most countries, including the affluent ones, will soon be either default or hyperinflation of the currency needed to repay the IOUs. This means that capital accumulation itself is now on life support, as its managers are caught in what can only be described as a lose-lose situation. On the one hand, they know that they must find reasons to pull more liquidity (debt) into the present by dint of what is conventionally known as “printing it.” On the other, they also know that this hardly original escamotage can only lead to runaway inflation, and then hyperinflation. What takes place today as a matter of monetary normality used to characterise wartime economies, namely direct financing via the money presses. While this can only result in depressing the real economy, simultaneously generating the highest wealth inequality on record, what should give us pause is the thought that a world hostage to bubble inflation inevitably “melts into thin air”, losing its social grounding as well as the language to articulate any form of resistance. Collapse is at once economic, socio-political, and cultural.
In August 2019, Blackrock (perhaps the most powerful single entity on the planet) issued a white paper unambiguously titled ‘Dealing with the Next Downturn: from Unconventional Monetary Policy to Unprecedented Policy Coordination.’ The paper warned against two strictly interrelated risks: first, that markets were becoming illiquid while the policy toolkit was empty (interest rates being already negative); second, that continued monetary expansion carried the risk of Zimbabwe-like hyperinflation. Betraying more than a hint of anxiety, Blackrock urged Central Banks (the Federal Reserve) to find ‘unconventional’ remedies to avoid the coming downturn. Specifically, they pushed an ‘unprecedented response’ described as ‘going direct’: ‘Going direct means the central bank finding ways to get central bank money directly in the hands of public and private sector spenders’, while making sure that such monetary behemoth does not trigger a potentially devastating inflation. A few months later, something truly unprecedented happened: COVID-19, followed by what continues to appear as an unstoppable stream of global emergencies. As I have argued in more detail elsewhere (here and here), Virus allowed the ‘going direct’ plan – the methadone-like injection of trillions in mouse-clicked cash – to be executed in safety mode. The hyperinflationary tsunami feared by Blackrock was postponed courtesy of, again, ‘unprecedented’ lockdowns, which prevented the liquidity-flooded economy from overheating. Unsurprisingly, however, after the first year of deflationary Covid hysteria the monster came out of the closet with a vengeance, reminding us of Blackrock’s existential dilemma: ‘how to get the inflation genie back in the bottle once it has been released.’
Keeping up appearances
The key to understanding our economic predicament is to realize that inflation – or more precisely the calamitous devaluation of the money-medium – is now structural, since the simulation of monetary growth has penetrated all forms of capital. Insubstantial financial liquidity has long colonised commodity production and consumption, making both hostage to the credit industry. The financial sector responds to what happens in bond markets, which are increasingly propped up artificially by Central Banks’ monetary inoculations. Bonds are issued to raise money, and pay regular fixed interest to the bondholder. However, bonds are also tradeable, which means they give returns called bond yields. When, in a critically stressed economic environment like ours, bond yields rise sharply and in seemingly uncontrolled fashion, it is usually a sign that bond prices are falling at a similarly dramatic pace. This suggests that investors are pulling out and, as a consequence, the bond market is tanking – which is bad news for the debt-doped stocks. In short, the cost of financing one’s debt surges rapidly, and the insolvency ghost rears its ugly head. Because debt-binging went through the roof after 2008, any turbulence in bond markets is now registered as a shock in stock markets. It is very much like clockwork: when bond yields rise fast, stocks get a hit, which normally prompts the Central Bank cavalry into action. The only way to keep bonds from deteriorating is for Central Banks to use their unlimited firepower and print more cash to buy the unloved debt securities; which is intrinsically inflationary, thus dealing yet another fatal blow to the purchasing power of fiat currencies....
....MUCH MORE
Previously:
....Follow the moneyIn pre-Covid times, the world economy was on the verge of another colossal meltdown. Here is a brief chronicle of how the pressure was building up:June 2019: In its Annual Economic Report, the Swiss-based Bank of International Settlements (BIS), the ‘Central Bank of all central banks’, sets the international alarm bells ringing. The document highlights “overheating […] in the leveraged loan market”, where “credit standards have been deteriorating” and “collateralized loan obligations (CLOs) have surged – reminiscent of the steep rise in collateralized debt obligations [CDOs] that amplified the subprime crisis [in 2008].” Simply stated, the belly of the financial industry is once again full of junk.
