Thursday, September 17, 2015

R.I.P. Capitalism

Hi! Happy Thursday!

Capitalism is dead. R.I.P. The proof is one word: zero-percent interest.

Ever ask yourself what the Fed will do when the next bubble bursts? They've been printing money, quantitative easing,  and lending at 0% interest going on seven years now.

Think about it.

A child born in 2008 would be 7 years-old. Imagine you are a parent and are about to explain money to your seven-year-old for the first time. What do you say about savings?

A entire new generation is about to be raised where saving money is the wrong thing to do. And yet our entire capitalist banking system was built upon an assumption of a savings economy. That savings economy doesn't exist any more and never will again. So neither does capitalism. R.I.P.

The Fed made their scheduled announcement today: no raise to the interest rate:

The Federal Reserve announced on Thursday that it is keeping its benchmark interest rate at or near zero, maintaining a policy that is likely to allow the job market to improve further. The Fed’s federal funds rate -- the interest rate the Fed charges for banks to lend to one another overnight -- will remain at target rate of 0.0-0.25 percent, where it has been since December 2008 at the height of the financial crisis. The Federal Open Market Committee (FOMC), the central bank body charged with adjusting key rates, will have its next chance to adjust the influential interest rate when it meets again on Oct. 27 and 28.

The impact of zero-percent interest rate means businesses cannot have any more advantage then they have today:

  • 100 percent of Americans are incentivised to invest. The zero-percent savings rate means to save money is to lose money with 2% inflation.
  • Businesses are borrowing at the lowest rate possible.  Lending rates won't get any lower or any more favourable to business. That means if the Fed ever raises interest rates ever again then savings interest rates will soon meet inflation and people will feel they can start saving again, pulling millions and billions out of the market. Bubble burst.

The stock market is a bubble of the Fed creation: zero-percent interest rate. The game is rigged. You either invest or lose money at a savings interest rate of zero percent.

Think about this: the Fed rate was 9%. If the Fed had raised the rate just 1/4 of a percent today then financial analysts predicted total ruin. 1/4% vs. 9%. Our economy has changed permanently.  Capitalism is dead because the capitalists no longer have to compete in a savings economy, instead the markets have to be propped up by forcing Americans to invest, permanently.

If the central bank raised the interest rates back to nine-percent and banks started paying savings again at 5% think of the billions and trillions of dollars people would pull out of the stock market. Boom! To whit, the zero-percent interest rate is a new permanent fixture.  The Fed cannot move.

I'm going to make a prediction when the next economic bubble bursts: the Fed will go negative on the interest rates. That's right, negative interest rates where the Fed will be directly subsidizing the markets.

In a previous blog post I wrote:

The global economy of today has undergone a sea change these last couple of decades. Conditions have change so radically and so fast so as make all historical data on economics irrelevant.

A permanent Fed rate of zero-percent should have been a wake up call to people that the game has changed, no looking back. Why are we even having economic conversations based on a past system?  This is not your parent's economy. All the yap by economists today is just BS. A fractional banking system where banks loan out 9/10 of all deposits assumes a savings economy.

What kind of economy do we have then? We need new political and economic words that correspond to new philosophies that reflect of the sea changes of these last decades such as with a permanent 0% interest rate lending economy with no savings. It cannot be called capitalism when you are extorted to invest or lose money.

The Irreni World Solution is innovation and not revolution. Why? Two reasons:

  1. Experiments need to be conducted to validate any new claims made. 
  2. The world is too big to revolution. If there is revolution in the US then millions and billions outside of the US will pay the price, including die. 

If millions and billions in this world are dependent on the US for life...food, medicine and protection...then what does it mean to be American? Shouldn't these people have a say in their future? in any innovation and revolution we undertake? This suggests even the concept of "country" is obsolete. We are just planet Earth now. We are living in a redefined world pretending it is not with outdated conversations. Soon our collective denial to face our sea change reality is going to inflict a terrible price in human life. Let's not let it get that far.

We need to wake up folks. We need to shake off our inability to admit reality simply because we are afraid to admit the truth. We refuse to admit our situation in part because we feel we have no solution, no options, no nothing. We are staring into the open maw of nothingness of options and are afraid, afraid that if we admit all our notions of capitalism, democracy, republicanism, socialism and communism are outdated then we have nothing to say. What next? And Bernie Sanders can't save you because there is no going back. Bernie has no ideas to innovate. Irreni World Scale does. Irreni World Scale is a system, a platform to innovate solutions to meet today's conditions. We need to innovate, together.

Cheers!

Demand Irreni World Scale!

Think disruption!

Empathy for all!

Moral relativity: think it, breath it!

Prove it or lose it!

Conversations equal consensus! 

Welcome to the 21st century!

Scale your empathy, scale the world! 

Find your tribe!

Be sexy people!

The future is coming! 

Innovate at a rapid pace!

Slow speed ahead!

Well come! and well met!
















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