The Economy

People will look back on this stuff later and shake their heads. Drizly is unprofitable in 8 or 9 years of existence. ... even with 2020 being the year of booze orders b/c of the pandemic, which was a boon to its business.

And someone just paid $1.1 billion for it.

Valuation doesn't matter when money is cheap and plentiful thanks to the Fed creating endless amounts of credit that has no lending standard attached to it because the market pricing mechanism has been destroyed by them. Billions get played with like they are millions. Why not? You can just keep borrowing or get funding from others who are using borrowed money, and never have to actually have a business that is viable.

The price tag / fallout for this lunacy when there is a debt implosion is going to cripple the world.

 

Uber itself will have lost almost $7 billion for 2020. It's not funding those acquisitions with profits. It's absurd.

 

Yes, it will. This is a graph of M1 money supply.



That hockey stick since the pandemic is beyond reckless. The higher that graph goes, the worse the debt crisis. And we are in unchartered territory historically. The financial crises in 2000, 2008 were caused by much smaller amounts of debt monetization (which is what this graph shows). What do you think is coming on the back of the insanity we are now seeing?

To put that graph into words: All aspects of our society -- our governments at the Federal and state levels, corporations, individuals, etc. -- are borrowing trillions upon trillions of dollars. The money doesn't find its way into the most economically productive or efficient things because there doesn't seem to be any consequences for spending it poorly as long as the Fed is able to distort the debt market. So it is spent in a piss poor way in terms of our aggregate good. As that graph goes higher, every dollar of debt is providing less economic benefit -- fewer jobs, less standard of living increase, etc. But the full cost of that debt is still going to be due. So we have borrowed decades from the future, getting a fraction of the value of what we have borrowed. It's beyond stupid.

While it is happening, that benefits anyone who has wealth already -- the rich get richer because the debt creates speculative frenzies and drives up asset values (to the point that unprofitable things get valued on hype, not profits). The vast majority of people? They have been languishing throughout the rise of that graph -- less savings, their earnings worth less, harder to get by.

It has taken more and more debt just to service the bad debt that has already been created as this all goes on. They won't allow failure, because they know that ends it all -- it will create a cascade of failures and unemployment through roof, years of economic malaise to clear all of the excesses.

So they now are frantically just piling debt upon debt for as long as they can by intervening in the debt markets directly. It has given us a runaway government, zombie companies that burn through borrowed cash without having to actually earn money, a student loan debt crisis, etc.

It has gone on because the Fed has destroyed the market forces that would regulate that behavior. At the government level. ... our legislators now sling around trillions of dollars in wasteful and corrupt ways without accountability, and our debt has skyrocketed, growing exponetionally:



Without the Fed we'd be drowing in interest payments by now and we'd default. Our economy would sink completely under the weight of that debt.

But the Fed has turned into a debt monetization machine. The two graphs combined amount to them creating money out of thin air. ... and using it to buy our own debt. Think about that. ... You are borrowing to live a fantasy. ... and you are funding that borrowing by taking the value from your currency. We have plenty of history to know how much misery that has caused other empires that tried it. It ends up devastating people economically and creating long periods of misery.

Do you think that can go on forever any more than a Ponzi scheme can? And how do you think it ends?

If you care, here is something John Rubino posted the other day, putting it into the context of the private debt markets and the stock market bubble it has created.

Is This The Biggest Financial Bubble Ever? Hell Yes It Is | Seeking Alpha

While the bubbles we have gotten used to over my lifetime seemed more concentrated in specific areas each time -- junk bonds, next time internet stocks, next time house prices. ... each self-caused crisis led to them answering the debt mess they created by propping it up with more debt by price fixing the cost of money.

The result is that we are in an everything bubble now as that debt has created a berzerk world. When (and it is a matter of when) they can no longer prop it up, yes, it is going to be devastating. Worse, people will have no understanding of what caused it, so as usual, they will look for the arsonist to ride in the fire truck to fix it.