"Stock market valuations don’t ‘reflect the damage ahead,’ BlackRock warns"
9 August 2019: The BIS issues a working paper calling for “unconventional monetary policy measures” to “insulate the real economy from further deterioration in financial conditions”. The paper indicates that, by offering “direct credit to the economy” during a crisis, central bank lending “can replace commercial banks in providing loans to firms.”
15 August 2019: Blackrock Inc., the world’s most powerful investment fund (managing around $7 trillion in stock and bond funds), issues a white paper titled Dealing with the next downturn. Essentially, the paper instructs the US Federal Reserve to inject liquidity directly into the financial system to prevent “a dramatic downturn.” Again, the message is unequivocal: “An unprecedented response is needed when monetary policy is exhausted and fiscal policy alone is not enough. That response will likely involve ‘going direct’”: “finding ways to get central bank money directly in the hands of public and private sector spenders” while avoiding “hyperinflation. Examples include the Weimar Republic in the 1920s as well as Argentina and Zimbabwe more recently.”
22-24 August 2019: G7 central bankers meet in Jackson Hole, Wyoming, to discuss BlackRock’s paper along with urgent measures to prevent the looming meltdown. In the prescient words of James Bullard, President of the St Louis Federal Reserve: “We just have to stop thinking that next year things are going to be normal.”
15-16 September 2019: The downturn is officially inaugurated by a sudden spike in the repo rates (from 2% to 10.5%). ‘Repo’ is shorthand for ‘repurchase agreement’, a contract where investment funds lend money against collateral assets (normally Treasury securities). At the time of the exchange, financial operators (banks) undertake to buy back the assets at a higher price, typically overnight. In brief, repos are short-term collateralized loans. They are the main source of funding for traders in most markets, especially the derivatives galaxy. A lack of liquidity in the repo market can have a devastating domino effect on all major financial sectors.
17 September 2019: The Fed begins the emergency monetary programme, pumping hundreds of billions of dollars per week into Wall Street, effectively executing BlackRock’s “going direct” plan. (Unsurprisingly, in March 2020 the Fed will hire BlackRock to manage the bailout package in response to the ‘COVID-19 crisis’).
19 September 2019: Donald Trump signs Executive Order 13887, establishing a National Influenza Vaccine Task Force whose aim is to develop a “5-year national plan (Plan) to promote the use of more agile and scalable vaccine manufacturing technologies and to accelerate development of vaccines that protect against many or all influenza viruses.” This is to counteract “an influenza pandemic”, which, “unlike seasonal influenza […] has the potential to spread rapidly around the globe, infect higher numbers of people, and cause high rates of illness and death in populations that lack prior immunity”. As someone guessed, the pandemic was imminent, while in Europe too preparations were underway (see here and here).
In the carefree days of yore I probably wouldn't have taken much notice of this beyond thinking "ah, big money manager has thoughts."But since "Flashback: That Time Just Weeks Before Covid That BlackRock Told The Fed Exactly What It Wanted The Fed To Do (BLK)" which links to ourselves and the 2019 BLK whitepaper where Mr. Fink's peeps gave the Fed its marching orders for the 2020 disaster; well, I'm paying a bit more attention. If interested the Philosophical Salon has more after the jump.....*****....A look at Chairman Powell's calendar for the period February through June 2020, when the market went from total collapse, including an intraday 3000 DJIA-point loss one day in March, actually in the middle of one of the covid press conferences, to one of the most amazing recoveries in the last 90 years:
TradingView, DJIA daily, December 2019 - June 2020
Some highlights from the Fed Chair's calendar:
February 19, Wednesday
3:00 PM – 4:00 PM Meeting with Jamie Dimon, CEO and Jenn Peipszack, CFO, JPMorgan Chase
Location: AnteroomMarch 19, Thursday
4:30 PM – 5:00 PM Phone call with Larry Fink, CEO BlackRock
April 3, Friday
3:30 PM – 3:45 PM Phone call with Larry Fink, CEO, BlackRockApril 9, Thursday
5:15 PM – 5:30 PM Phone call with Larry Fink, CEO, BlackRock
May 13, Wednesday
1:30 PM – 2:00 PM Phone call with Larry Fink, CEO, BlackRock
Of course there is much much more but discerning reader gets the point: Powell forgot to call me!
It appears I may have become a bit obsessed with the events of September 2019 - March 2020.
Also:
It's the debt.
From the Philosophical Salon, October 9 [2023]:
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